This time it's for real ... Obama 2.0 is what many thought 1.0 was, except this time there are no smokescreens, no evolving on issues, no revelations, and no compromise. The president's economic tour has revealed a plan that will fundamentally change America forever.
We are talking the formation of the Modern Welfare state first envisioned by Otto von Bismarck and backed by Kaiser Wilhelm to stop the tide of socialism then implanted to a certain degree by FDR who had the best backdrop of fear and four years to offer Americans a better "bargain."
"A Chicken in Every Pot"
Elected after promising an economy that would enable people to earn enough to eat well and own a car, Herbert Hoover was smacked with the start of the Great Depression, just months into his presidency. This set up the perfect backdrop for FDR to promote an ideology that included eliminating want as an American birthright. Just imagine a world where the government took care of all your needs and wants ... all you had to do was wake up in the morning to be invited to the party. The skin in the game simply would come from being here in America. One thing's for sure, while it was never a feasible plan with respect to longevity or greatness, it was always a heck of a selling tool-particularly in hard times.
When asked about his Modern Welfare state, Bismarck remarked: "my idea was to bribe the working classes, or shall I say, to win them over, to regard the state as a social institution existing for their sake and interest in their welfare."In other words, the state cared and would be willing to put its money where its compassionate heart was. Of course, in the end the state must find money before it can spend it on would-be altruistic notions of fairness. Over the ensuing century, America would realize the greatest gift a government could give to its citizens was to be subordinated to its citizens and allow them to flourish through the hurdles of life and unlimited finish lines. A chicken in every pot is a good thing, but developing wealth that transforms lives and lifts large swathes of neighbors, friends, family, and employees was a whole different level. The notion of socialism was rejected in America save for some vestiges, but ideas never completely die, they lay dormant waiting for the right moment in time.
That Moment Is Now...
While Bismarck felt there should be health insurance, a pension, minimum wage, lots of regulations, unemployment insurance and guaranteed paid vacation the next version of the socialist dream will look to perfect the idea of fairness. Over the years many of the schemes have become financially untenable. Even social security cannot pay back monies contributed and promised interest. Regulations are choking business and prosperity and Medicare is a ticking time bomb. What to do? How to make it work? The new "middle class" bargain looks to create newer entitlements but pass on the cost directly to the private sector.
When President Obama brags about wanting the free market to take over for Fannie Mae and Freddie Mac he's saying he wants them to take on the role of doling out even greater largess without regard to risks. Housing should be part of the bargain and that means even folks with limited work history, high credit risks and limited funds for a down payment will still be eligible.
The healthcare law looks to funnel every American into a single payer system funded by outrageous taxes against working individuals and businesses of all sizes.
The new higher minimum wage push replaces welfare but at the expense of private industry. It rewards minimum efforts and thwarts the notion of true sacrifice to move ahead.
President Obama has had an epiphany over the past four years- capitalism and the American work ethic is hard to kill. Sure, each day more and more people drop out of the ranks of those willing to work, willing to take risk, willing to believe, but millions are holding firm to the idea this is still the land of milk and honey. Eureka! The government ran out of money a long time ago and debt racing toward $20 trillion will suck up any spare change and then some (just on paying the interest) and people are stubbornly stuck with that American DNA...
So, build the modern welfare system directly above the free markets. This goes beyond established schemes to a much bigger and more direct contraption sucking free markets dry. It's sold as a fair system with hints that all success is part of the public domain to begin with so should be shared equally. This is a lot sweeter than a chicken in every pot. It's the ultimate bribe ... freedom from want once and for all. Of course people should be paid $15.00 an hour for flipping burgers-it's a livable wage, and who is going to feed their children on anything less?
(The way this is being sold, an unwed mother working at McDonalds should be able to get a raise every time she has another child-McDonalds has that fiduciary responsibility.)
The true colors are out, setting up the midterm elections as the biggest fight for the America that became the greatest country in the world to resume that tradition of pulling one's bootstrap or ceding pride, self-determination and grit over to a paternalistic government that would baby us and reward mediocrity-cradle to grave. The summer tour will take a break for a presidential visit to an exclusive resort at Martha's Vineyard but then it's back to sell the notion of economic fairness.
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for September 15th, 2014 | John Ransom