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Markets Aren’t Easily Charmed

Unlike some delirious pundits still caught up in the charm of Obama, Michael Gerson cuts to the chase:

Markets, investors, businessmen and entrepreneurs are generally immune to tone and charm. They seek reassurance on three issues of substance: the credibility of the credit system, the eventual return of economic growth and a serious approach to debt.

And now that we know what is in the budget — massive new taxes and spending — Gerson’s take on the speech seems even more compelling:

The source of skepticism for many Americans is not the prospect of government waste but Obama’s theory of job creation. It sounds somehow passe to assert it, but most jobs are created by private capital in the private sector, often by small businesses. And small businesses got little policy attention in Obama’s speech. An example Obama used — retaining police officers — is a worthy cause, but hardly typical of American job creation. A small-business owner heard nothing about his daily struggles with litigation or regulation… Obama was even less credible on the issue of debt. Most Americans seem to accept the need for the temporary deficit spike to provide a jolt to the economy. But Obama’s pledges to go “line by line through the federal budget” and to remove “waste, fraud and abuse” were the most tired portions of his energetic speech — and simply were not credible with Speaker Nancy Pelosi in vivid green over his left shoulder.

The question remains whether substance or style matter when what is at issue is the ability to instill confidence and create optimism. The style will continue to transfix many an eye-batting columnist and even sustain public opinion polls for a time. But economic activity adheres to some predictable truths. If you tax businesses and investors more, they’ll have less money to devote to wealth creation and hiring. If you bail out firms that should be put through bankruptcy, you’ll perpetuate ineptitude in management and misallocation of resources. If you keep credit-unworthy people in homes, they’ll eventually default and further weaken financial institutions.

Some things can’t be disguised by stagecraft or media cheerleading. In the end, it matters what you do, not how you describe your plans.



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