President Obama’s economic hour-long speech at Knox College in Galesburg, Ill., on Wednesday was scary, not just for its statements, but for what some characterize as disregard of the rule of law.
Obama made yet another case for government spending — which he calls “investment” — on infrastructure, education, and health care. Then he threatened to use executive power or public shaming to move his agenda if Congress failed to act.
Politicians have a right to make their case, but not to make an end run around the law. Yet Obama said “I will not allow gridlock or inaction or willful indifference to get in our way. That means whatever executive authority I have to help the middle class, I’ll use it. Where I can’t act on my own and Congress isn’t cooperating, I’ll pick up the phone, I’ll call CEOs, I’ll call philanthropists, I’ll call college presidents, I’ll call labor leaders….”
Obama has a habit of overriding Congress. In the first two years of his term, a Democratic House and Senate did not pass cap-and-trade bills, which would limit greenhouse gas emissions. So Obama’s Environmental Protection Agency is doing cap-and-trade on its own. The Democratic Congress did not pass the DREAM Act, which would have allowed undocumented young people to remain in America. Obama told the Department of Homeland Security to allow them to stay.
Some legal experts, such as Stanford University professor Michael McConnell, say that the president is not allowed to pick and choose what laws to enforce. Obama appears to be pushing the limits of his power, which may make many Americans uncomfortable.
Later in the speech, Obama threatened businesses, many of whom are likely to be government contractors: “And I’ll be asking our businesses to set an example by providing decent wages and salaries to their own employees. And I’m going to highlight the ones that do just that. You know, there are companies like Costco, which pays good wages and offers good benefits, companies like The Container Store that prides itself on training its employees…”
Not only did Obama threaten to disregard the law, he didn’t always have his facts straight.
1. Mobility has decreased over the past 30 years
Not so. A Treasury Department analysis of income-tax returns for two 10-year periods, 1987-1996 and 1996-2005 by Treasury economists Gerald Auten and Geoffrey Gee, representing 84 million returns for 120 million taxpayers, found that economic mobility has not changed. From the 1980s to 2005, many Americans progressed both in terms of absolute mobility — they became better-off in absolute terms — and in terms of relative mobility — they rose to another part of the income distribution.
2. The income of the top 1% nearly quadrupled from 1979 to 2007, but the typical family’s incomes barely budged
Government data on individual spending patterns show that the ratio of spending between the top and bottom 20% of the income distribution, measured on a per person basis, was essentially unchanged between 1985 and 2010. The top 1% pay 37% of individual federal income taxes, and this is redistributed to the bottom 50% of income earners, who pay 2% of the taxes. This metric suggests that economic inequality has diminished slightly, rather than increased.
Between 1985 and 2010, spending per person in the bottom fifth increased by 6% in constant dollars, compared with an increase of 1.5% for the top fifth. Even though income inequality is widening, those at the bottom are doing better than they did 25 years ago.
3. We are implementing the Affordable Care Act
The Department of Health and Human Services is so unprepared for the ACA that Obama has delayed until 2015 the employer penalty for not providing health insurance, as well as the requirement that people applying for health insurance on the exchanges provide verification of income.
Only 14 states and the District of Columbia are planning to set up exchanges, and many states are not ready. Neither is the federal government, which has to set up exchanges for remaining states.
4. This year we’re off to our strongest private-sector job growth since 1999
Not if we look at full-time employment. In 2013 the number of full-time employed workers increased by 80,000, fewer than one tenth of a percent. The number of part-time employed workers increased by 592,000, or 2.2%.
This is a direct effect of the ACA, because employers will pay no penalties on part-timers.
5. Raising the minimum wage will get people out of poverty and help the middle class .
The minimum wage disproportionately affects teens and low-skill workers, many of whom qualify only for entry-level slots. University of California (Irvine) economists David Neumark and J.M. Ian Salas, together with Federal Reserve Board economist William Wascher, wrote in a January paper, “minimum wages pose a tradeoff of higher wages for some against job losses for others.”
Forbidding employment of those whose skills aren’t worth $9.00 an hour , as the president has proposed, prevents low-skilled workers getting their foot on the bottom of the career ladder.
6. Government-funded infrastructure will help the economy
The American Reinvestment and Recovery Act provided billions for shovel-ready jobs, but 2 million fewer Americans have jobs than at the start of the recession. Federally funded infrastructure requires even more federal control over highways and the resources to support them. Federal laws, such as Davis Bacon, project labor agreements that require the use of union labor, high-road contracting that requires a super-minimum wage, and “Buy America” provisions slow down infrastructure and raise costs. Environmental impact statements can take two years. States are forced to spend money on projects they do not want or need, such as mass transit, even where there are few users.
7. Republicans insisted on a “meat-cleaver approach” for the sequester that cost jobs
The Toomey-Inhofe bill, S. 16, would have allowed the president more discretion over sequester cuts where they chose, but Obama threatened to veto the bill. The White House stated, “If the President were presented with S. 16, his senior advisors would recommend that he veto the bill.”
8. Government preschool for 4-year-olds helps education
America has spent more than $8 billion annually on Head Start programs for 3- and 4-year-old children. But the Department of Health and Human Service’s Head Start Impact Study, released in 2010, showed that the program made no difference to children of similar income and social status. A follow-up report, released in October 2012, showed that any small gains had disappeared by the third grade.
9. The middle class doesn’t have incentives to save for retirement
Middle-class Americans have tax-deductible traditional individual retirement accounts and Roth IRAs (where income is not taxed upon distribution) to save for retirement. Limits are $5,500 per person a year for 2013. Self-employed Americans can use Simplified Employee Pension Plans, with a limit of $51,000 for 2013. Internal Revenue Service data show that most Americans do not take advantage of all their tax-free saving.
10. Republicans have not laid out ideas for improving the economy
Republicans in Congress passed Budget Committee Chairman Paul Ryan’s fiscal roadmap, “The Path to Prosperity,” which was published last March.
The plan proposed tax simplification for individuals and corporations, attracting companies back to America and increasing incentives to work and invest. It issues proposals to reform Medicare and devolve entitlement programs to the states. Obama might not agree with the plan, but it’s certainly not true that Republicans have not put forward ideas.
The larger truth is that the Republican approach — including across-the-board tax rate reductions and regulatory reform — would reinvigorate the economy, foster job creation, restore optimism, and put America back on the right track. More government spending under the guise of “investment” for “children and grandchildren” would leave the economy in its stagnant state.
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