Obama’s New Plans for Investing in America

State of the Union Speech Stresses More Spending to Move America Forward

President Obama’s State of the Union address was filled with the usual soaring rhetoric, self praise, promises to freeze spending and a section on how to make America great by spending more money. His ideas for spending, to which he refers to as “investment”, included more government money to be spent on education, infrastructure and renewable energy.

This is the Democrat’s answer to growing the economy and solving the nation’s problems. Initiate more government spending, which really translates into more borrowing, since the United States is virtually broke. To highlight that fact, and the economic factors facing the Federal Government of the United States:

• National Debt is $14.1 Trillion as of Jan. 2011 
• National Deficit  is $1.48 Trillion (Projected 2011 deficit as of Jan. 25, 2011) 
• Debt as a % of GDP is 9.8% 
• Unfunded Liabilities are Over $104 Trillion (As of Feb. 12, 2010 – Dallas Fed) 
• Annual Expenditures are Approximately $3.6 Trillion 
• Annual Receipts are Approximately $2.3 Trillion

That the Federal Government is broke is not even open to debate any longer. What is open to debate is: How does the United States get out of the mess it has made of its finances? Obama’s solution is simply stated in the following steps:

• Freeze spending at current levels - - meaning have the federal government continue to spend $1.3 to $1.5 trillion more every fiscal year than it recovers in revenue. 
• Spend and borrow more on the above mentioned areas to grow the economy -- education, infrastructure and renewable energy.
• Leave entitlements alone and fight hard to keep the most current entitlement – ObamaCare.

I believe that the spending emphasis is all wrong and the Republican plans to cut spending back to 2008 levels are only a modest start. The three Obama spending initiatives are totally worthless.

Education Spending

Don’t we spend enough on education already? According to Education Week, the average expenditure per public school student in the United States was almost $10,000 per student per year. And what do we get for this huge amount of money? Some of the poorest educated students from any of the developed countries.

In the most recent Program for International Student Assessment Studies (PISA), United States students did very poorly, indeed. The PISA results for 15 year olds in the most recent PISA international tests were:

2009 Reading Literacy  -  7th out of 33 countries.

2009 Math Literacy  -  18th out of 33 countries.

2009 Science Literacy  -   13th out of 33 countries.

Why are American students so poorly educated? Without going into a whole lot of analysis, there is one simple answer – teacher unions. These unions exist solely for the benefit of teachers and to the detriment of American public school children. Their sole interest is keeping the funding for education as high as possible and keeping teachers tenured for as long as they want to stay in the classroom, regardless of their qualifications or abilities as a teacher.

The last thing we need is more federal money pouring into educations and the coffers of the teachers unions. If you want to improve education, start with a program like Governor Christie’s in New Jersey, except do it nationwide. Governor Chris Christie is one of the first courageous politicians to take on the education unions in New Jersey and proposes to have the teachers in that state sign individual contracts with the state every 5 years. I wish him well in his plans to improve education in his state, which currently boasts the highest spending per pupil in the nation – over $17,000 annually.

Let’s have more charter schools, more home schooling and more private schools. The last thing we need is more money spent on public education by the federal government.

Infrastructure Spending

Do we need a massive new infrastructure spending program? As one who has driven across many of the roads and bridges across this country in recent years, I can attest to the need for more maintenance on the nation’s roadways. However, spending for infrastructure should be limited to the maintenance of the existing road ways and bridges. New roads should be built as toll roads, so that the users of those roads will pay for the bulk of their costs.

What we don’t need are new passenger rail services. Every study has shown that these are a complete waste of money. These new rail plans cannot pay for themselves and are at a serious competitive disadvantage with the airlines that can service these areas much more efficiently with less cost. Obama made numerous references to existing rail projects and seems to be very proud of them. However, new Republican governors in Ohio and Wisconsin are asking that these projects be stopped and the states be given the money for more worthwhile projects. These rail projects are wasteful and not cost effective.

It would be much better to upgrade the nation’s airports and the air traffic control system. Until just recently, the FAA has had to contend with ancient equipment first designed and built in the 1960’s. It is America’s airline infrastructure that must be maintained and expanded, where necessary.

Renewable Energy Sources

Obama wants the federal government to spend more billions on renewable energy and to remove some of the subsidies given to oil companies. What he means by subsidies, of course, refer to depletion allowances which have been an incentive for decades to investors to encourage drilling, so we could have the necessary oil to power our transportation system in the coming decades.

Obama would like to see electric cars dominate the roads in America as soon as possible. In his State of the Union (SOTU) Address, he stated that this nation can be the first to have one million electric vehicles on the road by 2015. That might sound like a lot, but it represents about 0.4% of the approximately 250,000,000 automobiles in the USA. Nevertheless, he and the Democrats want to spend billions to reach that figure. Just the day after the SOTU speech, Sander Levin (D-MI) has said he will introduce legislation that aims to allow the first 500,000 electric cars sold by an automaker to be eligible for tax credits up to $7,500. Hopefully, the Republicans in the House will squelch that bill.

Unfortunately, Obama’s primary focus has been to meet the CO2 reduction goals of the United Nations and its Intergovernmental Panel on Climate Change (IPCC). Obama is committed to saving the world from climate change and in his mind, renewable energy sources are the answer. We should all be driving electric cars in the near future and solar and wind should be the principle sources of the nation’s energy. Anyone who believes this is a dreamer.

We have seen solar energy efforts for the past 20 years, and most have met with few economic successes, even with massive federal subsidies. The fact is that solar power on a large scale has proved to be extremely costly and not very effective. The best example of the use of solar power on a large scale is in Spain, where the government there has supported the use of solar power with massive subsidies. In 2008, Spain accounted for half the world's new solar-power installations in terms of wattage, thanks to government subsidies. Unfortunately for Spain, its government suffers from the same disease as ours – massive debts which are now unsustainable. As a result, faced with the unraveling world economy and a deepening budget deficit, the Spanish government late in 2008 reduced the money it paid for solar electricity and capped the amount of subsidized solar power installed each year at 500 megawatts.

Let the Free Market Establish the Direction of the United States

Much of Obama’s plans to grow the economy and the country are to keep providing massive government supported subsidies. The real answer for the United States is to avoid bankruptcy, start reducing the deficit and the national debt, and to reduce size and scope of government.

If we let the free market do its job, we will ultimately have better educated children, better transportation systems and enough of the right kinds of energy to support the needs of all Americans. I can only hope that the Republicans in Congress still understand that and are not swayed by Obama’s vision for more government spending.