President Obama's Re-Election Is Powerful Evidence of Democracy Failure

This column by ACRU General Counsel and Senior Fellow for the Carleson Center for Public Policy (CCPP) Peter Ferrara was published January 3, 2013 on Forbes.com.

"Do not blame Caesar, blame the people of Rome who have so enthusiastically acclaimed and adored him and rejoiced in their loss of freedom and danced in his path and gave him triumphal processions....Blame the people who hail him when he speaks in the forum of the 'new, wonderful good society' which shall now be Rome's, interpreted to mean 'more money, more ease, more security, more living fatly at the expense of the industrious.'"
Roman statesman Marcus Tullius Cicero (106 - 43 B.C.)

Market failure is the doctrine that describes when the market fails to operate efficiently and maximize economic growth and prosperity for all. That is held to result when the market suffers from inadequate or inaccurate information delivery, inadequate or insufficient competition, principal-agent problems (where agents fail to represent the interests of their principals), and externalities (where market actors fail to bear the costs of their actions or choices), among other problems.

Those same problems exist in our current democratic process and its marketplace of ideas. That "democracy failure" analogous to the concept of market failure, explains the reelection of Barack Obama last year as President, despite the disastrous economic performance during his first term, and his track for far worse in his second term.

When President Obama entered office, the recession was already 13 months old, and was slated to end soon, given historical standards (in the 69 years since the Great Depression at that time, the longest recession previously was 16 months). Indeed, the recession was scored as ending in June, 2009 by the National Bureau of Economic Research, which is respected as the scorekeeper for such matters.

Obama's job was to manage a timely, robust recovery from Bush's recession. The American historical experience has always been the deeper the recession, the stronger the recovery, as America has always returned to its long term, world leading, growth trend. So a strong economic boom should have been expected by late 2009, if Obama let it happen. Obama himself effectively acknowledged this, saying in a 2009 national broadcast regarding the poor economy, "If this is not solved in three years, then this is going to be a one term proposition."

But all Obama's economic policies have been, and continue to be, anti-growth - higher tax rates, particularly on savings and investment, runaway regulatory burdens, explosive spending, deficits and debt (Keynesian witchcraft to the contrary notwithstanding), and cheerleading and cover for the Fed's unconstrained, runaway, money creation, dollar devaluation, and near zero interest rates indefinitely for years.

Consequently, of the 12 recoveries from U.S. recessions since the Great Depression, President Obama's was the worst by far. Economic growth was about one-third of the Reagan recovery from a similarly deep recession. Unemployment remained 8% or above for the longest period since the Great Depression. The work force continued to decline even after the recession ended, and has still not recovered.

Real wages and incomes also continued to decline even after the recession ended, which again was unprecedented. Despite all of Obama's rhetoric as the tribune of the middle class, real median household income declined by nearly 8%, meaning middle income families lost the equivalent of a month's of wages per year during Obama's first term. We know President Obama loves the poor, because he has created so many of them, with Census reporting more Americans falling into poverty under President Obama than in the more than 50 years that Census had been tracking poverty.

Yet, President Obama has shown no sign of changing course in a second term, promising still more of the same, and worse. That is why I say Obama's reelection indicates to me "democracy failure" analogous to "market failure."

Part of the explanation was inadequate or inaccurate information, as so much of the media is effectively under Democrat party control, such as NBC, CBS, ABC, PBS, MSNBC, CNN, the New York Times, the Washington Post, the Los Angeles Times, the Boston Globe, and other urban newspapers, as well as national magazines. For these institutions, the issue is no longer one of "media bias." It has gone well beyond that, to outright media partisanship. These institutions are not journalistic enterprises, but partisan political activist organizations posing as journalistic enterprises.

So just as the market cannot work if accounting statements involve widespread fraud or abuse, the democratic marketplace of ideas cannot work if half or more of voters believe what they are told by this party controlled press or media.

The political, democratic marketplace was further plagued by outright misrepresentation. Just as the market cannot work if products are sold through widespread misrepresentation or fraud, the political marketplace cannot function when Obama is free to make up the positions of his opponent, and campaign against those fabrications, without media supposed watchdogs holding him accountable for this fraudulent misconduct. Instead, they joined in helping to cover for him.

For example, while Romney's tax plan proposed a panoply of tax cuts for the middle class, which would amount altogether to the largest middle class tax cut in world history, Obama fabricated the plan as increasing taxes on the middle class to finance further tax cuts for the rich, then spending hundreds of millions to drive this false caricature home to the American people. Obama similarly denigrated Ryan's House budget proposals alleging that they involved made up, specific, draconian spending cuts that were nowhere to be found in Ryan's budget, and then spent hundreds of millions to drive home those fabricated allegations.

Probably the most egregious misrepresentation was Obama's constant refrain that the rich don't pay their fair share of taxes, when the official data reported by Obama's own Administration is that the rich pay far more than their fair share, particularly for the largest federal revenue source, income taxes. The Democrat party controlled press or media, rather than holding him accountable, covered for him here as well, joining to echo the misrepresentation.

The final responsibility for unmasking these false misrepresentations, though, belonged to the competition, particularly the Romney campaign. But they were never game or effective enough to correct the record, even about their own proposals, and let Obama run rings around them. So just as there is market failure when there is inadequate or insufficient competition, the Republicans failed utterly to explain the far superior market policies of economic growth and prosperity, resulting in democracy failure. Indeed, they let Obama blame those policies for the financial crisis, when the crisis was actually caused by anti-market, anti-growth policies of overregulation of housing finance effectively looting the banks, and cheap dollar monetary policies debauching the currency.

Our founding fathers repeatedly emphasized that democracy requires a virtuous citizenry to function effectively. But Obama and other Democrats have long set about to corrupt the citizenry by signing up as many of them as possible for the dependency of government benefits. Thus corrupted on the public interest in fiscal responsibility, they could be expected to vote for their special interest to keep their gravy train going.

This is like the problem of externalities, where market actors do not bear the costs of their actions or choices. That is exacerbated by our tax code, where close to half of all taxpayers are now exempt from any federal income taxes, and so do not bear the cost of their actions or choices.

The way to overcome this is through the competition of ideas demonstrating the far greater prosperity and gain for the people from rapid economic growth rather than redistribution. But here once again, the Republicans last year failed to provide sufficient or adequate competition in articulating the superiority of market ideas, which had enabled Republican success going all the way back to Lincoln, who best represented these ideas from the start. Since the election of Jefferson in 1803, the American people have always voted for economic growth and prosperity over redistribution, when the choice was articulated and offered to them.

But the decisive problem that determined the result was union monopoly power, just as monopoly is the classic case of market failure. Mallory Factor best explains this in his book Shadowbosses. Every other private institution in America must earn their income through voluntary purchases in the market, or contributions. But Government employee unions, such as SEIU and AFSCME, receive ultimately billions in taxpayer funds through mandatory union dues as a condition of employment, at least in states where right to work does not prevail. That is at least analogous to a monopoly practice. We see in states where that policy changes, such as in Wisconsin last year, the union dues voluntarily paid by government employees plummet.

These government unions devote that income stream to electing the most left wing, Democrat Party politicians, as they see socialism as in their government employment interests. They consequently spent sums in the last election to turn out the Obama vote that dwarfed the competition. Market forces depended on the decentralized market of ideas for their turn out. But these decentralized forces were routed by a professional machine operation that turned out Obama voters, even though those very voters were most hurt by Obama's policies.

African Americans remained plagued with high double digit unemployment throughout Obama's first term, and suffered the worst wage and income losses. Hispanics suffered double digit unemployment throughout Obama's first term as well, also with sharp income losses. Recent college graduates never got off the ground in the Obama economy. But the professional machine still turned out this vote, however unenthusiastic it was.

Factor says flat out that this was the difference in the election, and the reason for Obama's victory. It was the reason as well for the sweeping Democrat Senate wins.

People are free to vote for whoever they choose. But they are not free to escape the reality of the consequences. Democracy failure is the reason that America seems to be on a collision course with harsh reality right now. And America will stay on that crash course, until this democracy failure is corrected, Obama kool-aid drinkers to the contrary notwithstanding.

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