Here We Go Again…the State of the Union

It’s that time again.  For those of you who missed the SOTU last night, here are a few highlights of some eyebrow-raising claims and questionable statements:

“Upward mobility has remained stagnant…” If the meaning is that upward mobility has not changed, the president is correct.  But the term “stagnant” is normally associated with something that is negatively stubborn, such as economic growth.  Truth be told, upward mobility is not any worse than it was 20 years ago.

“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 to get ahead.”  False.  In fact,  the problem is that few Americans are working more than ever.  The Labor Force Participation rate is at  a 30-plus year low.  And average weekly hours have slightly declined compared to a year ago, according to the Bureau of Labor Statistics.  However, average weekly hours have increased since 2009, which was the worst year for weekly hours since the president took office.

“Over the past five years, my administration has made more loans to small business owners than any other.” Sort of.  While loans from the SBA peaked in 2011 and 2012 (because banks were reluctant to make loans that were not federally guaranteed), they also peaked in 2004 and 2007 during the Bush administration.  And sadly, loans are often politically, rather than financially, motivated.  (See the article from The Freeman.)

Still, other statements, while not false or questionable, were just an example of bad policy:

“…the White House just organized a College Opportunity Summit, where already 150 universities, businesses, nonprofits have made concrete commitments to reduce inequality in access to higher education and to help every hardworking kid go to college and succeed when they get to campus.”  The goal of college at all costs is simply bad policy and is responsible for job mismatches and soaring tuition costs.  The unemployment rate for college graduates is already abysmally high.  How about focusing on the demand for jobs that do not require a college degree? (Crickets chirping…).  See our NCPA report on this.

“So tonight, I’ve asked Vice President Biden to lead an across- the-board reform of America’s training programs to make sure they have one mission: train Americans with the skills employers need, and match them to good jobs that need to be filled right now.”  Vice President Biden will be responsible for making sure that American workers are trained with needed skills?  Call me cynical, but government job-training programs have a historically poor track record.  (See the following from NCPA’s Daily Policy Digest:  Why Government Job Training Fails, The Folly of Federal Training. Also, see the GAO report on green jobs.)  Let the private sector initiate this endeavor instead.

“I’m also convinced we can help Americans return to the workforce faster by reforming unemployment insurance so that it’s more effective in today’s economy. But first, this Congress needs to restore the unemployment insurance you just let expire for 1.6 million people.”  Good policy: reforming the unemployment insurance system.  See the NCPA report by economist Bill Connerly on how to do it.   Bad policy: extending benefits yet again. (see my previous blog post on this topic.)

“And Tom Harkin and George Miller have a bill to fix that by lifting the minimum wage to $10.10. It’s easy to remember: 10.10. This will help families. It will give businesses customers with more money to spend. It does not involve any new bureaucratic program. So join the rest of the country. Say yes. Give America a raise. (Cheers, applause.) Give ’em a raise.”  Okay, I am beating a dead horse here.  Instead of further comments, see the variety of NCPA publications on this topic here, here and here.  If America wants a raise, then America should sharpen its skills.  Isn’t that what all of the federal money poured into college is for?  How about minimum skill levels as opposed to minimum wages?

However, I will give credit to President Obama for mentioning the Earned Income Tax Credit and extending it further to singles without children.  It is not perfect, and yes, it is a form of wealth redistribution, but at least it does a better job of helping lower-income people without distorting the labor market.

“…tomorrow I will direct the Treasury to create a new way for working Americans to start their own retirement savings: MyRA. It’s a — it’s a new savings bond that encourages folks to build a nest egg. MyRA guarantees a decent return with no risk of losing what you put in. And if this Congress wants to help, work with me to fix an upside-down tax code that gives big tax breaks to help the wealthy save, but does little or nothing for middle-class Americans, offer every American access to an automatic IRA on the job, so they can save at work just like everybody in this chamber can.  Not a lot of details on this proposal, but it  is somewhat strange to me.  Isn’t this what an IRA is for?  And has the president forgotten about the little-known Saver’s Credit for  low-income earners?  Instead of inventing a new financial vehicle (which is somewhat like reinventing the IRA), why not make the Saver’s Credit refundable and also require that the refund goes an IRA account for the recipient?  Read the NCPA publication here on how to help savers.

Time for another cup of coffee.  Tune in again next year for another blog post on the SOTU.  Cheers!






Comments (9)

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  1. Lucy says:

    I couldn’t stomach watching last night, and after reading this, I’m glad to have missed it.

    The labor force participation rate issue has been completely ignored. The president will come out with his reports and say unemployment has gone down, when in fact it’s only due to people who have given up on finding work! Unfortunately, most people will not see beyond the unemployment figure and will think things are improving.

  2. Lloyd says:

    The myRA idea sounded like not much of a new idea. Something about saving to develop a “nest egg” by investing in treasury bonds. Really?….

  3. Thomas says:

    “How about focusing on the demand for jobs that do not require a college degree?”

    Exactly. Why isn’t there more focus on job training for jobs will be in demand and expect to have growth. College is not the “be all end all” and not everyone is fit for college. Nothing would stimulate the job market more than a focus on jobs that require apprenticeships or vocational training.

    • Matthew says:

      This would increase employment in the middle class, as well as not diminishing the value of a college degree.

    • Walter Q. says:

      Not to mention this being a viable solution to those who do not value a college degree at the price in which one costs. Or to those who cannot afford it in their current situation without taking on a mountain of student loans.

  4. Charles T. says:

    This blog shows the amount of political interests that surround the SOTU. The President’s intervention was filled with nice words, saying what the people wanted to hear instead of what is really going on. His flawed policies left him no option than to stand up and try to defend them by lying to the American people.

    • Peter A. says:

      I’ve always loved the analysis after the SOTU. When media crosschecks the President’s statements with reality, it allows the viewer to build an opinion, and in most cases realize the lies they are being told. I have never liked the SOTU, too much clapping and not many actual ideas.

  5. Jesse W. says:

    What worries me is the President’s statement that he would act, with or without Congress. That he will use executive orders to achieve his goals. I really don’t think that executive orders will solve anything. He is only saying that to increase his popularity, showing off as a strong individual that will “make America a better place.” With his statements he is telling the American people that every problem is Congress’ fault.

    • BHS says:

      He will use executive orders any way that he can. It is incredible – and concerning – that there is not more outrage over this.

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