The Edgy Optimist

President Barack Obama made the middle class the focus of his State of the Union address on Tuesday. He was lauded by some as fighting for jobs and opportunity, and even for launching a “war on inequality” equivalent to President Lyndon B. Johnson’s 1960s War on Poverty. He was assailed by others for showing his true colors as a man of big government and wealth redistribution.

Yet the initiatives Obama proposed are striking not for their sweep but for their limited scope. That reflects both pragmatism and realism: Not only is the age of big government really over, so is the age of government as the transformative force in American society. And that is all for the best.

Wait a minute, you might reasonably object: What about healthcare? What about the proposals for minimum -wage increases, for expanded preschool, for innovation centers, for $50 billion in spending on roads and infrastructure? Surely those are big government and aim, effectively or not, for transformation?

Healthcare and the changes under the Affordable Care Act are significant, and for now they have expanded the scope and cost of government However, those costs appear to be growing more slowly than expected, at least according to the Congressional Budget Office. While healthcare costs are increasingly untenable, the issue is one of healthcare costs for society as a whole. Recent legislation means government bears more of them, but someone will bear them no matter what.

So while healthcare is billed as an expansion of government, it is more a continuing issue of cost and delivery of something that has to be paid for by someone and at some cost.

As 2012 sputters to a close, it wraps up with a yawning gap between widespread economic pessimism and the actual state of economic affairs.

Though consumer sentiment rebounded in the fall, it fell in December, amid relentless coverage of the impending fiscal cliff. Holiday spending was muted. Businesses, meanwhile, cite the unresolved negotiations in Washington as evidence of continued uncertainty and many have put new spending, hiring or investment on hold. The media counts the days (and on some cable news channels, the minutes and the seconds) till we descend the fiscal cliff – adding to the general agitation.

Yet, every indicator of American economic activity has been strengthening. Stocks are up between 8 percent and 14 percent in 2012, depending on the index. Gross domestic product is increasing more than 2 percent a year; unemployment has fallen below 8 percent; wages are steady even as inflation is close to non-existent. Energy prices have declined, and home prices have increased. Debt burdens for American households are now at the lowest level in 29 years, giving the vast majority of consumers more flexibility in their spending