February 1, 1998

State Of The Union Close Enough For Government Work

The first minute of President Clinton’s state of the union speech was not exactly reflective of the real situation, but it was close enough for government work.

For the next 71 minutes he skipped over things as they are and laid out a wish list of government largess designed to seduce every voter in sight.

Nonetheless, congressional accomplishments for which he takes credit is worth noting:

“These are good times for America. We have more than 14 million new jobs, the lowest unemployment in 24 years, the lowest core inflation in 30 years. Incomes are rising, and we have the highest home ownership in history. Welfare rolls are the lowest in 27 years, and crime has dropped for a record five years in a row.”

Then came the usual, motor-boat response of liberals --- but,but,but,but.

Clinton continued: “But with barely 700 days left in the 20th century, this is not a time to rest. It is a time to build the America within our reach.”

The president had the good grace to credit a “bipartisan vote of Congress for turning a sea of red ink into black” -- no matter that Democrats were dragged there screaming and kicking.

Proclaiming a balanced budget in 1999, if not this year, he predicted “sizeable surpluses” thereafter which should be used to “save Social Security first.”

Declared Clinton: “I propose we reserve 100 percent of the surplus -- every penny -- until we have taken all the measures necessary to strengthen the Social Security system for the 21st century.”

In one of the few such instances, Republicans sprang to their feet and cheered. Their enthusiasm waned, though, as Clinton proposed scores of new spending programs. Among them are another raise in the minimum wage, expansion of Head Start, scholarships for college students, child care subsidies, Medicare for age 55 laid-off workers, additional funding for the International Monetary Fund -- just to mention a few.

Senate Budget Committee Chairman Pete Domenici estimates the cost of Clinton’s new spending to be $50 billion a year. Democrats say the surpluses will cover new spending if the Republicans don’t enact tax cuts, bolster national defense, or reduce the national debt.

White House number-crunchers assert the surplus will amount to $200 billion over the next five years. This would average $40 billion a year -- considerably shy of covering Clinton’s proposals. The Congressional Budget office estimates the surplus could be $660 billion over the next 10 years if no more spending is undertaken.

Henry Aaron, Social Security authority for the Brookings Institute, calculates that these surpluses would close only a quarter of the gap between Social Security’s payroll receipts and baby-boom obligations.

In other words, “Social Security first” won’t save the program -- even if Congress foregoes all new spending indefinitely. The final solution must be a massive infusion of taxes from the general budget, pushing back the retirement age, or reducing benefits -- probably a mixture of the three.

Though Clinton presides over improved trends in the economy, there are fundamental weaknesses that must be considered. Perhaps the most critical is the minimum wage.

Every increase in the minimum wage sends more jobs to third-world countries. Trade pacts such as NAFTA merely recognize what already has happened

Each minimum wage hike gives an illusion of additional income for about 60 days. During this grace period, the increase ripples upward through the hourly work force. Real purchasing power of all workers level off to pre-raise levels.

Robert Higgs, economist for Independent Institute, calls this “the madness of the minimum wage.” Productivity, on which income is based, has not increased one iota. Prices of things simply go up.

He says existing workers will not be affected because they already are earning the legal minimum -- currently $5.15. Those hit hard are workers of low productivity.

These primarily are teenagers, high-school dropouts, and people who don’t speak English.

The net effect on the U.S. economy is creation of a permanent class of unemployable persons dependent upon welfare or criminal pursuits.

In addition, artificial standards of wages widen the gap between skilled and under-skilled workers. The latter are forced to hold down two jobs -- by father and mother for example -- to raise a family and live comfortably.

Congress -- during the Bush administration -- established the earned-income tax credit up to $1,250 for worker families earning below the poverty level. With this and the many welfare programs already in place, we do not need fiat wage controls. The minimum wage is the most regressive tax ever thought up, and should be abolished.

Congress played the usual charade Tuesday of applauding every declamatory sentence of the president’s speech -- a total of 104 times. Democrats leapt to their feet 63 times for “big Os” (political slanguage for “ovations”). They looked like yo-yos.

The nation would be better served by following President George Washington’s example of sending a letter to Congress about the state of the union. He submitted proposals as appropriate.

John Kenneth Galbraith has it figured right: “Speeches in our culture are the vacuum that fills a vacuum.”

PARTING SHOTS

When I was a boy, my father told me anybody can be president. Now, I’ve come to believe it.

* * *

Congress reconvened last week. As is customary, the chaplain was called to the dais to open the new session. He looked around the House chamber, bowed his head and prayed for the country.

By Lindsey Williams, columnist for Sun Coast Media Group newspapers