But They Are So Smart

Bruce Bialosky
Monday, July 26, 2010

There are many people, smart and good people, who are deeply confused about the direction of the current administration. They are baffled as to why Barack Obama and his acolytes cannot see what is happening to our economy. I encountered one of these good people recently, and engaged in an eye-opening conversation.

I contacted a gentleman who holds some real estate investments, and with whom I’ve done some business in the past. We had met through Republican politics, but I sensed he was really uncommitted politically and certainly was no staunch Republican. It all started when he asked me how I was doing.

I replied that I was doing great, which is almost always true. Even when things are challenging – like they are today – I am thankful to be an American Jew living in this country, the greatest country in the history of mankind, with a beautiful wife, two wonderful children, and three terrific dogs. He said “You’re doing great? You are the only one I talk to who is doing great. All my tenants are struggling. These people in the Administration are so smart, why don’t they understand what is going on out here?”

What an opening – how could I pass on that one? So I told him what I thought he understood already. Yes, the folks in the Administration may be smart, but they have no experience. Virtually none of them has ever participated in the free enterprise system creating income and jobs, so how – and why – would you expect them to create policies that would help entrepreneurs and small-business owners move the economy forward. They may be smart, they may be great at writing papers and drawing charts with arrows and symbols, but they are fairly low on wisdom. Wisdom comes from suffering experiences in life – not just living arcane social and economic theories.

A perfect example of this wisdom deficiency is the newest member of the administration, Donald Berwick, the man chosen to administer the Center for Medicare and Medicaid Services. These two behemoth bureaucracies consume 4% of our gross domestic product, and that’s even before Obamacare vastly increases the amount of money running through their bureaucratic fingers. So one might think Dr. Berwick would have had some experience running a major medical operation or a similar entity. It turns out that his most significant position was as President of the non-profit Institute for Healthcare Improvement (IHI). If you go to the IHI website, they self-describe the organization as “a small organization with a very big mission.” Not exactly the credentials most of us would consider when looking for someone to run an organization that dispenses hundreds of billions of dollars. The important thing is Dr. Berwick has studied health care organizations and written heady papers and pontificated in speeches about how the health care system should be run. That should be good enough. Since that is the background of our President and almost all of his advisors, Dr. Berwick seems to be a natural choice.

The problem is that the left-wing rabble that comprises the Obama administration – having never done it themselves – have no understanding of how money is created other than by encouraging the federal reserve to print some more. They have no appreciation of what makes this country great, as described by Ayn Rand in Atlas Shrugged. She wrote “To the glory of mankind, there was, for the first and only time in history, a country of money –and I have no higher, more reverent tribute to pay to America for this means: a country of reason, justice, freedom, production, achievement. For the first time, man’s mind and money were set free, and there were no fortunes by conquest, but only fortunes-by-work, and instead of swordsmen and slaves, there appeared the real maker of wealth, the greatest worker, the highest type of human being – the self-made man – the American industrialist.” The people running our country not only have never created a dollar’s worth of wealth, they appear to have a visceral disdain for those who do.

These government wonks repeatedly insist that federal intervention and control is the solution, but some of their own brethren have proven them wrong through an extensive study. Three Harvard Business School Professors, Lauren Cohen, Joshua Coval and Chris Malloy, examined the effects of increased spending over 42 years when 232 Senators or Congressmen became committee chairs and funneled federal dollars to their states or districts. The study shows that the jump in federal funds significantly decreases private sector expenditures for capital items, research and development, and employment. The government money just squeezes out private funds. They found that this happens as long as the chairman stays in place, and begins to reverse itself only when the chairmanship is lost. The recently deceased Robert Byrd is a prime example. He was famous for funneling a hugely disproportionate amount of federal funds to West Virginia for 50 years, but when was the last time you heard people rushing to set up businesses in West Virginia. Maybe now that Byrd is gone, there is hope for free enterprise in West Virginia.

Our current Administration is stacked with book-smart and degree-laden people. Unfortunately, they have very little wisdom, no personal experience creating wealth, and don’t realize that efforts such as the Stimulus Bill just deter private enterprise from reviving the economy as it has in past downturns. The solution will come when they wise up – which, admittedly, is highly unlikely – or when change is forced upon them by Republican majorities after November 3rd.