The Economics of “Confidence”

Vince Lombardi, the iconic coach of the Green Bay Packers, was responsible for a number of now-famous quotes during his career, but maybe none as famous as this one:

“Confidence is contagious.

So is lack of confidence.”

This mantra for mental attitude (which I first heard from an old coach of mine as a teenager) is being proven on a daily basis in our country today, and I maintain that if it’s not reversed quickly, it will have far-ranging effects on our national psyche.

Lombardi’s aphorism applies directly to our economy, as I believe we are suffering from a national Lack of Confidence. We’ve been enduring a moribund economy for so long now, many of us have forgotten what a good one actually looks like. The reasons for our economic doldrums are complex and varied: current tax policy, the Fed’s monetary policy, “Green Energy“, Unemployment, and many more.

But just as much as any of the factors I listed above, the perceived economic climate is as much or more to blame for the continuation of our troubles as any measurable economic data points. What I mean by that is: do the folks who risk money (in order to make more money) believe that the climate exists here for them to maximize their chance for success?

Largely, the answer to that is a resounding “No”.

And in my humble opinion, the cause for that perception stems directly from the current Administration.

We’ve all read and heard the examples before: Obama’s incessant cry to “Tax The Rich“, his railing against “fat cat” bankers, and demonizing of “private jet owners“. The president has taken Class Warfare rhetoric to new levels, and it doesn’t require a Ph.D. to infer that folks trying to earn as much as the market allows are not looked upon kindly by the current White House resident.

Thus, much of the available capital which could be going to work here instead sits on the sidelines, or finds a more friendly venue overseas.

And the reason is that, alongside some poorly constructed laws like Dodd-Frank, we continue to get verbiage from the Obama White House like this most recent offering. From The Weekly Standard:

On Thursday, the White House’s administrator for federal procurement policy, Joe Jordan, wrote on the White House blog about a legislative initiative that President Obama is sending to Congress next week “to stop excessive payments to Federal contractors.”  

Jordan continues:

“Under current law, contractors that are paid based on their incurred costs (which represents about one-third of current contract spending) may demand reimbursement for executive salaries, bonuses and other compensation up to the level of the Nation’s top private sector CEOs and other senior executives. This taxpayer reimbursement level has skyrocketed by more than 300 percent since the law was enacted in the mid-1990s.”

The president believes excessive compensation for executives is unnecessarily driving up costs for the government.  What is excessive?  Apparently, anything more than the president himself makes [emphasis added]:

“The Administration’s proposal calls on Congress to abolish the current formula and instead tie the reimbursement cap to the President’s salary and apply it across-the-board to all defense and civilian cost-reimbursement contracts. Tying the cap to the President’s salary provides a reasonable level of compensation for high value Federal contractors while ensuring taxpayers are not saddled with paying excessive compensation costs.” 

Now, the argument here is not that the Federal Government should be spending more money than it needs to. No, the salient point is that the Government is once again attempting to dictate what constitutes a ‘reasonable’ amount of compensation for free citizens.

Surely you haven’t forgotten THIS little gem from President Populist?

That is Obama’s personal belief, once more being thrust into federal policy. I’m reminded of the Broadway musical ‘The King and I‘, and the King’s insistence people either sit or kneel in his presence, since no one’s head was allowed to be higher than his.

“….it’s GOOD to be the King. Et cetera…, et cetera…, et cetera….”

Obama’s “…you’ve made enough money” stance was bad all on its own, but now it’s to be considered “excessive” to earn more than the President?

What manner of governance is this, if not that of a wanna-be King?

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The fall-out of this hubris abounds. For instance, we’re still stuck with high unemployment, which in the words of The Washington Post’s Ed Rogers “has gone from terrible (8.3 percent) to very bad (7.5 percent)“. Rogers also points out:

• “…that more than 9.5 million people have dropped out of the labor force since the president took office in 2009“,
• and “the current labor force participation rate is just 63.6 percent, the lowest it’s been since May 1979.”  
• And finally, that “…more than 15.2 million more people are on food stamps today than were in February 2009, and during the same time frame, the poverty rate has increased by 0.7 percent“. 

Add in the realistic fear that if you disagree with the views of the Administration, you are likely to be targeted by Federal attack dogs, and the reluctance of so many corporations to openly pursue economic success here seems to be the obvious (and really, only) decision one could make.

Heck, when even economic Socialists like Paul Krugman are singing songs from my hymnal, you know things are bad.

“Defining a Good Economy way, way down”?

Yep, Paul; that we are.

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We do still have hope, but it will only come about if we can neuter the reign of fiscal terror that Obama & Company are waging upon American businesses, both large and small alike. There are still plenty of folks who remember what a thriving economy looks like, but the longer this continues, the more the current state of affairs will become the new norm, and the more people will just …give up.

Or, to quote Lombardi one last time:

“Once you learn to quit, it becomes a habit.”

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***UPDATE: 6-3-2013 at 3:35pm – 

Looks like more bad economic news which buttresses my overall point, courtesy of Ed Morrissey:

“The American economy hit another bump in the road, or headwinds, or whatever euphemism is in use this week for negative news. The ISM index for the manufacturing sector unexpectedly slid into contraction territory — although it didn’t have far to fall to get there…”

Read it all.