David Frum

02.13.13

Obama's State-Led Economy is Here

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A journalist who spent a lot of time with candidate Obama once joked to me: "Obama is more liberal than he thinks he is."

But that joke only applied to first term Obama. Second-term Obama has come to peace with his inner liberal. Last night's State of the Union address confirmed the message of the second inaugural: the Obama economic agenda will be firmly and aggressively state-led and state-directed.

Nowhere is this more clear than on energy, where the president boldly disregards price mechanisms to support and subsidize government-favored technologies. But the same preference is seen when the president talks about the manufacturing revival. Here's an important and positive change driven by (1) high oil prices - making it more expensive to ship from China; (2) cheap natural gas - promising low-cost electricity in this county; (3) a sharp rise in productivity -adjusted Chinese wages relative to U.S. wages. What does Obama's idea of manufacturing centers have to do with any of this? Zero. Yet here they come anyway.