When it comes to political promises that cannot and will not be met “It won’t cost a dime” is right at the top of the list. Not unexpectedly, that was the central thesis of numerous Fantasyland projections in Obama’s State of the Union Address Tuesday Evening.
Here are a few ideas from his state of the union address and my comments on them.
On Health Care Quality
In reference to health care costs, the president claims “medical bills shouldn’t be based on the number of tests ordered or days spent in the hospital – they should be based on the quality of care that our seniors receive.”
Mish says good luck with charging healthcare based on quality, because quality is impossible to define.
On Closing Loopholes
Obama says we can hit deficit targets and “save hundreds of billions of dollars by getting rid of tax loopholes and deductions”.
Mathematically speaking, one cannot save a dime by closing loopholes. Closing loopholes may be more fair, but that has nothing to do with “saving money”. Rather, closing loopholes simply spreads costs around in a different fashion.
On Tax Code Changes
Obama says “The American people deserve a tax code that helps small businesses spend less time filling out complicated forms, and more time expanding and hiring.”
I certainly agree with that, and a flat tax with no deductions would do just that.
Would Obama be willing to implement a flat tax structure and close “loopholes” like the mortgage interest rate deduction?
Of course not. The Real Estate industry would scream bloody murder. Obama is not really interested in closing loopholes per se, just the selected ones that he wants.
Hot Air and No Substance
Obama says “The greatest nation on Earth cannot keep conducting its business by drifting from one manufactured crisis to the next.”
I certainly agree with that.
The solution is to get rid of the Fed, end fractional reserve lending, and implement a balanced budget. Unfortunately, the president did not mention any of those action items. He is all hot air and no substance.
It Won’t Cost a Dime
Obama wants “Congress to help create a network of fifteen [manufacturing] hubs and guarantee that the next revolution in manufacturing is Made in America. He says “nothing I’m proposing tonight should increase our deficit by a single dime.”
That certainly would be excellent news (if only it was true). In reality, new manufacturing hubs in one city will come at the expense of existing manufacturing somewhere else unless more money is thrown at the problem.
Yet, if more money is thrown at the problem, why should anyone expect results different from Obama’s disastrous entry in various clean energy schemes that went bankrupt?
Climate Change Nonsense
Obama says “For the sake of our children and our future, we must do more to combat climate change.”
I suggest that if we want to do something for the sake of our kids, we should eliminate the deficit, get rid of the Fed, and back the dollar with gold.
Regardless of whether or not anyone believes the hype over global warming, the notion that governments will do anything sensible about it is complete nonsense. Certainly every cap-and-trade proposal to date has been preposterous.
Obama’s speech got downright scary when he said “If Congress won’t act soon to protect future generations, I will. I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy.”
And somehow that will “not cost a dime”.
“The states with the best ideas to create jobs and lower energy bills by constructing more efficient buildings will receive federal support to help make it happen.”
Apparently, federal support to construct more buildings will “not cost a dime” either.
President Obama proposes a “Fix-It-First program to put people to work as soon as possible on our most urgent repairs, like the nearly 70,000 structurally deficient bridges across the country.”
Supposedly that will not “cost a dime either”. Wait a second on that. His next sentence was “And to make sure taxpayers don’t shoulder the whole burden, I’m also proposing a Partnership to Rebuild America that attracts private capital to upgrade what our businesses need most: modern ports to move our goods; modern pipelines to withstand a storm; modern schools worthy of our children”.
I have a simple question: What part of the burden will taxpayers shoulder?
This “partnership” sounds suspiciously like a plea for tax hikes with the money going to overpaid public union workers.
If the president really wanted to insure we rebuild America at a reasonable cost, he would scrap Davis-Bacon and all prevailing wage laws, implement national Right-to-Work laws, and end collective bargaining of public union workers.
Instead, the president appears willing to tax the rest of the county to death to help the unions who elected him.
Still More Tax Hikes
The tax hikes don’t stop with “Fix-It-First” either. Obama says “Right now, there’s a bill in this Congress that would give every responsible homeowner in America the chance to save $3,000 a year by refinancing at today’s rates.”
If that does not add to the deficit, then it must be achieved by tax hikes.
The president’s free money ideas roll on and on. Obama proposes “working with states to make high-quality preschool available to every child in America”. Supposedly that pays for itself.
The surest way to destroy jobs is for government to mandate businesses pay labor costs in excess of a natural rate. Yet, Obama pledges to do just that. Specifically, Obama wants to “raise the federal minimum wage to $9.00 an hour”.
He claims “This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead.”
Minimum Wage Seen and Unseen
The president ignores the “unseen” effect of those who do not get a job because companies choose to hire a software or hardware robot instead of an overpriced human.
The problem is not a minimum wage, but rather how much the dollar buys. If Congress did not debase the dollar with massive deficits, the dollar would buy much more than it does.
The irony is Obama complains of “Factory towns decimated from years of plants packing up. Inescapable pockets of poverty, urban and rural, where young adults are still fighting for their first job.”
The US lost jobs because US wages were too high. Manufacturing is now returning, but to robots, not humans.
The president concluded “Thank you, God bless you, and God bless the United States of America.”
I conclude the president’s entire speech was one proposal after another that will destroy jobs, add to the deficit, and increase taxes.
Mike “Mish” Shedlock
“Wine Country” Economic Conference Hosted By Mish
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