The State of the Union is Not Strong

Watching politicians give speeches, such as Obama’s State of the Union address, is an occupational hazard when you work at a think tank.

Which is why, in the past, I’ve heartily recommended the State-of-the-Union Bingo game developed by Americans for Tax Reform.

But I was in New York City for a television program about the President’s address, so I had to pretend I was an adult and pay attention to the speech.

That being said, the silver lining to that dark cloud is that the folks at U.S. News and World Report gave me an opportunity to add my two cents to an online debate on whether the President was correct to assert that the state of the union is strong.

In my contribution, I combined some dismal economic indicators and bad policy developments to argue that America could – and should – be doing much better.

Here are the bullet points from my article.

• Economic growth has been anemic. Normally there are several years of above-average growth after a recession. These post-recession booms are very important since they help people recover lost income. But there’s been no boom during the supposed Obama recovery. We haven’t even climbed back up to the long-run average of 3 percent growth.

• When the economy suffers from slow growth, it hurts the living standards of ordinary people. Probably the most damning statistic is that median household income has declined every year that Obama has been in the White House.

• Another very grim piece of data is that America’s labor force participation rate has dropped to the lowest level in decades. Yes, it’s good news that the official unemployment rate has fallen, but it would be much better if it fell because of strong job creation instead of people giving up on finding work.

• Since we’re talking about the unemployment rate, it’s worth noting that the jobless rate only started falling after the so-called stimulus ended and the burden of government spending began to decline. In other words, the good news was in spite of the president’s policies.

• And since we mentioned government spending, let’s debunk one of the president’s big claims. He bragged about a falling deficit (not that a $400 billion-plus deficit is anything to brag about), but red ink has only declined because of policies that the president opposed, such as sequestration.

• In his speech, Obama talked about the importance of making American more competitive, yet he wants to extract more money from the U.S. business sector even though we already have the world’s highest corporate tax rate. He also wants to boost the capital gains tax rate, which will be bad news for job-creating investment.

• One reason for all these dismal numbers is that there’s been a dramatic increase in rules, regulations and red tape from Washington. That’s not good for economic dynamism, particularly since a growing regulatory burden imposes a disproportionate burden on small businesses.

By the way, I need to make one correction. I didn’t realize the 2013 data on median household income had been released, and it turns out that there was a slight increase that year. So while the average household is more than $2000 poorer than when Obama took office, it’s not true that there’s been a decline every single year.

But that goof notwithstanding, I think my concluding remarks are spot on.

The bottom line is that the State of the Union is not strong. We’re suffering from anemic growth and income stagnation because of an ever-rising burden of taxes, spending and regulation. Yes, the president was right when he noted that we’ve created more jobs than Europe and Japan, but that’s hardly a big achievement since those nations have traveled even further in the wrong direction with statist policies.

In other words, what matters most, in terms of prosperity, is our long-run growth rate. And this is where Obama’s policies (like Bush’s policies) have hurt the country.

P.S. If you agree with my analysis, feel free to vote in the online debate and give me an “up arrow.” If you disagree with what I wrote, by contrast, I’m sure you have more important things to do than casting a vote.

P.P.S. I realize I’m being pedantic, but the two cartoons included in this post may be amusing, but they should have focused on the underlying disease of too much spending (particularly the problem of entitlement programs) rather than highlighting the symptom of red ink.