Eagle Daily Investor

Obama’s State of the Union: A Sign of Failure

“The triumph of persuasion over force is the sign of a civilized society.”

In my pamphlet, “Persuasion vs. Force,” I made the point that when the U.S. president signs a bill forcing people to do things they don’t do voluntarily, it’s a sign of failure, not success, and Washington should be in mourning, not celebrating… whether the issue involves gun control, higher taxes or new programs like the president proposed this week in his State of the Union address.

Society can take two roads — the road to genuine prosperity, or the road to artificial stimulus. The first results in a permanent higher standard of living for all; the latter creates an inflationary boom that cannot last.

Want lower interest rates? The correct answer to that wish is a higher voluntary savings rate by individuals. To imitate the private market, the government (through its central bank) artificially lowers interest rates, causing unintended consequences — inflation and a boom-bust cycle.

Obama’s Own $9 Minimum Wage Plan

Want higher wages? The correct solution is to increase worker productivity through advances in training, technology, capital formation and efficient use of saving. The artificial answer is to mandate that employers pay workers a higher minimum wage or living wage, which currently is at $7.25 an hour.

The president proposed raising that rate to $9 an hour, a 24% increase, by 2015, and then index it to inflation (the Consumer Price Index). For most employers, that situation means they will have to pay more than $9 an hour, if you include benefits and their share of FICA taxes.

The unintended consequences are higher unemployment among the less-skilled workers — the same workers the government is trying to help. Not surprisingly, as the minimum wage has risen in past years, teenage and minority (largely unskilled) unemployment has risen sharply. In fact, unemployment among black male teenagers is currently 40% in this country — a social disgrace largely caused by a black president and his supporters (the president and Democrats pushed through the minimum wage increase to $7.25 in 2009). As Milton Friedman once said, “The minimum wage law is the most anti-black law on the books.”

In fact, according to a recent survey, more than 60% of professional economists want the minimum wage law abolished, lowered or kept the same. Only 37% think it should increase (and even then only slightly). They know that when the government imposes wage-price controls, the costs outweigh the benefits.

Years ago, the New York Times ran an op-ed: “The Right Minimum Wage Law: $0.00.” (Yes, the New York Times!) The newspaper opined that a welfare/workfare program is a better way to deal with poverty than interfering with the labor markets.

You Blew It! Sen. Marco Rubio Defends Big Government

“Medicare is especially important to me. I would never support any changes to Medicare that would hurt seniors like my mother. But anyone who is in favor of leaving Medicare exactly the way it is right now, is in favor of bankrupting it.”

– Sen. Marco Rubio (R-Florida)

In his response to President Obama’s State of the Union message, Republican Sen. Marco Rubio sent a mixed message. Maybe that’s why he was sweating so profusely and needed to drink some water — or maybe the purple Kool-Aid of big government.

While Sen. Rubio professed belief in free markets and free minds — the foundations of the American republic — he defended two very big government programs: the welfare programs of Social Security and Medicare, and the federal Department of Education. The first is an inefficient way to help retirees, and the second is a boondoggle of massive destruction.

It just goes to show you how good people can become benefit-corrupted by big government programs. Even wealthy people who can have their own private medical insurance and retirement plans become dependent on the government. Without Social Security and Medicare, Americans would be more independent, more health conscious and more charitable.

Sen. Rubio seems to think that without Medicare, his father could not have died with dignity. Or that his mother couldn’t have received proper assistance in dealing with cancer. Yet there are private and better alternatives to government assistance.

He seems to think that he couldn’t have finished college without federal student aid. Yet there are numerous private alternatives to government aid, such as private scholarships and grants. And by making college education available to all through federal student loans and grants, the cost of a college degree has skyrocketed.

Then there is the monstrous waste and regulatory nightmare associated with the Department of Education. Don’t get me started.

To read my e-letter from last week, please click here. I also invite you to comment about my column in the space provided below.

About Mark Skousen

Mark Skousen, Ph. D., is the editor of the monthly investment newsletter, Forecasts & Strategies, as well as three weekly trading services, Skousen High-Income Alert, Hedge Fund Trader and Fast Money Alert. He also is a professional economist, investment expert, university professor, and author of more than 25 books. He earned his Ph. D. in monetary economics at George Washington University in 1977. He has taught economics and finance at Columbia Business School, Columbia University, Grantham University, Barnard College, Mercy College, Rollins College and as a Presidential Fellow at Chapman University. He also has been a consultant to IBM, Hutchinson Technology and other Fortune 500 companies.

View all posts by Mark Skousen →

  • Lloyd G. Westphal

    I appreciate your common sense, free enterprise, independent approach to the
    problems facing the country. Washington bureaucrats create the problems and seldom offer practical solutions to any of their mistakes.

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