All Commentary
Friday, January 15, 2016

Obama Sells Hope over Reality, One Last Time

The state of the union is, at best, precarious

With roughly a year left to his presidency, President Obama chose to speak to America’s next five to ten years rather than report on the state of the union, which is his constitutional charge. In many ways, he brought his presidency full circle on Tuesday evening, offering language more reminiscent of candidate Obama than the churlish President Obama of the past seven years.

“Let’s talk about the future,” he said. But the president had demonstrable difficulty with the present. Throughout his speech, he steadfastly ignored the biggest problem facing the nation: our runaway $19 trillion federal debt.

He did, of course, offer the usual batch of goodies to the American people: free or more affordable college tuition, an increased minimum wage, enhanced Medicare and Social Security, better and cheaper healthcare, and “wage insurance,” whatever that is. Never once did he indicate where the money would come from to pay for these things.

He even offered homage to industry, saying that “a thriving private sector is the lifeblood of our economy.”  But as the speech wore on, it became painfully clear that the President has little to no idea what a thriving economy is, and his ultimate conclusion that “the state of the union is strong,” is simply incorrect, and demonstrably so.  

The president claimed that unemployment has been cut in half. Going by the official numbers, the unemployment rate today is 5% versus over 8% when he took office. But the jobs numbers tell a different story. The economy has created 8 million jobs since the President first took office. But there are now 17 million more working-age Americans. The government routinely excludes from its unemployment numbers people who have been unemployed for so long that they’ve given up looking for work. And their numbers have been growing since 2008. Add those people back in and the actual unemployment rate today is closer to 10%.

The president also claimed that he cut the deficit by three-quarters. It’s true that the deficit today is less than half of what it was at its historic peak in 2008, but sadly that’s a recent development. The deficit has averaged $900 billion per year over the past seven years, compared to $440 billion over the seven years prior to the President’s terms — and those figures assign to Bush the 2009 transition year when the deficit was at a whopping $1.4 trillion.

When President Obama took office, the federal debt stood at $10.7 trillion. Today, the debt is $18.9 trillion. But that’s small potatoes, comparatively speaking. In addition to its debt, the government owes unfunded obligations. These are future Social Security and Medicare payments the government has promised to retirees but which it does not and, under current law, will not have the money to pay. According to the Social Security and Medicare boards of trustees, unfunded obligations are about $70 trillion. That brings the total amount of money the government owes or has promised almost to $90 trillion — or 10% more than the annual economic output of the entire planet.

This is the last time the president will give a State of the Union Address. Did he take this opportunity to talk about how he plans to make Social Security and Medicare solvent? Or how he plans to pay for the $70 trillion the government owes retirees? No, he called for the programs to be strengthened. And by “strengthened” he means expanded.

The president asked, “How do we get everyone a fair shot at opportunity?” The answer, first and foremost, is by creating a condition in which the government’s long-term solvency is assured. As it now stands, the state of the union can only be described as precarious.

  • Dr. Antony Davies is an Associate professor of Economics at Duquesne University, and co-host of the podcast, Words & Numbers.

  • James R. Harrigan is a Senior Editor at the American Institute for Economic Research. He is also co-host of the Words & Numbers podcast.