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Morici: The State of the Union and the Obama Legacy

In his State of the Union Address, President Obama will ask for political comity. Quite a switch from two years ago, when he pronounced elections have consequences and used his majorities in Congress to push through new regulatory and spending initiatives with few concessions to Republicans.

Now that the tables are turned in the House of Representatives, the President is asking Congress to limit budget cuts and focus on creating jobs.

With unemployment hovering above 9 percent, this might be good counsel, but President Obama will propose more spending on education, transportation and technology that is not going to fix what is broke.

The schools don’t need more money to implement No Child Left Behind. Instead, they might do better with less federal meddling and money, and profit more from the opportunity for cultural change that could accompany making do with less.

States could enforce reasonable standards with rigorous examinations in specific elementary and high school courses, as New York has done for several generations. Instead, most states waste too much time contriving tests nearly everyone can pass, and encouraging students to “find themselves” instead of learning something useful.

Presidential speech pedistal
Photo by: Pete Souza
Presidential speech pedistal

The net result is too many high school graduates lacking skills to keep an entry- level job, and too many university graduates with useless humanities and social science degrees, burdened by guilt about America, and possessing too few professional skills.

Merely sending the states more cash to expand access to college, as the President might like, will only produce more English majors and not the engineers the nation needs to design, manufacture and export new products, and create jobs.

The national transportation system sorely needs upgrading—highways in major urban centers are beset by bottlenecks and congestion that slows the movement of commuters and goods, wastes energy and handicaps the American economic machine.

Instead of putting full effort into these problems, the Obama Department of Transportation favors fanciful high-speed intercity passenger rail projects that won’t solve congestion problems—especially for making and moving goods—and will impose operating deficits on cash strapped states.

Advocating more federal money for R&D is like endorsing motherhood but America has no problem generating new product ideas—the challenge is to manufacture those here.

The two big markets for new products are China and the United States, and China generally requires American companies from ambulances to xylophones to produce in China to sell there. And it flaunts World Trade Organization rules and norms offering generous subsidies and maintaining an undervalued currency—the recent 4 percent increase in the value of the yuan, even accounting for somewhat higher inflation in China, is hardly enough to compensate for a 40 percent undervaluation.

Too often products like solar panels and electric car batteries are designed with the help of federal and state grants, initially manufactured in the United States, and then moved to China to meet Beijing’s procurement rules, cope with high Chinese tariffs and take advantage of manufacturing costs made lower in China by generous subsidies and an artificially undervalued yuan. Then the Chinese engineers take over.

Engineering and exporting more American made products requires substantive U.S. steps to counter Chinese protectionism, much more than it does another round of R&D tax credits or grants to develop solar panels and electric cars. A more pragmatic and less idealistic trade policy would upset President Obama’s liberal base—not many folks reading the New York Times or teaching in the Ivy League much care if America has factories.

Therein lays the problem. It is much easier for President Obama to propose more money for schools, wiz bang electric trains and science labs than to tell educators to buck up, to fix bridges in congested cities, and play as tough on trade with China the way Beijing plays tough with U.S. companies.

Mr. Obama wants to be a great president, but he fails to grasp that the great presidents, like Lincoln and Truman, embraced policies that upset key constituencies, and accepted the political heat and disapproval of friends.

Sadly, despite powerful oratory, President Obama won’t take the tough steps, and that is what separates him from a place among the great presidents.

Peter Morici is a professor at the Smith School of Business, University of Maryland, and former Chief Economist at the U.S. International Trade Commission.