POTUS #StateoftheUnion '12

The annual State of the Union address. A major political event, economic increment and trending topic.

@RogueEconomista

Every year Americans await the President's take on the economy and where we're headed in the new year. Campaign years are especially important because voters can signal whether or not they are happy with the administration at the ballot box in November.

Previously, we've discussed the difference between positive and normative economic statements. This is never so tantamount as to when you are deciding which candidate, which party even, to vote for. Politicians have to pander to voters' preferences to get or stay in office. Their political promises, however, often lack the economic prudence to maintain our strong global standing with high production or low unemployment. Below, some highlights from President Obama's 2012 address that could have gotten lost in translation:

• The Iraq War is over and thus commenced the President's speech. By ending the way America lowered her military expenditures and extended the lifespans of troops no longer challenged by Bin Laden's al-Qaeda. President Obama philosophically challenges us to imagine a world where we achieve economic growth without the aggressive use of national (preemptive) defense. It's a tough picture to paint: Americans have been at war constantly for the last 9 years and our economy has not emerged unscathed. This should be a major selling point for what follows...

• "Everyone gets their fair share...everyone plays by the same set of rules..." President Obama calls this idea an American value, not one of only Republicans or Democrats. The idea of instituting equity or fairness into economics is a slippery slope: our experiences, lifestyles and beliefs shape our idea of what is right or wrong, fair or shady. This is a political promise, not an economic one. The markets don't promise fairness, only efficiency. There will be losers. And who determines what is fair? If there is in fact a "who" then we're not in Capitalist Kansas anymore. Welcome to the new State-Sponsored Capitalism. 

Where's the nose??

• Domestic manufacturing is definitely a major bulletpoint of this year's speech. Surprisingly (to me) the President blatantly promoted protectionist strategies to promote domestic business at the expense of importing or producing goods and services cheaper elsewhere. I believe this to be problematic because by promoting America and putting down the rest of the world we are effectively cutting off our own nose to spite our lovely face. International trade helps us to grow beyond the resources we have. If we couldn't trade financial capital or democracy for oil then we'd have to change our way of life immediately. Also, producing goods and services at the lowest cost is a hallmark of competition and provides incentive for businesses to expand and evolve. This is more President political pandering: Obama is obligated to throw his support behind American manufacturing and production because he needs to be reelected this fall. In the long-run trade barriers such as "buying American" or subsidizing American producers hurts competition.  Suppose we protect our industries as the President suggest and prices are better elsewhere in the world? then cash flows will leave our country for more favorable markets; it's a self-fulfilling prophecy. Trade restriction are a highly controversial area especially during a time when domestic jobs are so scarce! But economically, what's better for America's future?

• Aaah yes, and taxes. If anything the Buffet Rule is major political prose. The likelihood that we reform our complicated tax system anytime soon is slim to none. The likelihood that we reform taxes so they are more efficient, less obnoxious and well..fair? You do the math.

*sigh* And no word this year on moving closer towards faster, efficient public transportation like we see in technologically-advanced Europe and Asia. With rising gas prices and American protectionism we can  likely conclude that these constraints will constrict the economy and have an adverse effect on the job situation. People without income cannot pay high gasoline prices at the pump. They need high speed/long-distance trains, new buses, routes and stops, and metropolitan-wide light-rail systems to get them to where the jobs are. Oh, and more jobs will become available as we improve upon our nation's aged transit system to compete with other markets across the globe.

Love to hear your thoughts on this year State of the Union address!