Solutions to Texas problems lie with us, not Washington
This commentary originally appeared in the Austin American-Statesman on February 2, 2014.
President Barack Obama delivered his annual State of the Union address last Tuesday, and within it were several items of interest to Texans. Grasping the vision advanced by the president requires something more than a partisan analysis. Undergirding his policy propositions is a fundamental assumption shared by most D.C. power-holders: that the solutions to America’s problems lie with them and their ideas, rather than in the innate genius and resourcefulness of the American people.
And so the president’s speech contained a series of small-ball proposals ranging from purportedly guaranteed-return government retirement accounts to incentives for more solar energy. The latter could have come straight from a 1979 State of the Union address — and in fact Jimmy Carter did “call on Congress … to increase production and to speed development of solar power” in that one, presaging by 35 years President Obama’s declaration that America is “becoming a global leader in solar” last week.
Ronald Reagan once quipped that a government program is the closest thing we have to eternal life on this earth, but bad ideas in Washington, D.C., last just as long.
No State of the Union would be complete without mention of the president’s signature policy achievement, Obamacare. Of the Affordable Care Act he claimed that, “More than nine million Americans have signed up for private health insurance or Medicaid coverage.” But Medicaid is more than two-thirds of this number of which about half is from the regular churn of the millions of people who were already eligible, signing up through their states as they’ve done for decades. In other words, much of this number has nothing to do with the new law. As for the 2.2 million people who enrolled in private insurance plans though the exchanges, some 65 to 90 percent of them already had insurance — insurance that was canceled because of Obamacare.
The president also made this claim, “(M)y administration has made more loans to small business owners than any other.” The president was referring, of course, to government subsidized loans through the federal Small Business Administration (SBA). These government-backed loans totaled $106 billion to 193,000 small businesses and entrepreneurs in his first four years in office. This surge in lending activity was mostly driven by an injection of federal funds from the president’s stimulus program.
Are small businesses actually seeing increased access to needed loans because of the federal government? No. In 2013 the SBA issued a report that concluded with this stunning admission: there’s been a “downturn in small business lending.” So, small business lending is up and down.
This downturn is easy to explain. For all the talk about SBA loans, they still only constitute a fraction of the overall market. Big banks made 17 times more small business loans in 2011 than the SBA subsidized in four years.
But small community banks are especially important to the life of small businesses. Located throughout Texas in rural and urban areas, small bank managers often personally know the business owners who ask them for credit. And these banks have been suffering mightily since the president signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law in 2010.
Dodd-Frank has been a red-tape nightmare for small banks, causing many of them to throw in the towel and sell out to far larger banks. As with many acts passed by Congress, its effects were at odds with its name. The irony of Dodd-Frank was that it was supposed to fix “too big to fail” and has instead resulted in big banks getting bigger, exposing taxpayers and markets to greater liabilities in the event of failure.
We should be glad that the president chose not lay out ambitious new programs — we’re still reeling from the old ones. But we should be less pleased at what this State of the Union revealed about the mind of the D.C. elites who have created and presided over the worst national economic times since the Great Depression. They looked at an America with real challenges and real problems, and saw the solution in their own mirrors — with disastrous results.
The wiser course, and the course seemingly impossible in Washington, D.C., is to look at an America with real challenges and real problems — and see the solution in Texas, where instead of empowering bureaucracies with taxpayer money, we’ve empowered ordinary citizens with liberty and limited government. The results, with low unemployment and high growth despite D.C.’s best efforts, speak for themselves — and sustain the state of our Union better than the president’s agenda ever could.
Brooke L. Rollins is president and CEO of the Texas Public Policy Foundation.