State of Denial

This is only President Barack Obama’s second State of the Union, but his failed economic agenda has already forced him into early reruns. After more than $800 billion in Keynesian economic stimulus spending, our nation is still mired in a post World War II record 20th consecutive month of near double digit unemployment. Our national deficit stands at $14.06 trillion and we may hit the $14.29 trillion debt ceiling as early as this spring. Our country desperately needs a change direction, but that is not what we will get tonight.

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In this Jan. 27, 2010, photo President Barack Obama delivers his State of the Union address on Capitol Hill in Washington.

According to The New York Times, President Obama’s speech will describe his “five pillars” for ensuring America’s competitiveness and economic growth. He must be hoping that the American people already forgot about his first “five pillars” of economic growth that he unveiled at Georgetown University in April 2009. The President’s present pillar panel is pretty much the same as the old one. “Deficit reduction” and “investments” in education are completely unchanged. “New Investments in Renewable Energy” has been repackaged to the more centrist-friendly “New Investments in Infrastructure.” Out are “New Investments in Health Care” and “New Rules for Wall Street.” In are “innovation” and “reforming government.” As Charles Krauthammer pointed out almost two years ago, Obama’s rhetoric is a mirror image of President Jimmy Carter’s and his policies are no different either. Tonight’s speech is just old school 1970s tax and spend liberalism in sleek new Obama packaging.

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No matter whether you call it (“spending” or the Obama administration preferred euphemism “investment”), the simple fact is that Washington has been on a decades long spending binge and it has not made us any more competitive. Since 2000, federal spending has skyrocketed across the board including 89% growth in anti-poverty programs, 81% growth in Medicare, and 219% growth in K-12 education. Since 1970 federal spending on K-12 education has increased by more than 150% with absolutely no gains in reading, math, or science scores. Infrastructure spending is no better. President Obama can call it “targeted investments” all he wants, but the impact on jobs is well known in the economic literature. As the Congressional Research Service noted in a review of economic stimulus plans: “To the extent that financing new highways by reducing expenditures on other programs or by deficit finance and its impact on private consumption and investment, the net impact on the economy of highway construction in terms of both output and employment could be nullified or even negative.”

This year’s Index of Economic Freedom provides even more evidence that government spending does not help foster economic growth. Index data show that countries that reduced government spending had economic growth rates almost two percentage points higher in 2009 than countries whose government spending scores worsened. And countries with the highest rates of government spending had gross domestic product (GDP) growth rates 4.5 percentage points lower on average than countries where government spending was best contained. The Index’s authors explain: “It is undeniable that there is an opportunity cost to government spending: resources used by government are unavailable for private-sector consumption or investment. In addition, governments, because they operate outside of market constraints and competition, are typically susceptible to excessive bureaucracy, corruption, and waste.”

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The President will play lip service to deficit reduction tonight, but his aides have already made it clear that he does not have the courage to confront his base about their addiction to federal spending. The Washington Post reports that, in response to leftist pressure, the President will completely abandon his own Deficit Commission’s entitlement spending cut proposals. In response, Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, asks the President: “If you don’t lead now, when is it going to come?” We fear not any time soon.

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