Did you watch President Barack Obama’s State of the Union address last week? Nah, me neither. We went to see American Hustle instead. Actually there is kind of a poetic symmetry between it and Mr. Obama’s speech. Yes, the next day I read the whole thing – all 6,778 words of chest beating banalities. You can get through it a lot quicker if you ignore the programmed pauses for the obligatory standing ovations by the Democrats, and skim over the messages we’ve heard a hundred times and never believed once.
The only parts I was actually interested in were those dealing with the economy. After five years and this speech my bet is the Mr. Obama couldn’t spell E-C-O-N-O-M-I-C-S if you spotted him all the letters except the “O’s”. (For those of you forced to endure a teachers union led education in the Portland Public Schools there are two of them – “O’s that is.) There are three elements of Mr. Obama’s speech in particular that are troubling.
First, Mr. Obama noted:
“Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better. But average wages have barely budged. Inequality has deepened. Upward mobility has stalled. The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by – let alone get ahead. And too many still aren’t working at all.”
That’s right, Mr. Obama’s fellow Ivy League associates have been making out like bandits principally by doing the same thing he does – risking other people’s money with the secure knowledge that, when they fail, America’s taxpayers, rather than them, will foot the bill. (With an eye towards full disclosure, I have been riding their coattails as the stock market has increased to new highs; however, I’ve been risking my own money – not someone else’s.)
But it is the wide-eyed innocence, the feigned outrage, and the “I’m-an-observer, not-a-participant” posture that is particularly galling. It is reminiscent of a speech that Sen. Max Baucus (D-MT) gave to a gathering of lawyers in Helena, Montana, near the beginning of his tenure in the United States Senate. Mr. Baucus described his service on the Senate Finance Committee and declared his amazement at how casually the Senate spent money. He stole a line from some other politicians by noting, “You know, there is a Billion here and a Billion there and pretty soon it adds up to real money.” I’m sure that Mr. Baucus thought that was clever and funny but sadly for the next 36 years that is exactly how he conducted himself on the Senate Finance Committee including his time as chairman. (Yes, that is the same Mr. Baucus who is the primary sponsor of Obamacare and subsequently told Sec. Kathleen Sebilius that Obamacare was a train wreck waiting to happen – as if he had nothing to do with its promulgation – proving once again that graduation from an elite West Coast school (Stanford, BA and JD) is no more a predictor of intelligence or competence than graduation from elite East Coast schools (say Columbia and Harvard.)
What Mr. Obama fails to understand is that it is his policies precisely that have resulted in massive unemployment (the lowest labor participation rate in forty years), repression of average family income and the fabulous accumulation of wealth, without real economic growth, for the money changers on Wall Street. He is responsible for the increased disparity.
As of October 2012, Henry R. Kravis of Kohlberg Kravis Roberts estimated that large business had amassed a little over $1 Trillion in cash/capital that was sitting on the sidelines because they are concerned about the economic policies of this president. That number has been increasing ever since because the uncertainty has grown. That is over $1Trillion sitting idle while it could be invested in economic expansion that could deliver one job after another – private sector jobs, not increased employment of government workers or increased salaries and benefits for them as was the case in Mr. Obama’s Trillion dollar “stimulus package.” There are those who believe that Mr. Obama is simply trying to avoid responsibility. I think he simply doesn’t understand. Mr. Obama was the least prepared person by education, training and/or experience to assume the presidency and, because of his arrogance, he has learned less than zero – particularly about the economy – during his five years in the presidency.
Yes, Mr. Obama is responsible. He may not be solely responsible but, as the leader of the nation, he is primarily responsible. He has committed real errors (e.g. the Trillion dollar “economic stimulus”) and he has refused to engage on a whole host of economic issues; preferring to, as he did in the State of the Union speech, recite the litany of economic pain, as if he were an observer instead of a cause.
The second area is his “new” proposal for the MyRA. Mr. Obama stated:
“Let’s do more to help Americans save for retirement. Today, most workers don’t have a pension. A Social Security check often isn’t enough on its own. And while the stock market has doubled over the last five years, that doesn’t help folks who don’t have 401ks. That’s why, tomorrow, I will direct the Treasury to create a new way for working Americans to start their own retirement savings: MyRA. It’s a new savings bond that encourages folks to build a nest egg.”
In these words is proof positive that Mr. Obama does not understand anything about the economy. First, this isn’t a new idea – we are already doing it. We already have the Roth IRA which is after tax contributions to be invested tax free in whatever securities individuals want – that’s why it is called an “individual” retirement account. Under Mr. Obama’s version, the after tax contributions can only be invested in federal bonds – when he labeled this MyRA, he wasn’t kidding, it is his decision not yours. It should be called ObamaRA.
We also have a similar retirement program that was developed nearly eighty years ago. It’s called Social Security. And it has been steadily going broke since – a March 2010 article in the New York Times noted that payments would begin to exceed contributions in that year. Under Social Security there is a mandatory extraction of a portion of workers’ salaries and is given to the government to be spent on recurring costs – not a dime is invested for purposes of securing the “res of the trust” or to produce a return on it. It is simply a promise of the government to make payments sometime in the future. When Social Security was adopted in 1935, it promised a retirement-like pension to those age 62 and older. At the time of the adoption, the average life expectancy of all adults was 61.7 years. That meant that over half of the people paying into Social Security would never live long enough to receive anything in return.
From its inception, the money generated by mandatory payroll deductions was used to finance the recurring expenses of the federal government. For a period of time the so-called “social security trust fund” was treated for accounting purposes as a separate entity but the funds were always used by the government for general government purposes – not investment purposes for future pension payments. It was a sleight of hand income tax used by President Franklin Roosevelt and his Democrat controlled Congress to increase revenue to be used by government. Added to that was the belief at the time that the workforce would increase faster than the percentage of adults reaching retirement age – in other words, new investors would pay the returns guaranteed to the early investors and the actual historical contribution would never have to be repaid. That’s called a Ponzi scheme. Social Security was a sop designed to build hope while delivering little.
Next, Mr. Obama noted that as the stock market doubled in value it did nothing for those who did not already have an IRA. That’s true, but his proposal to invest (loan) money to the federal government would likewise do nothing for those who use IRA funds to invest in the market. It won’t help those investing and it sure won’t help job creation in the private sector. In fact, to the degree it results in removing money (capital investment) from the private sector by giving it to the government, it will have a dampening effect on economic growth. But that’s not something you would learn as a “community organizer” or most certainly if you are so arrogant as to refuse to listen to experts in the field.
And finally, the current federal deficit exceeds $17 Trillion and that does not include the unfunded future liability for public pensions, Social Security, Medicaid, or Medicare. The last thing this country needs is to further increase the national debt by MyRA (ObamaRA) or the recurring annual budget burden for payment of interest on those debts. Thank God, the First Lady is in charge of the Obama family finances or we could be visiting Mr. Obama in debtor’s prison.
The third area is the nation’s energy policy. Mr. Obama noted:
“Now, one of the biggest factors in bringing more jobs back is our commitment to American energy. The all-of-the-above energy strategy I announced a few years ago is working, and today, America is closer to energy independence than we’ve been in decades.”
Mr. Obama continues to take credit for that which he is routinely opposed – the development of domestic oil and gas resources. With the advent of fracking and the mapping of the Baaken field in Western North and South Dakota and Northeastern Montana, domestic production of oil has risen. A March 18, 2013 report from the Energy Collective noted:
“Historic Oil & Gas Production Trends –the production of U.S. domestic oil & gas has been in decline since the recent historic peaks in1985 and 2001 respectively. The decline in oil & gas production bottomed out in 2008 and 2005 respectively, and has since increased quite significantly. During 2008-2012 domestic oil production increased 29% and 2005-2012 natural gas production increased 27%.”
But the increased production occurred primarily on private lands because Mr. Obama and his administration continued to close off access to known reserves on Federal land and coastal off shore regions. (Please spare us the baloney about how many thousands of acres of federal lands are open for exploration – opening lands where the resources aren’t, doesn’t make up for closing the land where resources are.) Oil and gas production on federal lands actually decreased during that period according to a March, 2012, edition of Commentary Magazine:
“Earlier this month, the Energy Information Administration reported that oil and natural gas production on federal land declined 40 percent over the past decade and 14 percent in 2011 alone.”
Mr. Obama then went on to note:
“One of the reasons why is natural gas – if extracted safely, it’s the bridge fuel that can power our economy with less of the carbon pollution that causes climate change. Businesses plan to invest almost $100 billion in new factories that use natural gas. I’ll cut red tape to help states get those factories built, and this Congress can help by putting people to work building fueling stations that shift more cars and trucks from foreign oil to American natural gas. My administration will keep working with the industry to sustain production and job growth while strengthening protection of our air, our water, and our communities. And while we’re at it, I’ll use my authority to protect more of our pristine federal lands for future generations.” [Emphasis supplied]
That’s pretty much code for the continuing the moratorium on the use of federal lands for oil and gas production.
Meanwhile, Mr. Obama has wasted hundreds of millions of dollars on wind and solar projects which continue to provide power at rates that must be subsidized and which are so intermittent that the nation’s power grids cannot reliably use the power generated. Let’s all try to remember that solar panels do not produce power at night and only provide marginal power on days of heavy overcast – think Willamette Valley for eight months a year. Let’s also remember that wind generators don’t provide power when the wind doesn’t blow or when they are down for maintenance – a fact that is observable anytime you pass by the wind farms just west of Palm Springs. In contrast, demand for electricity does not subside at night or when the wind doesn’t blow. America’s power grids were developed using the assumption of continuous, reliable sources of power. To accommodate the sporadic production of power that is wind and solar will require literally hundreds of billions of dollars of additions and alterations of the power grid – a fact that is never included in estimating the production cost of wind and/or solar. Worse yet, the very people who promoted alternative energy (wind and solar) now resist the necessary changes to the power grids to move that power from where it is produced to where it is consumer -–all in the name a “pristine” environment.
But Mr. Obama is just another cheap politician who knows how to take credit for something for which he had nothing to do. At least I hope that is the reason rather than that he doesn’t understand this issue any more than he does the economy.