Before his speech in New Hampshire on Tuesday, President Obama visited a small technology company in Nashua called ARC Energy. During his talk, he promoted ARC Energy as an example of the kind of innovation he wants taxpayers to subsidize with what he called “seed money” in the form of federal “green jobs” funding. We need to do it, he said, so we can get ahead of the Chinese.
Probably few in the audience knew what the people who founded ARC Energy only two years ago know: ARC received no federal startup money. Dr. Kedar Gupta and his wife founded the company with their own money, the same way Dr. Gupta co-founded GT Solar, the world’s largest maker of photovoltaic cells, in the 1990s.
Obama presented a narrative that was fundamentally false – namely that, without federal “seed money,” our technology sector won’t advance quickly enough to beat the Chinese. But guess where ARC Energy sells many of its products? China.
That sleight of hand was typical of Obama’s speech. The main point of his presentation was to tout his plan to pump $30 billion into small banks for the stated purpose of providing them with enough money to lend to small businesses. But that cannot possibly be the real goal of the program, for several reasons.
First, community banks are not short of cash for lending. According to Stephen Wilson, the chairman-elect of the American Bankers Association, they aren’t lending because federal bank regulators have forced them to tighten their standards. “Obama is calling us ‘fat cats’ and telling us to be lending more, and then he sends his bank examiners and regulators to stifle our lending,” Wilson told the Cincinnati Enquirer last month. If Obama wanted to free up cash for small businesses, he could have his regulators back off and let small banks lend.
Second, if Obama were really interested in freeing up more money for lending, why is he proposing to tax large banks? Wells Fargo, one of the large banks Obama wants to punish with a new tax, is the largest small-business lender in America. It expects to loan $16 billion to small businesses this year. Bank of America projects a similar figure.
Those two banks alone would lend about as much (more, if the economy improves) to small businesses this year as the $30 billion Obama wants to spread among smaller banks. But rather than make it easier for them to lend, Obama is making it harder by proposing to tax them simply for being large and by having his regulators restrict their ability to take risks. By encouraging banks to build up larger cash reserves, Washington is reducing the amount of money available for lending.
Clearly, Obama’s interest is not in freeing up money for small businesses. The only explanation for his behavior — taxing the largest banks and distributing money to smaller ones — is that he wants to use the power of the state to shift assets (and, thus, power) from large banks to smaller ones.
This is purely an ideological crusade. Obama believes that large banks are generally a bad thing, and small ones are generally a good thing. So, he’s taking from the large and giving to the small. It’s economic idiocy, but in his mind it’s a morally just cause.
What Obama did in New Hampshire is the same as he has done for the past year, and on the campaign trail before that. He presented a façade of an argument to justify actions Americans would not possibly support were he to state their real motives. It’s exactly how he tried to sell health care reform (it’s vital to economic recovery!), his massive transfer of wealth from private producers to government employee unions (it’s shovel-ready stimulus!), and his cap-and-trade bill (it will create green jobs!).
If we take any lesson from his New Hampshire “town hall” event (it wasn’t a town hall meeting), it is that we must ignore what the president says his proposals are intended to do and scrutinize what they actually do. More often than not, we will find that they simply transfer wealth and power from people and groups Obama dislikes to those he favors.