Be A Hardcore Liberal or Change Politics: Obama's Challenge

All the political pundits have switched from trying to predict the race to defining the challenges facing Barack Obama. Most of them are focusing on the difficulties and problems of the country (and the world), and not on the leadership qualities of Obama. But the difficult situation was staring down whoever won the election, and it is the leadership qualities of the President - not the details of the situation - that will determine the outcome.

Obama's initial leadership dilemma will not be satisfying the sore losers on the right. His challenge involves the differences in the two core factions that elected him. The fundamental liberals expect him to reverse eight years of conservative rule (if you call record spending and deficits conservative) and enact a legion of standard left-wing policies and regulations that they believe will fix the free market and the problems of the lower classes. Meanwhile, the younger hopefuls expect him to usher in a new era of changing the way politics is done. He cannot do both.

We have to wait over two months to see which direction Obama will lean, although we will get a clue by the kinds of people he appoints to surround and advise him. Hopefully he will select some who are well-grounded in business and economic principles - both in theory and experience, since Obama has virtually no experience administering a corporation concerned with inflows and outflows of money - whether a business or the government. (His presidential campaign, which was overflowing with so many donations that he reveled in half-hour blocks of advertising, doesn't count. The organization he is inheriting is a little bit more starved for cash.)

My concern is that he will be encouraged to push for many standard Democratic policies that end up being counterproductive to their own goals. I've been skimming through his "Blueprint for Change," which contains promises such as enforcing equal pay of genders, since for every $1.00 a man makes, a woman only makes $.77.

Thomas Sowell's Basic Economics reminds us that the average person's salary rises significantly over the years as they gain more experience and productivity that makes them more valuable to a company, and that the average woman leaves the workforce for some period or periods of time to bear children, thus giving those women less work experience as well as making it harder for them to keep up in industries that are fast-changing (which, requiring more work and learning, typically pay higher). Sowell claims that when you adjust for the right factors and compare men and women of equal work experience, the pay difference disappears. This makes sense because it is disadvantageous for a company to discriminate against women who are just as productive as men when a competitive company will gladly pay a woman the same amount - or more if she is more productive and more valuable to the company.

So if the government forces an employer to pay the same wages for some high-skilled task to a man who has never left the workforce or a woman who has taken some time off to bear and raise children and thus has less experience and is less efficient, which person would the employer rather hire? He might have hired the woman and paid her the same amount as a different man with the same amount of lower experience and efficiency, but if he has to pay her as much as a man with more experience and efficiency, he is going to be encouraged to hire the man. It will actually be harder for some women to get a job if employers have to pay them more than their work is worth, and make it harder for them to gain the missing experience that makes them as valuable as some men. Thus "fair wage laws" that fail to take into account factors such as childbearing end up hurting the job opportunities of women, not helping them.

There are similar problems with other well-meaning Democratic policies, and hopefully these problems will not be realized to the full extent that economic theory suggests. The best scenario is that Obama saves the planet. The worst is that he fails and we come to think that his election wasn't something groundbreaking, but that he was thrust into this position because it would be groundbreaking - before he was truly ready. That is my concern, and I'm hoping history proves me wrong.