SOTU: Obama’s “Rigged” Economy

But there are other areas where it’s been more difficult to find agreement over the last seven years – namely what role the government should play in making sure the system’s not rigged in favor of the wealthiest and biggest corporations.  And here, the American people have a choice to make…

…Most of all, democracy breaks down when the average person feels their voice doesn’t matter; that the system is rigged in favor of the rich or the powerful or some narrow interest.

President Barack Obama, State of the Union, January 12, 2016

Watching the State of the Union last night was a bit of a snooze fest.  There was really nothing new or unexpected, although the speech was touted as an “untraditional” SOTU.  However, I was intrigued by the president’s belief that the system (I assume he means the capitalist system) is rigged.  The definition of “rigged” (according to Merriam Webster) is

1. to manipulate or control usually by deceptive or dishonest means

2. to fix in advance for a desired result

Hmm — I could see that term used to describe an election or a contest, but a capitalist economy?  That is a stretch.  In a market of 300+ million people doing various things, who really has the power to manipulate or control, or to fix in advance for a desired result?  The government, of course.  The president asserted that government’s role should be to make certain the system does not favor the wealthy or big corporations.  Unfortunately, it is government policy, not the private market, that does just that:

  • The U.S. Export-Import Bank doled out over $20 billion to firms in 2014 to facilitate the export of U.S. goods.  However, a few large firms – including General Electric, Boeing and Caterpillar – receive the majority of the subsidies, thereby stifling competition and creating barriers to entry for smaller firms.
  • Dodd-Frank legislation props up big banks while increasing regulatory compliance and capital costs for small, community banks.  Dodd-Frank hurts consumers, too.  One study found that every dollar spent on regulatory compliance reduces the money available to creditworthy borrowers by up to $10.
  • The federal flood insurance program primarily benefits the wealthy by encouraging the building of homes in high-priced coastal areas.  The program is $24 billion in debt, legislation that was passed to reflect the true cost of flood insurance premiums were met with constituents’ opposition.
  • The push to mandate a higher federal minimum wage actually does more to help higher-income households where there are two or three workers present, rather than helping the poor.
  • Effective this year, government enacted 3000 new regulations that will impact small businesses, in addition to the 3,300 rules that took effect in 2015.

This is just a handful of the many ways that government picks winners and losers, distorts the free market and creates adverse conditions that prevent people from succeeding.  It is remarkable how the president squawks that everybody should get a fair chance while he busily hands out goodies to large corporations (who, by the way are allegedly earning record profits) and wealthy donors at the expense of the not so well-heeled.  Yep, sounds rigged to me.

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