Our State of the Union's Troubled State

The British Economist Magazine says that "A strikingly unaudacious speech from Barack Obama failed to address America's problem. - As if his "speech" consisted merely of the words bla, bla, bla. America faces two huge, linked problems. Our unemployment rate is running at 9.4%, once you add in those who want full-time work but can only find part-time jobs, it is almost twice that. Job creation is not even keeping pace with the rise in population, and the budget deficit is running at almost 10% of GDP; on that measure this year and the previous two will have been the three worst since the Second World War. Nevertheless,Obama continues to employ our military to find useless wars in Iraq and Afghanistan. To the Republicans who now control the House of Representatives, the main problem is the deficit and the cumulative burden of debt it brings with it. The deficit will of course narrow as the economy recovers, but because of the insatiable demands for health care of America's now creaky and retiring baby-boomers, unless taxes are hiked, it will not dip below 4% of GDP, and it will start to rise again after 2015. That is not sustainable. Not only will borrowing on this scale tend to crowd out more more productive investment: the interest on it is already eating up 10% of government revenue, a figure that will rise as interest rates go up. Hence the Republican demand for swift and deep cuts. Get spending down, shift government off the backs of the people, and jobs will return, as the invisible hand works its magic. Mr. Obama sees things the other way around, but that's another story!