A Reaction to President Obama's State of the Union Message

Obama’s slogan for the State of the Union Address last night, “An Economy Built to Last,” was a way of referring to one of the accomplishments of his first years: successfully reviving the auto industry, which many had said couldn’t be done without nationalizing it. References to other accomplishments were stated more quickly, such as national security (withdrawal from Iraq, disposing of Osama bin Laden) or more obliquely, such as health care reform, financial reform, and arresting the freefall of the economy that Obama inherited in January 2009 (via fiscal stimulus and TARP - both of which are not especially popular programs).

I realize of course that some will not view these as true “accomplishments.” They will argue that we should have let the auto industry go bankrupt, or should have spent another 10 years in Iraq, or that bin Laden was deprived of his human rights, or that the Dodd-Frank bill went too far in financial regulation (or not far enough), or that a federal effort to reduce unnecessary hospital infections constitutes “socialism” or “death panels.” But most Americans wanted these policies.

Evidently the President also has in mind reducing American dependence on imported oil. And slowing the big rise in income inequality, in part by allowing to expire on schedule the tax cuts on the top earners like Mitt Romney that ten years ago brought their tax rates down to 15%.

To me, the phrase “built to last” suggests that the medium-term goal is economic growth that resembles the record expansion of the late 1990s, which was driven by expanding exports, technology, and private sector employment. This would be an improvement over the unsustainable finance-based economic expansion of the 2002-2007, or those of the 1960s, 70s or 80s; they were built on easy monetary or fiscal policy and an expanding government sector, and thus contained the seeds of their own destruction when inflation, debts and asset prices got out of control.

Indeed, as inadequate as the current economic recovery has been, the expansion of private sector jobs over the two years has exceeded the rate during the Bush Administration (when the government sector was the primary source of what limited job creation there was). This comparison holds even if one excludes the two recessions at the beginning and end of the 8-year Bush period, as the graph shows.

[TV clip, "Post Mortem on the State of the Union Message," BNN, 2012.]

The World’s Opinion Page

Help support Project Syndicate’s mission

subscribe now

  1. Television sets showing a news report on Xi Jinping's speech Anthony Wallace/Getty Images

    Empowering China’s New Miracle Workers

    China’s success in the next five years will depend largely on how well the government manages the tensions underlying its complex agenda. In particular, China’s leaders will need to balance a muscular Communist Party, setting standards and protecting the public interest, with an empowered market, driving the economy into the future.

  2. United States Supreme Court Hisham Ibrahim/Getty Images

    The Sovereignty that Really Matters

    The preference of some countries to isolate themselves within their borders is anachronistic and self-defeating, but it would be a serious mistake for others, fearing contagion, to respond by imposing strict isolation. Even in states that have succumbed to reductionist discourses, much of the population has not.

  3.  The price of Euro and US dollars Daniel Leal Olivas/Getty Images

    Resurrecting Creditor Adjustment

    When the Bretton Woods Agreement was hashed out in 1944, it was agreed that countries with current-account deficits should be able to limit temporarily purchases of goods from countries running surpluses. In the ensuing 73 years, the so-called "scarce-currency clause" has been largely forgotten; but it may be time to bring it back.

  4. Leaders of the Russian Revolution in Red Square Keystone France/Getty Images

    Trump’s Republican Collaborators

    Republican leaders have a choice: they can either continue to collaborate with President Donald Trump, thereby courting disaster, or they can renounce him, finally putting their country’s democracy ahead of loyalty to their party tribe. They are hardly the first politicians to face such a decision.

  5. Angela Merkel, Theresa May and Emmanuel Macron John Thys/Getty Images

    How Money Could Unblock the Brexit Talks

    With talks on the UK's withdrawal from the EU stalled, negotiators should shift to the temporary “transition” Prime Minister Theresa May officially requested last month. Above all, the negotiators should focus immediately on the British budget contributions that will be required to make an orderly transition possible.

  6. Ksenia Sobchak Mladlen Antonov/Getty Images

    Is Vladimir Putin Losing His Grip?

    In recent decades, as President Vladimir Putin has entrenched his authority, Russia has seemed to be moving backward socially and economically. But while the Kremlin knows that it must reverse this trajectory, genuine reform would be incompatible with the kleptocratic character of Putin’s regime.

  7. Right-wing parties hold conference Thomas Lohnes/Getty Images

    Rage Against the Elites

    • With the advantage of hindsight, four recent books bring to bear diverse perspectives on the West’s current populist moment. 
    • Taken together, they help us to understand what that moment is and how it arrived, while reminding us that history is contingent, not inevitable

    Global Bookmark

    Distinguished thinkers review the world’s most important new books on politics, economics, and international affairs.

  8. Treasury Secretary Steven Mnuchin Bill Clark/Getty Images

    Don’t Bank on Bankruptcy for Banks

    As a part of their efforts to roll back the 2010 Dodd-Frank Act, congressional Republicans have approved a measure that would have courts, rather than regulators, oversee megabank bankruptcies. It is now up to the Trump administration to decide if it wants to set the stage for a repeat of the Lehman Brothers collapse in 2008.