Thursday, February 14, 2013

“State of the Union”

Sydney M. Williams

Thought of the Day
“State of the Union”
February 14, 2013

Like Pavlov’s dogs, we have become conditioned to instant gratification. While explanations for such behavior may be shrouded in the mists of human psychology, government has certainly played a role. Despite four years of trillion dollar deficits and total federal debt exceeding 100% of GDP, Tuesday’s State of the Union was simply another confirmation of the importance Mr. Obama sees of government in our lives. The President asked $50 billion for infrastructure projects, universal public preschool for all four-year olds, higher minimum wages, and keeping the promises we have made to seniors and the infirm. He called for a carbon tax to limit emissions and an emphasis on renewables, despite our nation being rich in hydrocarbons. Like all politicians, Mr. Obama was long on promises and short on costs.

Also, like all politicians, Mr. Obama played fast and loose with facts. He said that we added six million jobs in the past four years, but neglected to point out that roughly 5 million people have been added to the workforce and, more importantly, that there are 3.2 million fewer people working today than when he took office. He failed to mention that more people have been added to disability roles than have received jobs since he took office, or that the number of people on food stamps has increased 50%. He said that the deficit has already been cut by $2.5 trillion, more than halfway toward a $4 trillion target, a mirage-like number, as our deficits have exceeded $1 trillion in each of the past four years and federal debt is fifty percent larger than it was four years ago. He did ask three important questions: How do we attract more jobs? How do we educate workers for those jobs? How do we ensure that those working will be paid a fair wage?

But the President’s responses suggest more government. He didn’t mention oppressive regulation or that the Affordable Care Act has rendered offering healthcare to workers unaffordable to many small businesses. He did not acknowledge that the government has refused to allow fracking on federal lands, or that the EPA has prevented the building of the Keystone XL pipeline. While he did talk of tax reform, it was only in the context of generating more revenues to government, not to provide more incentives for employers. There was no mention of the streamlining effects competition brings to the private sector. Mr. Obama urged Congress to raise the minimum wage from $7.25 an hour to $9.00, as it would allow millions to emerge from poverty. He pointed out that the minimum wage pays annually about $15,000 a year – an amount no family can live on. He neglected to point out that $9.00 an hour would only pay $18,720 annually – roughly what the U.S. Census deems to be the poverty level for a family of four. As Marco Rubio said, in the Republican’s response, such a number is unconscionably low. The answer, as Senator Rubio said, is faster economic growth, not saddling employers with a higher minimum wage, which history has shown almost always increases unemployment. Steve Malanga, of the Manhattan Institute, put it more eloquently: “The real key to raising wages is not boosting the minimum wage, but eliminating the disincentives to hiring.”

Our tax system needs reform. It penalizes savers and rewards consumption. The President speaks eloquently of “shared sacrifice” and “investments” in the future, but his reality is something far different. By shared sacrifice, he is speaking of redistribution and by investment, he means spending on entitlements and benefits for consumption today.

A characterization of our age is that we live under the sign Carpe Diem (seize the day,) the words David Brooks entitled his op-ed in Tuesday’s New York Times. Mr. Brooks’ concern is that when we focus too much on the present, we give up the future. The principal exception, it seems to me, are immigrants – those who come here because of the promise of opportunity that America has long offered. Naturally there are a few who come for the handouts, but they are a distinct minority. Mr. Brooks quotes from one of my favorite novels, Giants in the Earth by O.E. Rolvaag. He describes Per Hansa, a Norwegian immigrant, describing his Minnesota land to a visitor. He speaks of his beautiful home and the surrounding barns and out-buildings. Mr. Brooks writes: “The visitor confesses he cannot see them. That’s because they haven’t been built yet…but they already exist as reality in his mind.” The President is right to call for immigration reform – protecting our borders while making it easier for immigrants to live and work here. I was pleased that he mentioned that learning English should be a prerequisite for citizenship.

In his latest (and sobering) book, The Great Degeneration, Niall Ferguson concerns himself with what Adam Smith called ‘the stationary state.’ By that he meant formerly wealthy nations that had ceased to grow. Professor Ferguson notes that it is very hard to achieve higher growth under a heavy debt burden. He quotes from Reinhart and Rogoff’s “Debt Overhangs: Past and Present.” “The debt burden lowers growth only when it rises above the 90% of GDP threshold.” Today our total federal debt exceeds 100% of GDP, but supporters of Mr. Obama will point to the much higher level of debt following World War II, a period that was followed by strong economic growth. However, that period coincided with an extraordinary pent-up demand resulting from sixteen years of depression and war. Borrowing from our grandchildren to pay for entitlements for people my age places an undue burden on future generations. Professor Ferguson writes: “I want to suggest that the biggest challenge facing mature democracies is how to restore the social contract between generations.

Mr. Obama, I am sure, cares about the welfare of the people and especially, as he repeatedly says, those who represent the middle class. But his means of redress seem at odds with what will do them the most good. Noting that the speech came on the 154th birthday of Abraham Lincoln, Kevin Brady and Lewis Lehrman, in an op-ed in Wednesday’s Wall Street Journal, wrote: “The underlying theme of Lincoln’s economic initiatives was that by providing ordinary people with incentives to use their own skills and labor, the entire nation would prosper.” The key word is ‘incentives” – very different from Mr. Obama’s emphasis on entitlements and redistribution.

Sounding more like a huckster at a campaign rally, rather than a President delivering a State of the Union, Mr. Obama called out half a dozen times: “Let’s get it done!” He is an eloquent spokesman, but his policies call for more, not less, government. He has a habit of taking credit for the favorable consequences of programs he did not support, like oil and gas production, and of placing blame on his political opponents for any failures. He demonstrates none of the strength of character of a Harry Truman, with the buck stopping with him. His view toward Washington is precisely the opposite of what Ronald Reagan told the American people when the late President said, “the nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.’” Keep in mind that Mr. Reagan’s Presidency ushered in the longest lasting period of economic growth in the post-war period. Will we be able to say the same for Mr. Obama?

The state of the Union is still strong, but less so than before. It is being weakened by crippling debt. It remains under attack by Islamic terrorists that we cannot wish away. It is being challenged by a rising China and a resurgent Russia. Financially, the process of decay has been underway for decades. The fault does not lie solely with Mr. Obama, but he has done little to strengthen the fundamentals of the nation or the resolve of its people.

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