Obama’s assault on profits shows profound ignorance of basic economics

On Jan 29th Barack Obama made history yet again, this time for mouthing what is perhaps one of the most asinine statements ever spoken by a United States president:

“…there will be time for [Wall Street firms] to make profits and there will be time for them to get bonuses. Now is not that time.”

The hallmark of a recession is a decline in the average rate of profit throughout the economic system.  It is this decline in profitability which results in retrenchment and layoffs.

Keep in mind that the opposite of profits is losses.  If Barack Obama had the first clue, he would have reassured the business community that his primary goal was the restoration of profitability.  For it is precisely the restoration of profitability that offers the quickest, most efficient path back to full employment.

But Barack Obama doesn’t have the first clue.  Instead, he lashed out against business before proclaiming that profits shall be prohibited until further notice.  This is tantamount to announcing that he will be doing everything in his power to prolong the recession, if for no other reason than to assuage the contempt he feels whenever a firm announces positive earnings.

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4 Comments on “Obama’s assault on profits shows profound ignorance of basic economics”

  1. Stef Says:

    President Obama is under the impression that history owes him $1 trillion right now to spend on whatever he wants. His language is strident and full of irritation that anyone would question his right to live out his personal dream of being Franklin Roosevelt to George Bush’s Hoover. This, he says, is what the election was all about.


  2. Michael Foley Says:

    I read in the news:

    “The president said he was reacting to a New York Times report about Wall Street executives who had given themselves almost $20 billion in bonuses in 2008, the same amount they received collectively during the much more bullish 2004.” (http://bulletin.aarp.org/yourworld/politics/articles/president_decries_shameful_bonuses_for_wall_st_ceos.html).

    So I think his phrasing suggesting that now is no time to earn profits was unfortunate.

    I tend to agree that executive bonuses ought to be tied to performance. Executive performance is monitored by the board of directors. And (I assume) the board of directors is monitored by fund managers and other investors in the company. Somewhere along the line, that accountability seems to be missing.

    Now the government is an investor, so it is demanding that accountability. That logic makes sense to me. The logic of government as investor is what doesn’t make sense to me. Sounds like socialism.

  3. Rebecca Says:

    Obama says there is a consensus among economists who believe his stimulas package of $3 trillion will work.
    I would like the names of those economists.They would
    share the blame along with Obama when his plan fails to ignite the economy. Didn’t Obama’s economists warn him about this very same plan not working in the 1930s?
    Is Obama surrounding himself with prejudiced expertise that only supports his great plans to save us from ourselves, thus limiting his problem
    solving and thwarting the recovery of our economy.

    As an example, chairman and professor of economics at George Mason University, Don Boudreaux, believes the current plan to bail out the housing market will cause the oppostie to happen: “re-inflate the bubble.”
    Some economists suggest refinancing on different terms all the failed mortgages. And why does Obama react so negatively to tax cuts? There
    are many solutions to solving our economic crisis that don’t require throwing trillions of dollars at.
    Once Obama’s stimulas is in place, there will be no turning back — on individuals who will be getting unemployment benefits when they decide to leave their paying jobs to take care of a sick family member, on individuals who surely will decide on COBRA medical benefits when the government is going to pay 65% of the costs. No turning back.

  4. Edward Cox Says:

    Mr. Foley,

    While the MSM takes great pains to portray Obama’s statements in the best possible light, I take him at his word.

    If he meant, “now is not the time for bonuses”, he should have said only that. Populist and obtuse, perhaps, but understandable.

    But he didn’t say only that. He also said, “now is the not the time for profits”, and I believe this is what he meant to say. And he hasn’t exactly offered any public clarification, has he?

    Thank you for the comment.

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