American Elephants

What to Expect From the State of the Union —Or Not by The Elephant's Child

UPI Pictures of the Year 2012 – WASHINGTON POLITICS

The New York Times offered a preview of President Obama’s State of the Union Speech tomorrow, sounds like same as last year’s except longer and duller:

President Obama on Tuesday will move beyond of the politics of the moment to define a second-term agenda built around restoring economic prosperity to the middle class, using his State of the Union to unveil initiatives in education, infrastructure, clean energy and manufacturing.

After four long years of increasing unemployment, Obama wants more money to spend “invest.” There has been enough talk about the sequester, that Obama is probably aware that his very own clever ideas (Republicans will be so terrified by the idea of huge cuts in defense spending that they will give me what I want) are not going to work. The Sequester was entirely Obama’s idea, and he is so resistant to reducing spending at all that Republicans may just accept the sequester to get the necessary cuts in spending.

Democrats, impervious to reality, simply refuse to accept the idea that spending is a problem. It seems pretty obvious when we spend more money than our economy produces. Barack Obama was inaugurated on January 20, 2009. The recession that he “inherited” officially ended in June of 2009. Median household income was $54,983. By June of 2012, Median household income had shrunk to $50,964, adjusted for inflation. That’s $4,019 in lost real income. That hurts!

The unemployment rate is 7.9 percent — one tenth of a point higher than it was when Obama took office. But this does not cover the real toll of joblessness. The Labor Department’s  U-6 rate, which includes people who want a job, but have become so discouraged they have quit looking is 14.4 percent. A new study from Rutgers University shows that 23 percent of those surveyed have lost a job sometime in the last four years, while another 11 percent have seen someone in their household lose a job. Jobs, unemployment and the economy are the top concerns of the public, ranking far above any other issue.

Obama’s mindset and ideology make him convinced that changes in the economy come from the actions of government. Government will create jobs with new government spending on green energy projects. Government will create more capable new employees with government retraining programs and more student loans. Look for the new “Healthy Housing Initiative.”

So now that the economy is recovering (?) all the poor government employees who are vastly overpaid in comparison to their peers in the private sector, but who have suffered immeasurably by having their salaries frozen for the past two years, really deserve a raise, which Obama intends to give them. He really is blind to what is actually going on in the economy, and it doesn’t occur to him to set an example of thrift.

In a New Year’s interview with NBC’s “Meet the Press” Obama said his top priority for the next four years was immigration reform. In his inaugural address, Obama ignored the issue of the economy or jobs. The closest he came was when he said “An economic recovery has begun.” So now he wants to convince America that jobs are his top priority — in spite of every indication that it isn’t a priority at all.

But it is Lincoln’s birthday. You can expect him to compare himself favorably to President Lincoln.


Obama Will “Pivot to Jobs” Once Again! by The Elephant's Child


Investors Business Daily reported on President Obama’s preview of his State of the Union speech to Democrats. He promised that after four years of historically weak economic growth and an unemployment rate that seems stuck at or near 8% since he first took office, he’s going to turn his attention to job growth.

Even the Huffington Post put together a “Pivot to Jobs Deja Vu” story:

  • January 2009: “My economic agenda…begins with jobs”
  • November 2009: “This is my administration’s overriding focus.”
  • January 2010: “We are going to have a sustained and relentless focus over the next several months on accelerating the pace of job creation, because that’s priority No. 1.”
  • September 2010: “Our No. 1 focus has to be jobs, jobs, jobs.”
  • December 2010: “My singular focus over the next two years is…jump-starting the economy so that we actually start making a dent in the unemployment rate.
  • January 2011: “My principal focus, my No 1. focus, is going to be making sure that we are creating jobs not just now but well into the future.
  • November 2012: “Our top priority has to be jobs and growth.”

The new words are “growth agenda.” This means he is going to recycle his jobs promise, and offer up the same old economic nostrums he has been pushing for the past four years. More taxpayer money will be directed to cronies in the green energy business because they will promise green jobs. He will “invest” more on education and “roads and bridges,” raise taxes higher on the rich— just to be completely fair. He will also go on about growing the economy “from the middle out,” with no explanation of how that works.

This is really sad. At a time when the American people really need a growing economy that will grow the need for more jobs; the necessary understanding of how jobs are created is at complete odds with this president’s most basic ideas about the value of big government.  He has no understanding of the risks a business must take to borrow large amounts of money and expand; and how more layers of regulation which come along with threats of overcriminalization, the need to hire more workers just to keep up with the required paperwork —which just costs a business more without adding a cent in revenue. Taxes are going up. Obamacare is raising costs so much that businesses are having to reorganize entirely to avoid the costs of offering insurance to their workers.

Democrats’ idea of incentives have always been: “we will give you benefits and then you will vote for us so you do not lose the benefits.” It works a goodly percentage of the time.

There is a point at which the recipients of government largesse simply give up, and accept that it will not get any better, there is nothing to hope for except winning the lottery, and they have to protect the benefits they are receiving. That’s a dreadful spot to be in, because you no longer believe in yourself. And government benefits are only as dependable as the government in power as long as they decide to continue them. You are completely at the mercy of a bunch of politicians, and that is a frightening place to be.

Art Laffer has a column in the Wall Street Journal explaining the role played by disincentives in economics. The example comes from Pennsylvania where the young single mother with two children on welfare will receive government “needs tested” benefits — such as food stamps, child care and Medicaid services — worth more than $45,000 annually. If she begins earning wages, her total annual income, including her welfare benefits will rise as well—up to about $9,000 in wages. The next $5,000 in wages mean she will lose some Medicaid and other benefits, the equivalent of a $100% marginal tax. Would that motivate you to go out and find work?  Didn’t think so.

This means her total income — welfare benefits plus wages, minus taxes— won’t reach $57,000 until her gross wage income rises to $69,000. The money she earns between $29,000 and $69,000 faces a marginal tax rate of 100%. Her housing and food subsidies drop way down when she reaches $29,000, and at $57,000 her family no longer qualifies for the Children’s Health Insurance Program (CHIP).

This example is particular to Pennsylvania, but there are similar disincentives everywhere. Minimum-wage laws intended to help the young and poor, but study after study has shown that governmental minimum-wage laws discourage employers from hiring.  Laffer suggests:

How to counter these disincentives? My preferred solution is to enact a form of enterprise zone where marginal tax rates would be greatly lowered for both employers and employees in areas with high poverty. For starters, employer and employee payroll taxes could be eliminated for people who both live and work in the enterprise zones. There would be scant revenue loss to the U.S. Treasury because few people are working in these areas anyway.

This is all just part of the old saying that the right hand doesn’t know what the left hand is doing —particularly true in government and politics.  Democrats are unusually susceptible to “investing” taxpayer money in schemes that they believe will make the people love them and draw closer to that dream of a better world that they cherish. They just don’t recognize all the stumbling blocks in the way, nor that their better world is unreal and unreachable. And of course as Margaret Thatcher used to say. “Sooner or later you run out of other people’s money.”

A Dismal Speech Dissected As Never Before: by The Elephant's Child

Especially for those folks who watched the State of the Union and shrieked back at the TV: “That’s NOT True.” You could call it’ putting things in a more favorable light’, you could call it ‘sheer demagoguery.’  but the good folks at the CATO Institute weren’t inclined to let the president get away with it.  Enjoy.

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