Obama’s Final Betrayal

Perhaps because of his popularity, the mainstream media has failed to report on Obama’s audacious array of broken promises and backtracks. Within the same week, he pledged to not raise taxes until the economy recovers and also proposed a massive tax hike on individuals earning more than $125K per year. He pledged his support for 2^nd Amendment rights, but is now working to reinstate the pointless gun bans of the Clinton era. He somehow claims that tripling the budget deficit constitutes spending cuts, and that energy independence is achieved by outlawing shale, wilderness, and offshore oil. In short, Obama has kowtowed, to every far left demand so far put before him. The final betrayal of the capitalist system on Obama’s horizon is protectionism.

The far left dominated Democrats hate free trade, perhaps more than anything. Free trade exposes the failures of their union base and embarrasses the socialist ideologues of academia. Lefties hate free trade so much they smashed a Starbucks in its home town of Seattle. Starbucks has since campaigned for “fair trade,” which takes the sting out of free trade like carbon credits compensate for Al Gore’s mansion – by insubstantial feel good sleight of hand.

During the looting of America, A.K.A. the drafting of the stimulus bill, Obama requested that Speaker Pelosi remove protectionist language. Showing political cunning, she kept the language, but allowed the President to decline to enforce it. Thus, Pelosi threw a bone to her San Francisco liberal base, while hanging the burden of responsible governance on the far more popular Obama. Now Obama must decide if he will keep this promise or continue on his extreme leftward journey.

Free trade is important and valuable, and this time Obama cannot claim that every credible economist thinks otherwise (as he claimed every economist supported his stimulus plan). For example, two economists, Brian Singer and Kevin Terhaar explored the effects of market segmentation (protectionism) on risk premiums (the cost of doing business). Not surprisingly, they found that a country’s cost of financing growth increases as a direct factor of protectionism. Not only does protectionism increase the cost of purchasing protected goods, it increases the cost of doing business for the entire country. Steel tariffs not only increase the cost of washing machines and cars (made of steel), they increase the cost of a mortgage and suppress the value of the entire stock market. Because the US finances its economic growth through debt, a trade war with China will hurt the US far more than China. Conversely, the country that declines to respond to tariffs aimed at it actually benefits overall. Indeed, the body of credible economists supports free trade as improving the lives of all peoples.

Politically, the US’s major trading partners have cautioned Obama against trade protectionism. Still, given Obama’s extreme left policy in other areas, this blog is not optimistic that the President will choose free trade over a protectionist agenda. Obama has no real knowledge of economics; he is a “spread the wealth around” politician. The parallels of today’s recession with the 1930′s are striking – extreme Keynesian spending policies, along with trade protection. Those policies were proven to have turned a normal recession into the Great Depression, which the New Deal only made worse. Let’s hope Obama wises up at least on the free trade issue.