President Obama’s response to the Great Recession and then a pallid recovery has been guided more by “fairness,” a thinly veiled code for redistribution, than by free-market principles. As it stands now, the top 1 percent of Americans generate 16 percent of the nation’s income but pay 40 percent of the income tax. This isn’t enough for Obama: he’s pushing for still-higher taxes on those who create jobs while increasing transfer payments and entitlement spending for everyone else. Recent publication of a 1998 video in which Obama declares, “I actually believe in redistribution,” helps reveal the philosophical underpinnings of his economic agenda.
To see the long-term consequences of these policies, Americans can look to Argentina, a country that was once strikingly similar to the United States. As outposts of the “New World,” both were settled by frontiersmen who tamed a wild landscape, setting the foundation for valuable agricultural and livestock industries. The frontier spirit contributed to strong federalist traditions, which in Argentina’s case drove the outlying regions to take up arms against the dominance of Buenos Aires throughout the nineteenth century. Free trade with Europe powered both nations’ economies, attracting foreign investment and millions of European immigrants between 1880 and 1930. By 1930, Argentina’s GDP and per-capita income rivaled those of Germany, Canada, and Australia. This period was Argentina’s golden age, and the country remained a free-market bastion through the 1940s. Buenos Aires was the “Paris of the South,” with a trove of cultural and architectural treasures that reflected the country’s wealth.
Too many on the right are quick to compare Barack Obama with Adolf Hitler, but the comparison between the two–and the Americans and the Germans for that matter–doesn’t stand up. A more fruitful comparison is with Juan Peron, and it’s one I’ve made on many occasions over the years. But alas Americans’ ignorance of Latin American history is even more profound than the ignorance of their own. And it isn’t just Obama either; it’s the entire Democrat Party approach to life, as I discussed re Hillary Clinton.
And, of course, the result of Peron’s policies are well-known:
Perónism’s effects were soon clear. Between 1945 and 1948, Argentina’s $1.3 billion trade surplus was eviscerated. Argentina borrowed heavily from the United States, forcing the nation’s central bank to print money to service the debt, devaluing the peso by 70 percent between 1948 and 1950. Political leaders made some genuine attempts at reform, but Perón’s overhaul of economic institutions and tradition of central planning proved hard to undo. After decades of high inflation and continued stumbling from one crisis to the next, the country defaulted on its debt in 2001 and had to be bailed out by the IMF and other international lenders.
Argentina’s fall from grace remains unprecedented in modern history. It was driven by the hubris of a government that took its country’s affluence for granted and thought it could manage the economy better than the private sector could. And it shows what America could look like in 30 years. The size of the U.S. government has accelerated measurably under the Bush and Obama administrations. From 1980 to 2000, government spending held steady between 30 percent and 35 percent of GDP, but it jumped to 37 percent after Bush’s second term and is now at 41 percent as Obama’s current term comes to a close. As government grows, so do annual budget deficits, themselves a brash assumption that economic growth will continue indefinitely. Interest rates today are at rock bottom, penalizing those who would save or invest conservatively. The Fed’s current expansionary policies may devalue the dollar by as much as 33 percent over the next 20 years.
It’s not a perfect choice we have. But ultimately it’s a choice about ourselves and the kind of country we want to be. And, at least, we have a candidate who knows how to keep track of money.