Statist Policies Undermine the State of the Union

We need free markets and small government, not intervention and a welfare state.

January 21, 2015 • Commentary
This article appeared on U.S. News & World Report (Online) on January 21, 2015.

President Barack Obama’s State of the Union address was filled with poll‐​tested buzzwords designed to reach average voters. All presidents do the same thing, so there’s nothing wrong with that, but it’s important to look past the rhetoric and investigate whether lofty words are matched by substantive policy.

This is where the president failed. He repeatedly highlighted how his agenda supposedly is good for the middle class, yet all of his proposed policies would make America more like Europe, where excessive government has led to economic stagnation and fiscal crisis.

But the problem is bigger than his proposed policies. Most of his past policies also increased the burden of government. And that’s why it’s rather silly for him to claim that America is now is “strong” shape. Let’s look at some sobering economic data:

  • 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.
  • 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 directionwith statist policies.

    That’s the lesson we need to learn. The Obama presidency, like the Bush presidency, has moved America in the wrong direction. We need free markets and small government, not intervention and a welfare state.

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