In the State of the Union Address last night, President Obama made the following claim: Corporate profits are skyrocketing but wages, over the last decade, have barely gone up.
Everything in that statement is technically correct but will lead most to believe that this is somehow corporate America’s fault. Oh, no folks, this is politics 101, and this president is the best BS’er I’ve ever seen. Welcome to How Stuff Works, the Political Edition:
First let’s look at the simple part of that statement: wages, over the last decade, have barely gone up.
This gives the impression that wages have grown, but very slowly over the last decade and gives this president cover, because if they’ve barely gone up over a decade, this is a systemic problem that transcends political divides (a Repupublican and Democrat President). The problem is then not a product of his policy, right? Wrong! This is what happens when politics meet fizzy math, specifically averaging:
Under President Bush (heretofore referred to simply as ‘W’) wages rose at a decent clip. Under President Obama, they’ve fallen. When you add the two up and divide by ten, you get wages barely rising. Presto, you have your systemic, butt covering statement – and it’s complete horse shit. Add that to the jab that corporations are finally making a decent profit again and President Obama makes it look like corporations are the greedy bastards!
In other words, the President was correct in stating that wages have only gone up slightly in the last decade, but they’ve fallen under his leadership. This is his baby and the problem most certainly is not systemic.
Now, over the last four years or so revenue into the government has stagnated. This is a product of the economy stagnating as a result of various forces, chief among them, presidential policy – the drop wasn’t Obama’s fault, but the stagnation certainly is and it has nothing to with “the rich not paying their share. Look at the Canadian oil pipeline that President Obama quashed: Keystone. I’ve seen estimates that the pipeline was worth 200,000 direct jobs with hundreds of thousands of ancillary jobs tied to it. In a time when this country needs jobs, who would turn that down? There are two things, two reasons that makes this make sense, and it’s not the environment, that was only the “cover”. The pipeline leads directly to refineries, skipping steps in getting oil to market… One would assume this would make gas cheaper, yes? The president wants expensive gas because we use less of it when it breaks us – don’t take my word for it, he’s said so plenty of times, look it up on YouTube.
The second is a little trickier. It has to do with new technologies in clean energy. Cheap energy is the bane of green energy because the system has to adapt for it to work. This adaptation has a price that we, the consumer, have to pay (think about it this way, whether the power company passes the buck or the government subsidizes, the consumer picks up the tab). Wind energy is actually quite cheap by itself. The expense is in storing the energy because it’s erratic. Solar is just flat-out expensive. Cheap natural gas and cheap oil will allow people to relax and new technologies – the presidents “investments in the future” of energy would fall flat.
This is just one simple case – if you multiply that across the whole American economy, it’s no wonder companies are holding on to cash. This is what we do in times of crisis or uncertainty – the situation is tenuous enough and companies are trying to weather a storm the best they can – we weather uncertainty with reserves (unless you’re Solindra, then you do it with a fat government loan and then flop – or the government, they have the red-phone hotline to China).
The last thing I wanted to touch on here is the notion that budget cuts will hurt the economy and that the government doesn’t have a spending problem which was also a part of the Address last night. Federal spending to prime the economy makes sense, short-sighted, until you factor in that for the government to ‘spend’ it has to take that money out of the economy first, the notion doesn’t hold water. Let’s look at federal spending over the last decade or so…
Notice, please, the surplus/deficit column… While W. did have a few bum years (during the recession), spending wasn’t brought back under control – revenue grew after the tax cuts of 2001 and 2003. Now the federal deficit in 2006 was managable – a mere $277 Billion. It was 2006 that Congress shifted back to the hands of Democrats who promised to end the fiscal irresponsibility! That lasted a year ’07 spending was already set, and that deficit ($174 Billion). In 2008 spending goes up by a couple hundred billion – but look at the deficit, revenue went down by another hundred billion (housing bubble popped). Now look at the spending jump in 2009 – half a trillion dollars. Democrats controlled both Houses of Congress and the Presidency. On top of that, revenue declined because of the recession by $470 Billion – folks, there’s a dual problem here. Revenue and spending – one fell and the other jumped. Granted, spending leveled out, but so did revenue – it flatlined. Now, compare the 2001-2003 recession to this one (in terms of revenue) W. lost just shy of $400 Billion. Obama lost $560, so yes his recession was worse, by a bit – but the increase in spending didn’t help, it hurt… Where Bush’s pro-growth policies and tax cuts raised revenue, stimulus and federal spending did not. In other words, if federal spending were the path to prosperity, we should be humming right along right now with deficits 3-5 times worse than President Bush’s worst!
Federal spending isn’t the answer, economic growth is – and this is exactly why we’re in the mess we are in now – because the bureaucracy has it’s boot on the neck of economic growth (everything but the firearms and ammunition industries I should say which are both seeing a boom [forgive the term] of epic proportions). This explanation is the only thing makes it all make sense.
Now that’s just one statement – maybe a second or two in the whole State of the Union Address… And the entire address was filled with little seconds like that. Of course, this also explains why rebutting an entire speech is so difficult. It took 1000 words to put two seconds into context. In the end, whose problem is the spending? Congress. Whose problem is revenue? Well that would be President Obama folks.
Have a nice day.