Things You Did NOT Learn From The State Of The Union

January 21, 2015 2 Comments

The State of the Union is always interesting. Not because the president actually says anything meaningful, but because it reminds people like me that the Super Bowl is just around the corner. Needless to say, President Obama was slightly humble this time around. The total word count of his speech was 6,493 words. This was the lowest SOTU word count of his entire presidency, which means that he made less factual errors this time around…

Here is a word cloud of the most frequently used words in the SOTU speech:
Dissecting everything from the transcript line by line is very tedious. Instead, I’m going to focus on the more relevant parts.

“The Stock Market Has Doubled”

I’m not sure anyone has bothered to explain to the President the meaning behind this chart:
Stock market gains from the previous 5 years are a clear result of Federal Reserve monetary policy, also known as quantitative easing. The overall purpose, without getting too technical, is to reduce the amount of financial assets (such as US Securities and Mortgage Backed Securities), which lowers the yields on these assets. As a result, investors rush into financial assets with higher returning yields, which they did for the last 5 years by purchasing equities and corporate bonds. This in turn inflates corporate profits, as well as corporate stocks, sending stock market indexes to new milestones.

President Obama touted this as an example of ‘Middle-Class Economics.’ While this is great and all, how exactly does a doubling stock market help the middle-class?

Considering that the Top 10% owns 90% of all the stocks and bonds in this country, I think that it would be fair to say that this is an example of progressive trickle-down economics, rather than middle-class economics…

“Middle-Class Economics”

Speaking of Middle Class Economics, how long will it be before ours return to their pre-recession levels?

“Our Economy Is Growing And Creating Jobs At The Fastest Pace Since 1999”

Except for that pesky Stock Market bubble, 1999 was a pretty good year for the economy. The economy is growing and creating jobs, which no one disputes. The problem is that the type of growth the economy is currently experiencing is much different from the type of growth from the late 90s.

Consider the employment to population ratio and the amount of people leaving the labor force each month:
Of course, people just blame that on the baby boomers retiring. Most of the data out there, including BLS own statistics, shows that this is inaccurate. Financial advisors such as Doug Short and Lance Roberts often record their take on the reason why the labor force participation rate has dropped so much since the beginning of the recession.

While there does seem to be an influx of baby boomers retiring and leaving the labor force, this is only a faction of the overall problem. Most of the data shows that the labor force is aging, and is also very reluctant to retire  A good portion of the people who have left the labor force did so because they were unable to find work, and have sat on the sidelines since. While the economy has created lots of jobs, the labor force has barely budged as a result of that.

“Wages Are Finally Starting To Rise Again”

Um, what?

If by ‘rise’ you mean the lowest growth since December 2012, then the President would be correct.

“The Cost Of Community College For All Will Be Zero”

That is because the taxpayers are going to pay for people to attend school. That is if you don’t already enjoy your job prospects once you have graduated from community college. Either way, don’t people ever learn that there is no such thing as a free lunch?


And I haven’t really touched upon the tax plan, but what’s the point of doing that? The speech is basically more of the same Obama that the electorate has grown to expect. I’ve always wondered why the legal voting age was dropped from 21 to 18. I’ve always wondered why it was ever 21 in the first place. We should actually amend the constitution to allow a person of any age to vote. Like the unveiling of a new iPhone or electronic gadget, all we ever do is wonder what new toys the President is going to give us.

 

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