There’s a new type of macroeconomic theory to add to your text books, boys and girls! Last night in his SOTU, the President introduced us to “Middle-class economics,” a redistributionist policy approach that promises new services and goods to Americans at the expense of higher income earners and business. Robin Hood just took to the Ivory Tower.
According to the President’s address, middle-class economics is “the idea that this country does best when everyone gets their fair shot, everyone does their fair share, and everyone plays by the same set of rules. We don’t just want everyone to share in America’s success – we want everyone to contribute to our success.”
If you think you’ve heard these terms "fair shot," "fair share," and same rules before, it’s because you have. Once again, the President and progressives are rehashing the divisive, populist, anti-wealthy, 99 percent versus 1 percent language that they favored in recent years.
He continued, “So what does middle-class economics require in our time? First – middle-class economics means helping working families feel more secure in a world of constant change. That means helping folks afford childcare, college, health care, a home, retirement – and my budget will address each of these issues, lowering the taxes of working families and putting thousands of dollars back into their pockets each year.”
All of that translates into money for childcare (a new tax cut of up to $3,000 per child), per year; seven days of paid sick leave; and the perennial favorite of closing the (almost non-existent) pay gap. None of these proposals have a demonstrated track record of success for workers, but will raise the costs of labor. As we know, when labor costs rise, employers respond by eliminating jobs, cutting hours or cutting wages. What good are seven paid sick days if you have no job?
Second, middle-class economics demands free college tuition for two years of community college. Equating this proposal to the expansion of free public high school education in the 20th century, President Obama suggests that dropping the cost of community college to zero for students who have made a C + or better in high school will get Americans ready for the new economy:
“America thrived in the 20th century because we made high school free, sent a generation of GIs to college, and trained the best workforce in the world. But in a 21st century economy that rewards knowledge like never before, we need to do more.
…
“I want to spread that idea all across America, so that two years of college becomes as free and universal in America as high school is today. And I want to work with this Congress, to make sure Americans already burdened with student loans can reduce their monthly payments, so that student debt doesn’t derail anyone’s dreams.”
Now, community college may be the best course of success for many Americans, but as millennial advocacy group, Generation Opportunity, has noted “President Obama’s answer to a broken higher education system is to fold it into an equally broken secondary education system. There’s no reason to think that a government-run K-14 education will do much more to prepare us for the jobs of the future than a government-run K-12 education.” Our public school system is failing and elevating that failure to the community college level will do no one any good.
If private companies boost worker education and training, we applaud that because those are private sector solutions.
And third, high-wage jobs through stricter trade agreements and infrastructure spending:
“21st century businesses need 21st century infrastructure?—?modern ports, stronger bridges, faster trains and the fastest internet. Democrats and Republicans used to agree on this. So let’s set our sights higher than a single oil pipeline. Let’s pass a bipartisan infrastructure plan that could create more than thirty times as many jobs per year…
… as we speak, China wants to write the rules for the world’s fastest-growing region. That would put our workers and businesses at a disadvantage. Why would we let that happen? We should write those rules. We should level the playing field. That’s why I’m asking both parties to give me trade promotion authority to protect American workers, with strong new trade deals from Asia to Europe that aren’t just free, but fair.”
If these policies don’t excite you, you are probably aware that infrastructure spending without an increase in business enterprise won’t help our economy over the long run. Government spending is a short-term boost at best. Free trade delivers consumers with wider options at better prices.
There's an implicit admission that the economy is not adding enough high-skilled or high-paying jobs. It's adding low-skilled jobs. Rewarding unions through protectionist policies won't help. Unions tend to be part of the problem as are other moneyed interests that lobby Congress and legislators to protect their industries from new innovative companies. No mention of that though.
What the President is re-purposing as middle-class economics is simply Keynesian, big government spending wearing a middle class suit. We’re not fooled and we bet other Americans won’t be either.