A Populist Speech Misses the Mark on these Real Issues

"Yeah, what he said."

Last night President Obama gave another speech dressed in his best likeness of a historical figure who history, rightfully or wrongfully, has anointed an American hero. The Pres enjoys likening himself to such American figures in attempts to draw parallels to support his goals. From what I gathered from the speech, Obama likes the middle class and thinks it’s bad that it’s shrinking. I think the direct goal of the speech was to ensure us that the payroll tax cut should be extended while the indirect goal was to remind us that despite his actions, he’s a populist? While this speech was moving and parts of it hard to argue from a basic humanitarian standpoint, our leadership once again misses the mark on the real issues.

Like I said parts of this are spot on…

“But everybody else struggled with costs that were growing and paychecks that weren’t — and too many families found themselves racking up more and more debt just to keep up.”

Ok Barack, you’re on to something. I like where this is going…

”Now, for many years, credit cards and home equity loans papered over this harsh reality. But in 2008, the house of cards collapsed.”

….and you lost me.

The credit cards and home equity loans? These are the instruments that deserve all the blame for a credit bubble? This is where the buck stops for the inflationary, unstable credit expansion over the last 2 decades? There’s a big piece missing here-the foundation for credit expansion. What is that foundation? Well if you’ve read anything I have ever written before you probably know where this is going. That’s right, the Fed! The Federal Reserve’s unprecedented expansion of the money supply through interest rate manipulation has fueled unprecedented debt. It has created an environment that, by deliberate design mind you, discourages savings and forces people to put their money to other use. “Papering” over the harsh reality of diminishing wealth is the sole function of the central bank. Retail debt issuers are tertiary at most in the debt scam chain that has created this credit crisis. Home equity loans are also not independent of Fed action or the Federal Government’s never ending meddling efforts to socially engineer some outcome. He made many statements like this, never tying the government policies of the last 40 years to the decimation of middle class wealth. This one made me shiver with irony:

“At stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home and secure their retirement."

How can we build a modest savings with the current state of money? “High interest” savings accounts go for around 1%. What we saved 10 years ago is worth 20% less. How can we buy homes when government policy continuously inflates the prices beyond reasonable and attainable value? How can we be secure in retirement when government tax code forces us to put most of it in risky markets while putting the rest toward an insoluble fund?

The President went on to highlight a very serious problem with inequality in our society, but somehow excuses himself from it:

“Inequality also distorts our democracy. It gives an outsized voice to the few who can afford high-priced lobbyists and unlimited campaign contributions, and it runs the risk of selling out our democracy to the highest bidder.”

Like Goldman Sachs perhaps (Obama’s second largest contributor to the 08 campaign)? Everyone in elected office likes to talk about this but never acknowledges their hand in it. I also think Obama has the causality relationship wrong on this one. The rising wealth of certain corporations and other top tier types is a result of this broken political practice, wealth itself is not the cause. Lobbyists and contributors exist to benefit their own interest, typically measures that will bring higher profit. This is what they lobby for, not only because they can, but because we have a system that allows it and a bunch of hypocrites who enjoy it. This is crony capitalism to the highest degree.

Obama made another excellent point:

“We shouldn’t be making it harder to afford college — we should be a country where everyone has a chance to go and doesn’t rack up $100,000 of debt just because they went.”

This one carries a very personal sentiment for me and I’m sure many other millennials (or Gen Ys or whatever Time magazine calls us now) sharing a significant debt burden from our college days. But this statement is a major contradiction. The government’s attempts to make college more affordable have predictably had the opposite effect. The influx of well intentioned, federally subsidized loans did exactly what subsidies do; raised the price of the good. Federally subsidized funds effectively guarantee a bare minimum piece of market share for the “commodity” of a college tuition. This meant less competition for available funds to go toward the market for college. It also meant the people who couldn’t afford the cost outright, or were not able to get a reasonable loan from a bank now had a means to buy a college tuition. This raised demand and along with it prices. Higher education’s value itself has also been greatly diminished. A bachelor’s degree today is the high school diploma of yesterday. Now we are told we have to take loans out to go to Graduate school to remain competitive. From what I can tell from my research, the education in those more expensive degrees will teach me even less relevant drivel than my undergrad course. The government’s meddling has not only inflated the cost of a degree, but education in general! If Obama is laying the groundwork for more government assistance in funding middle class education I fear greatly for my hypothetical children.

So to the point he was actually trying to press, I think: extending the payroll tax cut. What a misguided debate. Essentially the Dems want to decrease the rate for middle income earners from 4.2 to 3.1%. This will leave a $200B reduction in revenue that they want to recoup by taxing $1M plus earners. Obviously the Republicans playing their role in this political drama have to object to this as an assault on the “job creators.” Where’s the party standing up for everyone? Why isn’t someone discussing a permanent cut in the payroll tax across the board, and reducing the budget by $200B? Well, if they would actually pass a budget. Why is the tax revenue non-negotiable? Seems to me the only real winner in this is Federal bureaucracy. Why do only either the middle class or the "rich" have to bend, why doesn’t Uncle Sam? The correct response is a $200B spending reduction, but that is not even being seriously discussed.

Obama came out and did a nice job tugging at our pure little populist hearts. I agreed with all his problem statements, but his conclusions are simply shortsighted and fail to address the real issues and the government’s hand in them.

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