President Obama is right

Now this is a surprise — President Obama delivered the beginning of a good speech today.

This bit made think for the first time that he — or at least his speechwriter — actually understands what’s going on:

Long before the recession hit, hard work stopped paying off for too many people. Fewer and fewer of the folks who contributed to the success of our economy actually benefited from that success. Those at the very top grew wealthier from their incomes and their investments — wealthier than ever before. But everybody else struggled with costs that were growing and paychecks that weren’t — and too many families found themselves racking up more and more debt just to keep up.

Now, for many years, credit cards and home equity loans papered over this harsh reality. But in 2008, the house of cards collapsed. We all know the story by now: Mortgages sold to people who couldn’t afford them, or even sometimes understand them. Banks and investors allowed to keep packaging the risk and selling it off. Huge bets — and huge bonuses — made with other people’s money on the line. Regulators who were supposed to warn us about the dangers of all this, but looked the other way or didn’t have the authority to look at all.

That’s exactly right.

The middle class fell behind for many reasons, both natural economic reasons and Washington-created policy error reasons. Chief among the first category are technological developments and international competition, in that order. ATMs replaced tellers, e-mail replaced mailmen, MERS replaced loan processors, computers replaced cubicle-dwellers (see our earlier posts Rise of the Machines and RotM continued).

The policy errors that contributed to the demise of the middle class include the Federal Reserve deliberately facilitating stock market and housing bubbles so that a generation of Americans thought they could get rich quick. Why get a difficult degree in engineering or medicine when you can make more money flipping stocks or flipping houses? These bubbles enriched those at the top (investment bankers, stock brokers, mortgage brokers, asset owners), and left middle-class workers with neither jobs nor skills after the bust. Beyond the Federal Reserve, Congress and many Administrations were complicit in the bubble-blowing with misguided policies via FHA, Fannie Mae, Freddie Mac, CRA, etc. Obama doesn’t understand — or doesn’t admit to understanding — this yet.

But if Obama is beginning to understand how we got here, he couldn’t be further from understanding how to get us out of here. Obama’s solutions are expensive mandates on businesses like ObamaCare, left-wing tribunals like the NLRB telling companies how they can run their businesses, and demonization and taxation of successful business people. Oh, and raising taxes for 10 years to pay for a 1-year re-election stimulus. All these will destroy job opportunities for the middle- and aspiring-middle classes.

What might turn the tide? Repeal ObamaCare, scrap the NLRB, and flatten the tax structure, ending loopholes and subsidies. Yeah, we need to deal with the debt issue too, but that’s another post (and another area where Obama’s policies make things worse).

I’m reminded of the lyrics of Son Volt’s Drown:

What goes wrong
You’re causing it to drown
Didn’t want to turn that way
You’re causing it to drown
Doesn’t make a difference now
You’re causing it to drown

Read more at W.C. Varones