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Last night, Barack Obama gave a State of the Union address that was built on false premises and false promises.  Intentionally or not, he is deceiving the American people and making promises that cannot be kept.

First Delusion: The Recession is over.  While his exact words were "the worst of the recession is over", his complete lack of any short-term programs to help get the economy moving demonstrates a belief that the recession is over and we can just focus on long-term growth. Wrong. As Paul Krugman pointed out in a recent article, short-term stimulus is still needed. Just yesterday Britain reported that it experienced negative growth for the last quarter of 2010, There are fears that it will also experience negative growth in the first quarter of 2011 - two straight quarters of negative growth, the very definition of a double-dip recession. The federal government must continue to spend money in ways that immediately add jobs and put money in consumers’ hands. This recession is not over and unless we continue to implement short-term economic stimuli, the worst in fact may not be over.

President Obama also claimed that increased corporate profits and improvements in the stock market are evidence that we are out of the woods.  Wrong again.  While the wealthy in this country should be happy about those improvements, they mean nothing for workers and those who are out of work. Consumer spending has not shown any signs of consistent - much less robust - growth. The job market is equally shaky. Meanwhile, food prices are increasing and with the severe weather being experienced around the world are expected to continue their rise.  The threat of stagflation is here and it is real.

Second Delusion: Globalization is the cause of the "new economy" in which we live. President Obama claims that our economy has changed because we are facing competition from "emerging markets" both in the production of goods and services and in education.  And while that certainly plays some role in this "new economy", a more substantial role has been played by federal programs and policies and corporate greed.  Look at tax policy first.  No one talks about this, but throughout the 1950's the top federal income tax rate was consistently at 90%.  That’s right, 90% for the entire decade, a decade that saw strong, steady economic growth and strong steady corporate profits. And for much of that decade there wasn’t a war going on.  The Korean War ended in 1953 and the U.S. did not become heavily involved in the Vietnam War until well into the 1960's.  Yet here we are fighting two wars at once and our top tax rate is stuck at 35%.

Next look at antitrust policy.  There was a time when our antitrust laws were actually enforced.  Does anyone remember the breakup of Ma Bell? Would that happen today?  No. Our politicians - both left and right - pay lip service to the concepts of the "free market" and "competition" but enact policies which hinder both. You don’t have a free market when you have monopolies and oligopolies and you don’t have competition without numerous competitors. Japan has eight major domestic car manufacturers, we have three - and the smallest of the three has been foreign owned for years. Want to understand how economic power has become concentrated in a few hands? Want to understand how "too big to fail" entered the lexicon? It isn’t globalization’s fault, it’s government’s fault.

Then there is corporate greed.  Again looking at the 1950's, ceo’s back then earned compensation that was about 60 times the average worker earnings.  In the last few years ceo compensation has reached 700 times worker earnings. At the same time, corporations have exacerbated worker misery and increased ceo pay by doing away with defined benefit plans - the most popular pension program a few decades ago - and replacing them with defined contribution plans and 401k’s.  No longer do employers have to worry about increased pension costs during a stock market downturn, instead workers suffer huge pension losses with little hope of recovery. Again, not due to globalization.

Third Delusion:  We can count on technology and innovation to restore our economy.  While it is true that technology and innovation both present new economic opportunities, they will do nothing to alter the economic disparities that have mushroomed in the last few decades.  The new economy will be built on a foundation of government-supported corporate greed. Jobs will continue to leave, workers will continue to see little if any wage growth, income and profits will continue to flow to ceo’s and top executives and the terms "free market" and competition" will have less and less meaning as mergers and acquisitions continue to be approved.

Fourth Delusion: Simplifying the tax code and cutting corporate loopholes and deductions will make the income tax fair and help close the deficit.  Bogus, bogus, bogus. The glaring problem with the tax code is a top rate of 35%. Want to eliminate the deficit? How about bringing that top rate to 70% - still a substantial discount from the top rate of the 1950's and in fact it was the top tax rate as recently as 1980. The stuff President Obama seems to be proposing would be just window-dressing.  Nothing substantial would change for most individuals and corporations and would do little to reduce the deficit.

There was a great deal more delusion in the State of the Union last night than what I’ve put forth here; the idea that we’ll have a high speed rail system anytime soon is a joke and the idea that we can "defeat" al Qaida would be a joke if a policy built on such a wrong-headed assertion did not mean countless lost lives as we continue to fight an unwinnable war. We worked for and voted for change, instead we got more of the same.

Unless and until we find a political leader who will admit all this, a political leader who will not feed us promises based on illusions, we are doomed to an economic system that will someday be studied in history books as the beginning of the collapse of the greatest economy the world had ever known.

Originally posted to tonymil on Wed Jan 26, 2011 at 12:51 PM PST.

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Comment Preferences

  •  PRIMARY OBAMA! (2+ / 0-)
    Recommended by:
    tapu dali, flhiii88

    Basil Molyneux for President!

    "We cannot have peace among men whose hearts find delight in killing any living creature." - Rachel Carson, American Author and Marine Biologist

    by GlowNZ on Wed Jan 26, 2011 at 12:56:23 PM PST

  •  FAIL. nt (3+ / 0-)
    Recommended by:
    vlajos, kalmoth, flhiii88

    Exspectamus et vigilamus: quod nolite somnamus.

    by tapu dali on Wed Jan 26, 2011 at 12:57:55 PM PST

  •  Your first two "delusions" are true. (4+ / 0-)
    Recommended by:
    vlajos, kalmoth, Hawkjt, tapu dali
    1. We are out of the recession.  "Recession" has a specific technical definition -- you can't just redefine it to mean "the presence of things I don't like, such as a wealth gap and unemployment."
    1. Globalization is indeed a big contributing factor to the "new economy" we live in -- that's not really a controversial point.  Your response sounds as though you were arguing about the causes of the increasing wealth gap, which is conceptually different from the "new economy" (though of course closely related).  Changes in redistributive fiscal and monetary policy did play a big role (along side various factors that could be lumped under "globalization") in increasing income disparity.  But, as far as the general structure of our post-industrial alignment, I know of no serious analyst that would single out the government as being more important than globalization.  The two work in such close tandem that it's silly to try to disentangle their unique effects.  

    In Rand McNally, they wear hats on their feet, and hamburgers eat people!

    by cardinal on Wed Jan 26, 2011 at 01:04:53 PM PST

  •  Yep. All four are... (1+ / 0-)
    Recommended by:
    Knarfc

    ...over-simplifications, at best.

    But, they are good political strategy.

  •  Not a good idea to speak against the Common (3+ / 0-)
    Recommended by:
    prfb, Angela Quattrano, Revy

    Wisdom, the Current of the Narrative.

    Love the "technical definition" defense: "Official" unemployment, U-3, is what, 9.4%? U-6 is what, 17%?

    NOT a recession, right?, no "negative growth" (whatever that is supposed to mean), unless you are one of the desperate dispossessed, maybe booted out of your home by some fun and games in the mortgage-processing world.

    And "economists" and their precise technical definitions, economists who can offer lots of theorems and models and definitions and argue over them ad nauseam, but for some reason cannot produce either prognostications that consistently comport with What Actually Happens, or models that actually behave like aggregate or even individual humans, or account for the emotional aspects of transactions between humans. What proof gets offered in the WSJ or FT for statements like "the recession is over?" A combination of a "soaring DJIA" and the statement "most economists agree." I didn't know that the "science of economics" involved weight-of-the-opinionators determinations of what is "true." (Well, actually, that's been pretty apparent to me for decades, along with the usual gulf between what the shills for wealth opine and what happens down on the jungle floor...)

    I apologize for those who pile on you for your observations, and gladly take on a share of their dudgeoon. The road we are all on has special moving byways to lift a very few very high indeed, while the rest of us slog through ever-deeper pools of open-sewer shit...

    "Is that all there is?" Peggy Lee.

    by jm214 on Wed Jan 26, 2011 at 01:55:25 PM PST

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