OBAMA'S WORN-OUT ECONOMIC IDEAS

By Thomas Sowell

Senator Barack Obama recently said, "let's allow our unions and their organizers to lift up this country's middle class again."

Ironically, he said it at a time when Detroit automakers have been laying off unionized workers by the tens of thousands, while Toyota has been hiring tens of thousands of non-union American automobile workers.

Labor unions, like the government, can change prices -- in this case, the price of labor -- but without changing the underlying reality that prices convey.

Neither unions nor minimum wage laws change the productivity of workers. All they can do is forbid the employer from paying less than what the government or the unions want the employer to pay.

When that is more than the labor in question produces, some workers who are perfectly capable become "unemployable" only because of wages set above the level of their productivity.

In the short run -- which is what matters to politicians and to union leaders, who both get elected in the short run -- workers who are already on the payroll may get a windfall gain before the market adjusts.

But, sooner or later, the chickens come home to roost. They have been coming home to roost big time in the automobile industry, where hundreds of thousands of jobs have been lost over the years.

It is not that people don't want automobiles. Toyota is selling plenty of cars made in its American factories with non-union labor.

Some claim that it is automation, rather than union wages and benefits, that is responsible for declining employment among the Detroit auto workers.

But why are automobile companies buying expensive automated machinery, except that labor has been made expensive enough to make that their next best option?

Senator Obama is being hailed as the newest and freshest face on the American political scene. But he is advocating some of the oldest fallacies, just as if it was the 1960s again, or as if he has learned nothing and forgotten nothing since then.

He thinks higher teacher pay is the answer to the abysmal failures of our education system, which is already far more expensive than the education provided in countries whose students have for decades consistently outperformed ours on international tests.

Senator Obama is for making college "affordable," as if he has never considered that government subsidies push up tuition, just as government subsidies push up agricultural prices, the price of medical care and other prices.

He is also for "alternative fuels," without the slightest thought about the prices of those fuels or the implications of those prices. All this is the old liberal agenda from years past, old wine in new bottles, a new face with old ideas that have been tried and failed repeatedly over the past generation.

Senator Obama is not unique among politicians who want to control prices, as if that is controlling the underlying reality behind the prices.

There is much current political interest in so-called "predatory lending" -- the charging of high interest rates for loans to poor people or to people with low credit ratings.

Nothing will be easier politically than passing laws to limit interest rates or make it harder for lenders to recover their money -- and nothing will cause credit to dry up faster to low-income people, forcing some of them to have to turn to illegal loan sharks, who have their own methods of collecting.

The underlying reality that politicians do not want to face is that here, too, prices convey a reality that is not subject to political control. That reality is that it is far riskier to lend to some people than to others.

That is why the price of a loan -- the interest rate -- is far higher to some people than to others. Far from making extra profits on riskier loans, many lenders have lost millions of dollars on such loans and some have gone bankrupt.

But politics is not about facts. It is about what politicians can get people to believe.