The State of the Onion

Ok, so I am a couple of weeks late on this one.  It was exam time for my classes, and I had to first read the transcript of the President’s speech, and then calm down enough to think clearly.  When you have been following economics and politics for as long as I have, certain parts of your mind scream out “Lies!!!” as you read something like this:

State of the Union

The title is not a typo.  Political speeches like the State of the Union address have many layers, just like an onion.  You have to peel the layers back to see what is really at the core of the speaker’s message.

I don’t even bother to watch the speeches anymore.  I just download the transcript and go over it the next day.  So, here is my take on the economic policies in the speech.

Blatant Falsehood #1

Over the last few years, both parties have worked together to reduce the deficit by more than $2.5 trillion.

I already covered this here:

The federal government has been spending 40% more than it takes in in revenue for the last 4 years.  It has run a deficit of more than $1,000,000,000,000 for the last 4 years, and will do so for a 5th: Trillion Dollar Deficits.

One thing you need to realize is that when Washington politicians talk about ‘cutting spending’, they really mean that they are going to increase spending by less than they had planned.  In other words, a reduction in spending isn’t really a reduction in spending.

Blatant Falsehood #2

Already, the Affordable Care Act is helping to slow the growth of health care costs.

Ok, so health care costs are slowing.  But, is it because of the Affordable Care Act, or something else?  Many provisions of the Affordable Care Act haven’t even been implemented yet.  It could be that the effects of the recession are causing people to spend less on healthcare (demand for healthcare declines, so the price of healthcare goes down).

Slower Growth in Health Costs

Blatant Falsehood #3

…nothing I am proposing tonight should increase our deficit by a single dime.

Then why, Mr. President, does your budget still project the national debt to be $25 trillion by 2020?  If you read the entire speech, it is nothing but promises for more government spending and tax credits for businesses.  There is no flipping way that the policies that the President proposes will not increase the deficit.

3 Stupid Questions

Every day, we should ask ourselves three questions as a nation: How do we attract more jobs to our shores? How do we equip our people with the skills they need to get those jobs? And how do we make sure that hard work leads to a decent living?

3 Brilliant answers

1) Cut taxes and regulations to attract investment (like the Keystone Pipeline).

2) Stop subsidizing education so that colleges and universities will be forced to cut staff and lower tuition.  Tuition has far outpaced both the CPI and home prices in the last 30 years:

College Tuition

Why?  In large part it’s because colleges and universities figured out that they could con young people into borrowing money (guaranteed by the taxpayers) to pay for parties, alcohol, drugs, and sex an education, and that they could then increase tuition into the stratosphere.  Oh, and its not because those lazy professors are overpaid either:

Highest Paid Private College Presidents

Highest Paid Public College Presidents

Sweet Count of Monte Cristo!  Why is the president of Birmingham Southern making over $2 million a year?!?!?

3) Cut taxes and regulations so that people get to keep more of the money they earn by working hard.  Honestly, this is Economics 101.

La Piece de Resistance

Tonight, let’s declare that in the wealthiest nation on earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour.

Once again, this is covered in Economics 101.  I am beginning to suspect that the reason why the President refuses to release his college transcripts isn’t because he was classified as a foreign student, but because he failed economics.

The relevant question here is, what effect would raising the minimum wage have on the unemployment rate?

I have written 3 papers (unpublished) on the effects of increases in the minimum wage on the unemployment rate.  Increasing the minimum wage results in more unemployment among low income, unskilled hourly workers.

Every.  Damn.  Time.  And we don’t need to go back very far to see this.  In fact, the last time the federal government raised the minimum wage from $5.25/hr to $7.25/hr in 2007, the unemployment rate went from 4.6% in 2007 to 9.6% in 2010:

Minimum Wage Increases, Unemployment Doubles

And the group that experiences the most unemployment every time the minimum wage is raised?  Black urban males between the ages of 16 and 19.  The same demographic that ends up in gangs, selling drugs, and killing each other.  Just what does the President have against these black urban teens?

The bulk of the speech is the usual political blathering that you get when any politician opens his mouth in front of a camera.

Why are we listening to these types again?

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Categories: Borrowing, Debt, Depression, Government Shenanigans, Government Statistics, Unemployment

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