The political gaffe aspect of Obama’s recent “the private sector is doing fine” comment has been exhaustively analyzed. With employment still over 8%, and only that low due to the large numbers of people who have given up searching for work altogether, the statement reads as absurd and shows a disconnect from reality all on its own.
More interesting, however, is how perfectly the statement in context reveals the president’s flawed economic understanding, which envisions the government as calibrating policy to reach an ideal balance between public and private employment. Here’s what he followed his gaffe with:
Where we’re seeing weaknesses in our economy have to do with state and local government — oftentimes, cuts initiated by governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don’t have the same kind of flexibility as the federal government in dealing with fewer revenues coming in.
But the public and private sectors are not sub-elements within a governmental economic framework in which government-determined and politically motivated balances between the two sectors are decided upon and kept. Obama’s inability to make this elementary connection is why he’s so willing to tax and borrow to infuse large stimulus packages and introduce quantitative easing into the economy. If Obama’s initial statement is true, and the private sector is “doing fine,” then it would naturally follow that the public sector is doing fine as well. If the public sector is not doing fine, then the private sector must not be doing fine either, otherwise the revenues would exist from private sector to continue the current levels of public sector funding.
Let’s break this down to four basic points: Continue reading