Rhetorical Economics

Yesterday the President offered his thoughts (the first we are told of five or six) on how to fix the economy in a speech at Knox College in Illinois.   Evidently, his prescription is to blame the members of the House GOP and to whip up a new batch of rhetoric.  Much of what he said was a restatement of what he has said before.

Here's how he said we got to where we are economically - "Technology made some jobs obsolete. Global competition sent a lot of jobs overseas. It became harder for unions to fight for the middle class. Washington doled out bigger tax cuts to the very wealthy and smaller minimum wage increases for the working poor."   Even in that short paragraph there are some interesting assumptions.   Employees quite joining unions (except public sector unions) well before technology and global competition started changing the workforce.    One might quibble with whether the minimum wage actually helps or hurts the working poor - most economists argue that the minimum wage makes it a lot harder for low skilled workers to get any job.  Indeed all of those things have changed the economy - one cannot make the assumption as he does that all have been destructive of the middle class.


He went on to say "And towards the end of those three decades, a housing bubble, credit cards, a churning financial sector was keeping the economy artificially juiced up, so sometimes it papered over some of these long-term trends. "   The bubble he speaks about and all that "juice" came mostly from federal policies well described in books like Reckless Endangerment which describe the absolute thievery perpetuated by people inside and outside of the government.   Yet, compared to the S&L crisis - almost no one has actually been prosecuted for their misdeeds.

He makes the claim that the economy has recovered (although he does not add that it is the weakest recovery ever) because of health care and "investments" in new technologies (like Solyndra) and the two mega enactments of his Presidency that even he has admitted are too complicated to administer. (Dodd Frank and Obamacare) He seems to claim that his policies (although he has dragged his feet on approving shale leases and things like the Keystone pipeline) have allowed us to reduce our dependency on foreign oil to historic levels.

He then commented "When wealth concentrates at the very top, it can inflate unstable bubbles that threaten the economy. When the rungs on the ladder of opportunity grow farther and farther apart, it undermines the very essence of America — that idea that if you work hard you can make it here.  And that’s why reversing these trends has to be Washington’s highest priority."   Ok, so even if you do not agree with the lead up rhetoric America should be an opportunity society.   So what are his key solutions?  

One of his constant refrains is that middle class incomes have stagnated for four decades but the data (from the Washington Post no less) suggests that is not correct.   The Post Numbers show a growth in both family and household income that is significant in constant (inflation adjusted) dollars.  If the WP can find this trend it is a wonder that the President cannot.

He mentions a couple.   Immigration reform - a very important public policy but not likely to move the needle on growing the economy.  He also lists "America has to make the investments necessary to promote long-term growth and shared prosperity — rebuilding our manufacturing base, educating our workforce, upgrading our transportation systems, upgrading our information networks."   Some of those things could be aided by sound government policies, others less so.

The speech laces in criticisms of the House GOP as engaging in an "endless parade of distractions and political posturing and phony scandals" (I guess the direct involvement of the General Counsel of the IRS - one of two presidentially appointed people in the IRS in trying to suppress political opponents is one of those phony scandals).   As a conservative (and not a member of the GOP) I am tired of the rhetoric on both sides - that accuses the president of every misdeed.  At the same time there are some real problems with this administration that should be examined - that is the oversight function of Congress which it did not do in the build up of the credit bubble.

Ultimately the best way for the president to engage on the issues he cares about is to genuinely engage with his opponents.   But one of the most significant failures of his presidency has been his unwillingness to get off his rhetorical stump and engage the other side.