Nov 13, 2009 11:38 am


Stop telling me that unemployment is a lagging indicator. It may be so but it is higher and is lagging more in the US than in the rest of the developed world. Not only German but even British unemployment is declining! Oh, yes, it picked at 7.9% and declined to 7.8% to the "surprise" of economists. The are probably the same economists who no longer dare attach the word surprise to the ongoing decline in German unemployment to 7.7%. After all, Brown, unlike Merkel, used generous economic stimulus to try to deal with the recession. So clearly the stimulus alone is not responsible for the lack of decline in the American unemployment rate.

What is? More than ever, I suspect the fault lies in the Obama/Democratic congress legislative agenda which creates too much uncertainty in the business community for them to invest in the US.

Consequently, when American companies, even those run by the American government such as GM, prefers to direct it's investment not only to fast growing Asia but also to slow growing Europe. Case in point, GM managers enlightening decision not to sell it's European subsidiary Opel as it had previously announced it was doing.

It was a decision that benefit Britain and Germany not to mention that it will probably force GM to repay the German government 2.2 billion dollar advance it gave GM. GM's decision stunned Europe. It should not have. Faced With potential costs inherent in thousands of pages of new complicated health care and cap and trade legislation, GM managers sensibly concluded that investing money in Europe is more sensible because the environment is more predictable.

Indeed, the notion that the high American unemployment may be a self inflicted wound may be penetrating even the thick skull of some economists and Democratic politicians. Moreover, they are beginning to understand that the US simply cannot afford Obama's ambitious legislative agenda. Consider the following exchange between to economists on BBC's Head to Head and remember they have not even mentioned cap and trade.

John Silvia: I agree on the forward momentum. My issue is that the pace will be disappointing to a society and political class that has made significant promises in health care and education that will not be deliverable with just moderate growth.

Middle-income and low-income families will see their standard of living below their expectations. . . .

Mark Perry: Passing health care legislation, at least the public option part, is looking less and less likely to me, so that issue could be dead by the end of the year.

In other words, as could have been predicted and has been predicted, Socialists such as Obama, who purport to put equality before productivity, end up making the poor poorer. This is the essential truth Ayn Rand explained so well and the left succeeds in covering so well.

Is there a light at the end of this tunnel? Yes. The truth is beginning to penetrate and hopefully restrain Obama and Congressional Democrats and, more importantly, ingenious Americans are beginning to tinker again. If only, the increasingly coercive Democratic administration does not force them to leave their homeland in search for freedom as those coming to America did in the last four centuries.

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