STAFF NEWS & ANALYSIS
Economist's Sad Analysis of Obama's State of the Union
By Staff News & Analysis - January 31, 2014

Deal or no deal? American politics may be becoming a bit less dysfunctional. In big annual speech to Congress, Barack Obama made several promises. He pledged to raise the minimum wage for those contracted to the federal government, to create a new tax-free savings bond to encourage Americans to save, to work for the closure of the Guantánamo Bay prison, to push immigration reforms and to veto any sanctions that Congress might pass designed to derail his deal with Iran over its nuclear programme. But for anybody listening from abroad, his most startling promise to America's legislature was to bypass it. – The Economist

Dominant Social Theme: President Barack Obama was a little more assertive about government activism – and that's a good thing.

Free-Market Analysis: The editors of The Economist magazine gazed upon Barack Obama's state of the union message and decided it was good.

The reason it was good is because the US president gave indications that he would try to "get more done" over the next year or two than previously.

Of course, from a free-market point of view, the idea of Obama getting "more done" sounds a bit like a threat. When laws are passed in the US or anywhere else, they mostly retard the prospects of some worthy businesses at the expense of others.

Here's more from the article:

"Wherever and whenever I can take steps without legislation to expand opportunity for more American families, that's what I'm going to do," he vowed. This year, he said, will be "a year of action".

That in America this pledge was not regarded as the most remarkable element of the speech shows how inured the country has become to dysfunctional government.

After years of gridlock, Americans have got used to the idea that the gerrymandering of the electoral system and the polarisation of their two political parties have set the branches of government against each other, and that the checks and balances originally intended to keep the country's polity healthy have condemned it to sclerosis.

Government shutdowns, fiscal cliffs and presidents who promise to do their best to ignore the legislature are no longer much of a surprise. Yet Americans may have become too gloomy: Mr Obama's speech could be the latest in a series of small signs that things are getting better.

Last year's shutdown was such a public-relations disaster for politicians in general and the Republicans in particular that it is unlikely to happen again. The Tea Party's kamikaze tactics have been discredited; that is why, without much fuss, Congress recently managed to pass a budget.

… Take inequality, Mr Obama's new theme. Higher minimum wages are a less effective way to help poorer Americans than expanding the earned income tax credit (a negative income tax for workers on low pay). Several Republicans are open to this idea. Senator Marco Rubio, a rising star, recently said so; a fact Mr Obama alluded to in a speech that was uncharacteristically—and encouragingly—short of partisan sniping.

On immigration, too, a deal is doable. House Republicans are about to release a list of principles for reforming a system everyone agrees is broken. Mr Obama said he wants to sign a bill this year; if he handles Congress delicately, he may get his wish.

The same goes for his request for lawmakers to give him "fast track" authority to negotiate trade deals. This is an essential tool for promoting free trade: if Asians and Europeans think Congress will rewrite trade pacts after the haggling is over, they will not take Mr Obama seriously as a dealmaker.

It is still sad that this is the best that can be said of the world's most powerful democracy. It is hard to imagine the citizens of emerging economies looking at these compromises and finding them inspiring. But they are a start—and the political winds may be changing.

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The Economist article mentions three areas that lend themselves to presidential activism: inequality, immigration and trade.

Interestingly, two of these three areas advance a globalist agenda. This makes sense if you believe that Washington generally is in thrall to globalism. In fact, even the "inequality" meme lends itself to bigger government.

So, start at the beginning. The Economist would like to see a minimum wage raise of some significance, but standard neo-classical economic theory informs us that raising minimum wages via government mandates actually retards hiring. Instead of hiring more individuals, businesses may be apt to hire fewer – even though such an employment stance may eventually retard business prospects.

Thus, those who want to see a more vibrant private sector lose twice with this sort of approach: Businesses don't hire as much nor expand as quickly. Some solution. That The Economist could tout it only shows the current unseriousness of the magazine.

Second comes immigration. Last we looked, a tiny percentage of US citizens regarded immigration as an issue crying out to be remedied. "Immigration" is a preoccupation of the legislative class – and one that Republicans will further damage themselves with if they support the current "remedies" on the table.

The real reason – as we have explained before – for immigration reform may have to do with a growing alignment between the US, Mexico and Canada. While the so-called North American Union is denied at the highest levels, the pattern of the merger remains clear.

A US-sponsored drug war is destabilizing Mexico, various secret security pacts are homogenizing the civil and military forces of the three countries, health care policies are being brought into alignment and the immigration issue, if resolved in a way that allows further legislative easing of employment conditions, will create a kind of industrial merger.

Finally, there is so-called free trade, another issue that is well down on the list of US civil preoccupations but is an issue beloved by the internationalist crowd.

One can see the international influence simply based on the misnomer utilized: Free trade is anything but free. These vast 1,000-page treaties are MANAGED trade – and as such never accomplish anything remotely "free." Each treaty merely drains competitiveness from US workers generally while providing healthy incentives for the further spread of US corporatism throughout the world.

None of these three areas cited by The Economist as places where Obama can have a legislative impact are remotely positive from the standpoint of the average US worker – or even the average entrepreneur who should be able to make up his or her own mind about whom to trade with and where … and how much to pay workers, as well.

The Economist magazine wants government to interfere yet again with worker pay scales in the name of equality, supports further industrial and worker mergers with Mexico and wishes to generate a system where the US president has significant or even sole authority over important managed trade pacts masquerading as free-trade negotiations.

After Thoughts

The article concludes by noting that these are meager and even "sad" goals given the extent of what could and should be accomplished by the US legislative system in the early 2000s. But we would argue that what is really sad is an article in a supposedly free market-oriented publication that suggests these are worthy goals to begin with.

Posted in STAFF NEWS & ANALYSIS
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