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State of the union and state of the state: An economics lesson for Wisconsin politicians

This week, Governor Doyle and President Obama will give their annual 'states of the union and state' speeches in Madison and Washington respectively.  Given the general political climate in Wisconsin and across the Nation, it will be interesting to see and hear the tone both politicians take (they are afterall, from the same political pew).  Governor Doyle can be more agenda focused given the fact that he is a lame duck although, most capable of doing damage to the careers of would-be-Governor Barrett and all other affiliated Dems running for statewide posts.  Mr. Obama on the other hand must walk a bit more carefully as he has already scattered political landmines around him sufficient enough that his room to maneuver politically is rather tight.

What I have seen and heard so far about both the President's and the Governor's speeches is a continued profound misunderstanding of economics and the sentiment of local and national voters.  I've been curious for quite some time how two men, obviously well educated, could be so economically dense.  And then just the other day, listening to President Obama talk about his immediate proposals to create jobs, it struck me (http://www.miamiherald.com/news/politics/AP/story/1445539.html.  Nearly simultaneously, I watched Governor Doyle's party loyalists in the Senate pass legislation making it easier for medical practitioners to be sued in Wisconsin for pain and suffering, including opening the door as far back as claims occurring between 1994 and 2000 (http://www.chicagotribune.com/news/chi-ap-wi-xgr-medicalmalpra,0,5251163.story).  My hypothesis: They both suffer from the same fundamental misunderstanding of economics and as a result, apply the same flawed economic assumptions time and time again to public policy issues.

The inherent flaw that both Governor Doyle and President Obama have when it comes to their (collective) understanding of economics lies in the relationship of government acting on the marketplace dynamics of supply and demand.  For example, Mr. Obama heard the cries of an overwhelming majority (the demand) for lower cost healthcare.  To Mr. Obama, this meant that he should use the power of the government to create a 'supply' of lower cost healthcare.  Herein lies the fundamental flaw.  What Mr. Obama did was to misunderstand that government's role is not to determine what kind of 'supply'; only to assist the market by eliminating the governmental barriers that allow this supply to be delivered within the marketplace. Instead, Mr. Obama decided that his and government's role was to determine exactly how the supply should look, how it should be delivered and under what kinds of circumstances and conditions the demand would be satisfied.  Now almost incredulously so, he wonders how and why those with the demand and the rest of the marketplace, rebelled against the 'supply' he was willing to deliver.  The problem for Mr. Obama is that he failed to remember that market forces determine the laxity or stricture of demand curves and simultaneously, generate supply if allowed, that meets the market wide demand at a point of equilibrium.  Government's role in this process is to create a playing field or venue where fair fight rules are used to arbitrate the process, nothing more.  If, as was the case for Mr. Obama and the House and Senate Democrats, government sees itself as both the interpreter of the demand and the creator of the supply, the process collapses onto itself thus leaving in this case, a political sink-hole.

Governor Doyle, suffering from the same economic myopia as President Obama, believes that state government is the only source capable of meeting the economic development demands of businesses and citizens in Wisconsin.  His answers to the common demands of citizens for lower taxes, better education and better roadways and infrastructure is to balance the budget of the State on debt and shell games, placate the teacher's union and the educrats, and fund light rail and inter-urban trains as opposed to repairing vital highway systems, bridges and overpasses.  For Governor Doyle, his view of supply is all about 'what' he wants Wisconsinites to have as an answer to demands rather than 'what' the marketplace could and would provide, including the marketplace of tax paying citizens and businesses.  Obviously, as with all demand and supply issues, when willing buyers cannot have their needs met by the supply systems available, they will have no other choice but to find new markets where the supplies to meet their needs are available.  In Wisconsin, such has been the case as businesses and individuals continue to exit far faster than their same clan from other regions, enter.

Correlating my hypothesis posed with the content of the speeches soon to be delivered,  one should see the following occur.  In Mr. Obama's case, he will deliver a series of off the mark proposals to address his reinterpretation of the demand that exists across the nation for lower spending, less government, more jobs, etc.  His proposals will all be contrived governmental 'supplies' that will fail to come anywhere close to meeting the demands at present.  He will, as he has to date, fail to understand that government is not the creator of supply nor is that its intended role in a free, market based society.  He will soundly miss the fact that government's role is to facilitate the rapid creation and express delivery of new and existing supply within the marketplace. 

Mr. Doyle will fail equally as miserably as Mr. Obama and because of his lame duck status, do further damage to his intended successor, Milwaukee Mayor Tom Barrett.  Barrett suffers from the same lack of economic education as does Governor Doyle and his lock-step embrace of all failed Doyle and Obama policies will surely crush his gubernatorial aspirations.  Wisconsinites simply will no longer tolerate unmet demands and the inefficiencies and inadequacies of the Wisconsin supply climate created by Governor Doyle.

The beauty of economics is simply this: left alone to work with the energies and capacities of the market and enhanced by the role government can and should play as an arbitrator not an actor, demand and supply work fluidly and in concert.  The lesson for politicians is that demands for lower governmental spending, lower cost health care and more jobs can only be addressed by government at the State and Federal level, allowing the energies of the free market to create the supply.  The best thing government and politicians can do is to stop believing that a 'governmental delivered or manufactured supply' is the answer to meeting the demands of taxpayers - individuals and businesses alike.

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