Gerald Warner: Steep at the price - Obama sells US economy for $9 an hour

It was an intransigent insistence that big government, high spending and totalitarian intervention in every area of American citizens’ lives were to be intensified, when the diametric opposite is the only policy that could save the United States and the wider world from disaster.

From the authoritative musings of The One we learned that “deficit reduction alone is not an economic plan”. There was a peroration borrowed from the Great Charlatan Blair, claiming, “it is our unfinished task to make sure that this government works on behalf of the many, and not just the few”. (Oh, the nostalgia!) It was the material in between, though, that alerted the world to how seriously America’s economic predicament – and, with it, global prosperity – is doomed to worsen under this socialist fantasist.

Obama wants to increase the minimum wage to $9. Cue hysterical applause from Beltway bleeding-heart liberals on massive incomes. Experience has shown that fewer than 15 per cent of minimum wage beneficiaries are people below the poverty line; the real poor miss out. In 2009, the minimum wage cost 600,000 teenagers their jobs. Obama wants to set the population to work repairing 70,000 bridges – that conjures images of a Soviet/North Korean propaganda film of industrious ants with pick-axes swarming over public works. Then he promised “executive action” on “climate change”. At least he had the grace to end with a joke: “Nothing I’m proposing tonight should increase our deficit by a single dime.”

The reality behind this Keynesian hallucination is that America is in debt to the tune of $16 trillion, of which Obama has contributed $5 trillion so far. Federal debt is forecast to remain above 73 per cent of GDP, after averaging 39 per cent over the past 40 years. It is a pity, some will suggest, that Obama cannot profit from the example of our own hatchet man, George ‘Austerity’ Osborne. On Osborne’s austere watch in Britain, the cost of social security benefits, currently £179.8bn, is to be “cut” to £196.6bn by 2017-18, despite rising employment. In 2013-14 government expenditure is forecast to be £719bn, or 44 per cent of GDP. Next year government spending will be “cut” to £45bn more than this year. The national debt, currently £1.11 trillion, will have been “reduced” to £1.53 trillion by 2017-18 – a 50 per cent increase since 2011-12. A fiscal snapshot last November showed underlying state spending up 5.5 per cent year-on-year.

Yet David Cameron said on 23 January: “We’re paying down Britain’s debts.” The truth – not an entity with which Dave is familiar – is that his policy is to increase debt by 60 per cent over five years. Then there is the Eurozone crisis which, you may remember, was solved, cured, over and done with as recently as last Wednesday but which inexplicably resurrected itself last Thursday. The latest figures showed that the Eurozone produced no growth for an entire year, with GDP down 0.5 per cent. France had a worse than expected drop of 0.3 per cent. The euro currency duly slumped in response. There you have an illustration of the domino effect, stretching from Obama’s deluded socialist policies to currency fluctuations in another continent, that menaces the world with disaster.

There are three factors that could trigger global economic meltdown: sovereign debt, undercapitalised banks rancid with toxic assets and currency wars. Two of those three are government-controlled, the third partly so. It is politicians that could lead the world back to cave-dwelling primitivism, when the computer screens first turn red, then black, and the lights go out. This hypothesis is no longer a fantasy; it is being considered, even if as a remote possibility, by some economists. The root cause is the infatuated ambition of the state to control populations, to spend citizens’ money on curbing their freedoms.

The state is not a wise, paternal agency; it does not know what it is doing. The present generation of interventionists in smart suits is just the rust-bucket Soviet Union with a makeover. The only way to restore prosperity and avert global depression, or worse, is to cut taxes, to the benefit of both state and citizen. The Laffer curve is irrefutable. Take one small empirical example from Britain: when the top tax rate was 40p, 16,000 individuals paid it; when it became 50p, 10,000 of them removed themselves from fiscal jurisdiction and the Treasury lost £7bn. Guardianista guff about “fairness” – old-time Marxism transparently refurbished – must be disregarded and sensible fiscal policies implemented before it is too late. The state’s hand must be removed from our wallets or eventually there will be no wealth to covet.

Twitter: @GeraldWarner1