We know that supply-side economics emphasizes serious cuts in tax rates and Keynesianism relies on massive amounts of government spending. But how in the world does “middle class economics” work? After President Obama cited it repeatedly in State of the Union speech, I waited and waited for him to explain how it works. He never did.
Instead, he confused a cause with a result. Middle class economics, he said, “is the idea that this country does best when everyone gets their fair shot, everyone does their fair share, and everyone plays by the same set of rules.” That’s a nice sentiment, but it’s not an economic policy.
“So what does middle-class economics require in our time,” he asked rhetorically. First, “it means helping working families feel more secure in a world of constant change.” That’s a worthy goal. Second, “we have to do more to help upgrade their skills.” That suggests still another government job training program is on the way. And finally, “we need the new economy to keep churning out high-wage jobs for our workers to fill.” That sounds like a hope and a prayer.
But what is the engine of middle-class economics that produces all this? Obama doesn’t let on. My guess is he doesn’t have a clue. He may think the money saved in tax reform by killing loopholes and tax preferences can bring about some of these things. But his vision of tax reform is so far from that of Republicans who now control Congress it’s a non-starter.
On this subject and many others in his address, Obama is blowing smoke. He claims wonderful things have happened in his presidency, now entering its seventh year. But most of his claims are false or weren’t the result of his policies. He touts the boom in oil and gas, which he sought to prevent.
He boasts of an economy that’s experiencing “the fastest economic growth in over a decade.” He’s referring, I suspect, to the impressive five percent growth in the third quarter of 2014. Yes, one quarter. But it took six years of slow-as-molasses growth for the Obama economy to get to this point, though the so-called Great Recession ended in June 2009. What took so long? President Reagan’s recession was just as severe, but the economy was booming again in three years. And Reagan knew what had caused this – deep cuts in income tax rates.
Obama fails to come clean on the tax hikes he wants to impose on Americans. It’s not just the richest of the rich who would be hit. So would parents saving for their kids’ college in 529 funds. Obama would tax the money taken from the funds to pay college costs. And he would cap how much workers could put in 401(k) funds for retirement, thus making more of their income subject to yearly taxes.
And jobs? Don’t ask. The president wants to raise taxes on investments and inheritances. It would reduce the amount of private capital available to invest in start-ups and new jobs. This would not be an unexpected consequence. As Jack Kemp used to say, when you tax something, you get less of it.
On foreign policy, Obama seems to think he has stopped Vladimir Putin’s invasions in their tracks. “We’re upholding the principle that bigger nations can’t bully the small – by opposing Russian aggression, supporting Ukraine’s democracy, and reassuring our NATO allies,” he declared. The principle is a worthy one, but it hasn’t stopped Putin. Despite Obama, Putin went ahead and annexed Crimea and seized a chunk of eastern Ukraine.
There was also a Middle East whopper. Obama declared: “American leadership – including our military power – is stopping ISIL’s advance” in Iraq and Syria. No, it’s not, especially in Syria, where ISIL continues to gain territory.
Guided by Obama, the U.S. is “assisting people everywhere who stand up to the bankrupt ideology of violent extremism.” But “extremism” can’t be an ideology. It has to be an extreme version of something, in this case “Islamic jihad.” Obama won’t say those words. You’ll have to figure his reason on your own.
The most insincere part of his speech was a monologue on his goal of keeping America as one nation, one people, and not a cluster of groups like blacks and whites, liberals and conservatives. Cynics who say he’s has failed – well, they’re just cynics, said the man known as the Great Divider. No wonder he’s famous for ducking responsibility for anything that’s gone wrong on his watch.