President Barack Obama’s State of the Union address contained a number of interesting ideas aimed at fixing the many problems facing the United States, some of which ideas may echo with Canadians. These included a surprising call for early-child education and a proposal to increase the federal minimum wage from $7.25 to $9 per hour. But while these are noble ideas, they came from a second-term president who seems blithely unaware of his country’s fiscal and political realities. There is no money or Republican support to launch expensive new programs, no bi-partisan support for hiking taxes and, in the case of the minimum wage, no evidence that raising it has any effect on reducing poverty.
Take early-child education. The work of James Fraser Mustard, the Canadian doctor and scientist, on the importance of early learning has left little doubt about the value of a proper kindergarten experience. His research helped convince the Ontario government to implement full-day kindergarten in some schools, and the results are already promising. But now the government is facing pressure to cut its new program entirely to help deal with its $16-billion deficit, the same deficit that prompted it to freeze teachers’ wages, eliminate their right to strike and resulted in the sudden resignation of former premier Dalton McGuinty. President Obama’s idea sounds good on paper, but a country facing deficits in the trillions of dollars simply cannot afford to make “high-quality preschool available to every child in America,” as he put it. The timing is wrong. The U.S. does not want to repeat Ontario’s bitter experience.
As for the proposal to raise the minimum wage, while a noble effort to close the income gap, it could end up doing more harm than good to the American economy. As counter-intuitive as it may seem, there is almost no evidence that a higher minimum wage is an effective way to fight poverty. Study after study, including empirical ones based on recent minimum-wage increases in Ontario and Quebec, has shown that the vast majority of low-wage earners live above the poverty line, so that increasing their wage does nothing to lift them out of poverty. A higher minimum wage will help some families pay their bills, but it will also cost some people their jobs as businesses, hit with higher costs, cut back.
These two proposals may sound good in a speech from an energized Democrat president who has 18 months to act before he becomes a lame duck, but they are not viable approaches to fixing the critical issues facing the United States, which are its unsustainable debt and deficit levels, and it high unemployment. A better idea from President Obama was his proposal for a private-public partnership to repair the country’s aging bridges and other infrastructure. But his speech’s signature proposals are out of touch. He ended his speech with an attempt to shame Congress into at least voting on legislation to reduce the slaughter caused by unchecked gun ownership. It’s not clear he’ll even be able to do that, so how does he think he will get Congress to accept massive new education spending and higher business costs?