Clarke’s Response to the State of the Union

The views expressed in this op-ed do not necessarily reflect those of the “!” Student Newspaper.

On January 28, President Obama delivered his annual address to the nation to spell out his agenda for the remainder of his second term. With his approval ratings at just 43.5% (1), the President needed to use this speech to put a rough first year of his second term behind him, and offer a vision for the next three years.  For those of you who prefer not to sit through hour-and-15-minute-long speeches, here are my opinions about the State of the Union speech and how the President’s policies may affect you.

State_of_the_UnionFive years after the official end of the Great Recession (2), the economy is still viewed by most Americans as the most important issue facing the nation, and the President spent a great deal of his speech focusing on his agenda to improve the United States’ prospects. In my opinion, the policies proposed by the President will do little to help an economy that has barely improved from when he took office five years ago. Take, for example, Mr. Obama’s proposal to raise the minimum wage to $10.10 an hour. This proposal, while undoubtedly well intended, would prove disastrous for the very people it is trying to help. When the cost of labor becomes more expensive, employers are faced with a choice to either hire fewer people or raise prices to offset the higher costs. According to a 1982 article published in the Journal of Economic Literature and used in Stanford University’s Economics 101 class, “studies show that a 10% increase in the minimum wage reduces teenage employment by 1 to 3 percent. (3)” Even Bill Gates, argues that: “raising the minimum wage does cause job destruction.”

As most at the OHS plan to attend college, the President’s plan to combat the high cost of a university education is particularly pertinent to us. “We’re shaking up our system of higher education to give parents more information and colleges more incentives to offer better value,” he said, “so that no middle-class kid is priced out of a college education. We’re offering millions the opportunity to cap their monthly student loan payments at 10 percent of their income.” Here again, good intentions are clearly evident, but in reality this program amounts to another federal subsidy, which appears to have done nothing to lower the cost of college. The facts are that federal subsidies for education have increased by 475% since 1982 and the cost of college as subsequently increased by 439%, four times the rate of inflation over the same period. As students’ purchasing power increases due to the subsidy, colleges simply raise their prices in lockstep. Continuing these questionable policies will not make things better and, in fact, the President’s plan may only exacerbate the problem.

President Obama spent a considerable amount of time defending the Patient Protection and Affordable Care Act, commonly known as “Obamacare”, a law that 66% of Americans (according to the Associated Press) say is not going well. The President touted the bill, saying that “no American — none — zero — can ever again be dropped or denied coverage for a preexisting condition.” Once again, this policy is particularly detrimental to young people like you and me. Clearly the idea that insurance companies are required to offer insurance to people who are already sick is going to raise costs: after all imagine what would happen if you could buy car insurance after you crashed your car. To subsidize these higher cost, the President turned to young people and their parents, and said: “Moms, get on your kids to sign up.” In the new system, young people are expected to buy policies that are more expensive and offer more coverage than they need. All of this subsidizes those take out more in healthcare than they pay in, mostly the elderly and those who are already sick. Of course, all insurance plans works this way, but the difference is that under Obamacare, participation is compulsory: you can either buy health insurance or face a fine. In this way, the President puts the load on the backs of the young and healthy and creates a system that disproportionally burdens them.

This redistribution of wealth from the young to the old is not limited to healthcare. The President was able to get through the entire speech without mentioning the 17-trillion-dollar national debt, 7 trillion of which was incurred under his watch. Some will blame George W. Bush, the former president, for the debt increase. Clearly, Mr. Bush increased the debt significantly, however, it is disingenuous to claim that he is responsible for the increase in debt that occurred under President Obama. In fact, many attribute the Troubled Asset Relief Program, more commonly known as the bank bailout, to be responsible for the debt increase under Obama. While TARP was signed by President Bush and increased spending, subsequently raising the debt, Mr. Obama, then a presidential candidate, publicly supported the bill and voted for it in the U.S. Senate. In addition, the Bush-era tax cuts are cited as responsible for the increase in debt. However, it is important to also consider that President Obama extended virtually all of the Bush tax cuts. It is ironic how President Obama supports these debt-causing policies, even when in the past he has noted the long-term damaging effects of debt.

Furthermore, the most impactful than any of policies of the Bush administration is the Mr. Obama’s insistence on Keynesian economic policy fueled by increasing federal outlays.  Urging increased spending on universal Pre-Kindergarten, infrastructure, and extended unemployment benefits, all of which will increase federal spending and subsequently increase the debt, is simply passing the bill off to future generations. The President chastised Republicans in Congress, insisting they raise the debt ceiling, or the amount of the debt the United States is legally allowed to incur. Eight years ago, then-Senator Obama voted against raising the debt ceiling and said, “Leadership means that the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership.” I believe that the Senator was right, and the President should take his own advice.

Perhaps, the current president could consider the example former President Bill Clinton faced. Mr. Clinton dealt with a Republican-led Congress, but nonetheless worked with the other side to pass welfare reform and balance the budget. (It is important to note that his budget passed with no Republican votes.) Why can’t President Obama seem to work with Speaker of the House John Boehner, as President Clinton did with then-Speaker Newt Gingrich? The disparity between these two administrations is striking. On the one hand, Mr. Clinton was able to compromise with the Republicans and saw tremendous economic growth as a result. Unfortunately though, Mr. Obama has demonstrated that he cannot work with the other side and, as a result, we have seen five years of stagnant growth.

Beyond the debt issue, several instances of contradiction were very noticeable throughout the speech. Take the President’s lamenting over income inequality:

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 to get ahead. And too many still aren’t working at all.

This section of his speech raises the question: whose responsibility is that? After five years, I believe that the country’s condition is ultimately the President’s responsibility, and the fact that the income gap has widened is partially attributed to his policies. Mr. Obama’s monetary policy of quantitative easing, essentially printing money, and keeping interest rates low has caused the stock market to soar, gaining 30% last year. Almost always, the ultra-rich get to reach that level via the stock market. While this policy has helped the wealthy, it has done little to assist the middle class and lower-class families.

Mr. Obama also advocated an “all of the above” energy policy. Apparently the Keystone Pipeline, a proposed project to build a pipeline from Alberta’s oil sands to U.S. refineries and may create thousands of jobs, is stalled yet again, without approval. The decision to place the environment over jobs, regardless of whether this is a good idea or not, obviously contradicts the President’s claim that jobs are is number one priority.

Of course, in all of these proposals: the minimum wage, college subsidy, and universal healthcare, the President genuinely does want to help people. However, Mr. Obama, Congress and various bureaucrats in the far-away Washington D.C. cannot and do not know what the best decisions are for the people who make up this nation. The lure of the promises made by the President and the images he creates are enticing, but we cannot forget that they are just promises to be fulfilled in the future. As an old proverb goes, “the path to hell is paved with good intentions.” It is not enough for the President to simply mean well; he must also do well, and it is in this area that there is cause for much concern.

I agree with some parts of this speech, though. The President’s proposal to change the way foreign profits are taxed when they are brought back stateside is something Republicans could certainly get behind, as is increasing veterans benefits and helping our returning soldiers find jobs. On the whole, however, this State of the Union showed the nation what we already know: that the President is running on steam. Unable to work with Congress, I believe he is forced to offer small, bite-size policy changes that may threaten to defy the Constitution through executive action. Mr. Obama showed that his administration is out of big new ideas — elected without a coherent second-term agenda. Whether he will be able to reconcile with Congress and pass meaningful legislation remains to be seen, but for the millions of Americans left behind by the five years languishing in this economy, the next Presidential election in 2016 cannot come soon enough.

(1) According to the Real Clear Politics average

(2) A recession is formally defined as two consecutive quarters of GDP contraction

Categories: Opinion


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