Economic illiteracy among the journalistic class is hardly new. Journalists were usually the people with higher verbal than math scores on the SAT. (I speak from personal experience.)
Economic illiteracy among the political class is fairly widespread, too. I'd wager that four out of five congressmen of either political party, if asked, couldn't explain the law of supply and demand and would probably vote against it if they could.
But economic illiteracy among presidents is a much more consequential affliction.
The shape and scope of Barack Obama's economic illiteracy becomes more manifest with each passing day. Three examples from just the past week suggest the president and his team of economic advisers know little about the big plans they wish to foist upon the American public.
Obama visited Wall Street on Monday to mark the anniversary of Lehman Brothers' collapse with plans to enact sweeping new regulations over U.S. financial services.
"Under the Treasury reform blueprint," write the Wall Street Journal's editors today, "any financial company, whether a regulated bank or not, could be rescued or seized by the Federal Deposit Insurance Corporation if regulators believe it poses a systemic risk."
Much hinges on the term "systemic risk," but the president didn't elaborate much about that on Monday. Instead he hauled out a few hoary clichés from last Winter.
"We will not go back to the days of reckless behavior and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses," Obama said. "Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall."
Obama's visit to Wall Street follows an announcement Friday that the United States would impose a 35 percent tariff hike on Chinese-made tires. Now, the tariff is a complicated issue. Phil Levy attempts to explain the nuances at Foreign Policy's Shadow Government blog. The bottom line, however, is that the tire tariff was a choice, not a necessity -- an act of protectionism, not of free trade.
Yet here's what President Obama had to say about the tire tariff on Monday: "Enforcing trade agreements is part and parcel of maintaining an open and free trading system."
That's true -- when a trading partner breaks an agreement, you enforce the rules. And the Chinese have not been good partners when it comes to intellectual property, for example. But the tire tariffs have more to do with appeasing unions and other special interests in the United States, not punishing Chinese malefactors abroad. Naturally, China filed a complaint with the World Trade Organization.
Now, I might feel less anxious about Obama's high-stakes gambits with China and other prominent trading partners -- including Japan and Mexico -- if he didn't say things that would make a freshman econ major blush.
In the middle of his address to Congress last week, Obama dropped this little stink bomb:
I've insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects. But by avoiding some of the overhead that gets eaten up at private companies by profits and excessive administrative costs and executive salaries, it could provide a good deal for consumers, and would also keep pressure on private insurers to keep their policies affordable and treat their customers better, the same way public colleges and universities provide additional choice and competition to students without in any way inhibiting a vibrant system of private colleges and universities.
Profits aren't overhead and overhead isn't profits. Profits are what you're left with after overhead, salaries, benefits and taxes are paid. That's elementary economics -- so basic even a freelance journalist knows it.
(There are actually two stinkers in that passage. Perry Glanzner noticed and discusses the second one.)
Possible objections: That's just one gaffe! Bush made a million of them and gave us TARP and committed a million other sins, shredded the Bill of Rights, and all the rest of it. Yes, yes, that's fine. But Obama is president right now and it's his economy to ruin by virtue of his words and deed.
In fact, Obama's public displays of economic ignorance are extensive, if not particularly well documented. And they aren't always gaffes. Sometimes, Obama will speak in vague platitudes that suggest maybe he's just trying to B.S. his way through a economic policy discussion or making stuff up. From little slips like "profit and earning ratios" to howlers such as comparing the stock market to a "tracking poll," it's clear that the president is simply not in his element when it comes to questions of finance and economics.
Take a look at the transcript of the president's July 22 press conference. In his opening remarks, he says, "we passed a Recovery Act that has already saved jobs and created new ones." The administration predicted the $787 stimulus -- most of which has not been spent, by the way -- would hold unemployment at 8 percent. The official unemployment rate in August was 9.7 percent.
The point is, making economic predictions is tricky and making economic policies is trickier still. Having a president who doesn't know much about economics in the Oval Office wouldn't be so alarming if he had advisers who could check his worst impulses and correct his errors and temper his anti-market instincts. But instead Obama's surrounded by people, with the exceptions of Ben Bernanke and possibly Tim Geithner, who think and act just like him.
It's worth noting that the president's Wall Street audience gave him a standing ovation at the conclusion of his remarks Monday morning. Praise, like currency, can be easily inflated. Obama's job is to do no harm to the economy. So far his efforts, while expensive, have been of little help.
But the president can only get by on wit and ridiculous federal expansion for so long. For while those stockbrokers were cheering the president, the Dow Jones Industrial Average declined 23 points on sluggish trading. The market, it seems, is immune to the president's charms.