As the new NBC News/Wall Street Journal poll shows, confidence in President Obama’s ability to handle the economy or put the country on the right path continues to decline. But with more than two and a half years to go until his successor is chosen, the president is barreling ahead and attempting to implement his liberal agenda without congressional assent or much public support. This is a dubious strategy for any president, let alone one whose approval ratings are at all-time lows with little prospect that they will recover as he heads inevitably to the lame duck portion of his second term.
But in order to counteract these trends, the president has chosen what, at least in theory, are the most populist measures available to him. Hence, the “give America a raise” theme he introduced in his State of the Union speech in January that sought to pin a comeback on an effort to implement a hefty increase in the minimum wage. The follow-up comes this week as he builds on that sweeping measure with another designed to play to the same populist sentiment: changing the regulations about overtime payments. The law requires workers to be paid overtime for the hours they labor above the normal confines of the workweek. But the same laws have always exempted supervisors and management employees from these regulations. Obama wants to change that to allow more of those who run the workplace to benefit along with their employees with extra pay for extra hours.
But the truth about this proposal is that it is just as much an example of liberal economic snake oil as the minimum wage. Promising people a free lunch is always popular. But someone has to pay for it, and those who will be most affected by the president’s fiat will not be rich or powerful. That the president is shoving this down the throat of the country in a manner that undermines constitutional checks and balances that provide for accountability shows how desperate the White House has become for cheap and ultimately ephemeral political wins.
Like the hike in the minimum wage, it sounds perfectly fair and seems to address the supposed problem of income inequality. Why shouldn’t government force profitable companies to fork over more of their profits to their workers? Such measures appeal to resentment about big business and sympathy for those struggling to get by in a struggling economy.
But while implementing the new overtime rules may direct more cash to the pockets of some deserving workers, it will also hurt the very companies the country is counting on to help pull us out of the economic malaise that America is currently stuck in and reduce employment and growth.
As was the case with his blithe admonition for all Americans to get a raise, President Obama speaks as if money can be pulled out of the air to give to those who are hard-working or deserving without anyone other than the undeserving rich being made to pay for it. But this sort of magical economic thinking seems more appropriate to a banana republic than the economic engine of the free world.
The basic facts of life are that the increases in pay will have to be paid for by cuts in overall employment and wages. That will mean companies—large and small—will be forced to cut back on their workforces or to think twice about expanding their businesses. Once the applause for the free lunches being delivered by the president dies down, many of those who think they will benefit from his largesse will soon realize that they have become victims of basic rules of economics. And unlike the president, they will not be able to disregard or pretend that the force of Obama’s personality and good intentions or the wave of his imperial hand can override the math.
It is also remarkable that a president who claims to be clued into technology and cutting edge innovation would choose to ignore the economic models that show a better and more productive way to reward supervisors. The high-tech companies Obama loves to laud have always preferred rewarding those ascending the ladder of company responsibility with stock and other benefits that get them invested in their employers’ success. Merely raising wages is not only economically unsound, it is also less likely to incentivize workers and supervisors to work hard and get ahead. For a president who claims to champion the middle class, this measure is profoundly counterintuitive and unlikely to help anyone.
Last, by directing the Labor Department to change regulations in order to force through this change rather than asking Congress to do so, the president is again trying to see how far he can go in governing by executive order. The answer is that he can do a great deal on his own and the low approval ratings for Congress ought to enable him to get away with it without paying much of a political price. But if he thinks the American people are longing for him to govern as a benevolent despot, he is misreading the poll numbers. As unpopular as Congress may be, voters tend take an equally dim view of the president and still expect him to govern within the bounds of the Constitution.
Promising the voters free lunches via executive orders may garner the president cheers from his political base. But it won’t save the Democrats in a midterm election that is increasingly looking as if ObamaCare will produce another GOP landslide.