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The State of the Union: My Take

Mon, Feb 11, 6:42 PM ET, by Bob McTeer

In anticipating the President's State of the Union speech, I asked myself what I consider it to be. I'm sorry to say that the first thing that came to mind was the Ogden Nash quote, "I find it very difficult to enthuse over the current news."

In my decades of trying to keep track of our economy, I've been an optimist. My optimism was stoked by our transformation in the 1980's, when, for a while, we worried about being left in the dust by Japan and joked that we would all have to learn to speak Japanese. That turned out to be a false alarm, and not entirely because of Japanese missteps.

My optimism was reinforced in the 1990's, particularly in the second half of the decade, which we dubbed the new economy or the new paradigm economy. A multi-year surge of productivity growth, boosted largely by a computer-technology-internet revolution, stimulated growth in output and employment and depressed inflation while putting our fiscal house in order. From this period, I know what our economy is capable of and what we are now missing out on.

The financial crisis was so tragic in part because is was so unnecessary. It was a self-inflicted wound. But, once the policymakers woke up, they were aggressive enough to prevent it turning a second great depression, even though we did have the worse recession since the 1930s. The recovery, which "officially" began in mid-2009, is now more than three and a half years old, and we are a long way from recovered. Not only is the unemployment rate stuck several percentage points above where it should be, but the percentage of the labor force and the population has also declined by several percentage points. Fewer and fewer people are working, and we can't get together to do something meaningful about it.

An aging population is accelerating the bankruptcy of our entitlement programs while our President and the majority in the Senate pretend the problem doesn't exist. We are focused only on short-run fiscal problems and are in gridlock there as well. The politics of the problems are becoming impossible because more and more people (who vote) are living off fewer and fewer income earners (who vote too, but are increasingly in the minority).

Even low hanging fruit is being ignored, I suppose, because one side or the other needs it for future bargaining chips. By low-hanging fruit, I mean things like a reduction in the corporate income tax rate that would immediately bring home profits and jobs. Also, the construction of pipelines and other infrastructure to accelerate the transition to greater energy independence while providing employment. The later would reduce imports, increase exports, and, by improving our balance of payments reduce our reliance on foreign saving to finance domestic investments. Another easy step with great consequences would be to encourage capable foreign students studying at our universities to stay here and work after graduation, and make it easy for them to become U.S. citizens.

Given the demonstration of what's been happening to the Chinese economy as they have adopted elements of capitalism and what happened to the Soviet Union and its satellites both before the collapse of communism and after, I find it astounding that, while they are benefiting from our example of yesteryear, we are moving in the opposite direction. How can any serious and educated person believe that a larger, more intrusive government is what we need? Surely we don't have to become a complete basket case before we wake up.

Speaking of educated people, I personally know of many top-flight public schools that are as good as or better than the better private schools. I live among many of them. However, the state of public schools in most of our large inner cities is so bad that I'm not sure they can be fixed. Why, then, have our politicians not adopted voucher systems that would offer an escape valve for students that don't want to be afraid to go to school every day? If the dysfunctional schools can't be fixed, then they can be replaced. What are we waiting for, permission from the teachers unions?

The United States of America in 2013 is a large complex country with large complex problems. Many of these problems are hard to solve. I don't have all the answers. But, hey, we have 50 states, countless cities and towns, and many, many creative people. The concentration of responsibility and power in Washington should be reversed so that these other centers can develop local solutions and experiment. Let the market place for ideas work. No one is smart enough to solve all the problems. Let millions do it.

One last thought. Why has our politics become so dysfunctional? Why do smart people individually become so dumb when they get together in political parties and try to govern? One answer to that is gerrymandering which makes for safe districts for incumbents who toe the line and pose a danger for any Congressman who engages in compromise to get something done for the greater good. We need some diversity within districts as well as among them. We have to get rid of districts that look like snakes and spiders and have them look more like a layer cake. That would be a good start to improving the state of the union.

And I haven't mentioned foreign policy, which isn't going so well either.

 

 

This Article's Word Cloud:   President   That   Union   adopted   after   because   become   being   complex   districts   dysfunctional   economy   employment   fewer   foreign   from   fruit   good   have   income   know   large   like   many   more   only   other   people   percentage   problems   public   rate   reduce   schools   second   several   something   students   that   them   then   these   they   well   what   when   which   while   work   would

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