1/25/12

The State of the Union address last night fit the usual pattern, in that Barack Obama took credit for the good things and blamed others for what is wrong in America. But, clearly our union is not getting stronger when we have to borrow $1 of every $3 we spend to keep the economy growing at a miserly 2% rate. If we keep going this way national bankruptcy is inevitable.

What is good in America today is that we are growing our oil production and have abundant supplies of natural gas. Environmentalists do not like this because it impedes the shift to higher cost alternative energy. To appease the environmental lobby Obama is blocking the Keystone pipeline and forcing Canada to look to Asia in order to sell their oil. However, Obama also sought to create the impression that the growth in domestic production is a consequence of his policies. even though he placed a moratorium on production in the Gulf and has prevented the issuance of drilling permits on federal land.

Obama is obviously sensitive to the Solyndra problem and that is why he said that hydraulic fracturing, which has allowed production of oil and gas from shale, resulted from federally funded research. Its practical application, however, was pioneered by Mitchell Energy, which is now part of Devon Energy. The comparison with Solyndra is not apt, because the fracturing technology was available to everyone in the industry, whereas Solyndra represents an attempt by government to pick individual winners. This is what is referred to as “crony capitalism.”

Obama waxed nostalgic about how good things were for American workers after World War II. This is strange, because progressives like Obama are supposed to be forward looking. We will never return to those post-war days when America was dominant in the world. The focus should be on how to adapt to a highly competitive global economy. That is why the Jobs Council argues that our education system must be revamped, so that companies will not be forced to shift operations abroad in order to hire skilled workers.

Obama claims the wealthy in America are paying too little in taxes, but it would be more accurate to say the average American is under-taxed, especially in comparison with people in Europe. Wealthy people in America pay a much higher percentage of income taxes than Europeans do. The New York Times today has a table which shows the median taxpayer in America pays only 2. 3 % in federal taxes. Even if payroll and Medicare taxes are included the rate is only 7. 4 %.The reason is Europe’s dependence on the value added tax, which is paid by everyone who shops.

Obama is forced to concentrate on income inequality because he cannot argue that America is becoming more prosperous. We are becoming poorer by the day as our debt grows and the dollar shrinks in value. It is easier for government to put people on food stamps than it is to create jobs. That is why the choice in this year’s election is between the opportunity society or the dependency society.