State of the Union speeches are disorientingly expansive. They dart here and there, zigzagging from one unrelated topic to the next, all while extolling the nation’s virtues and spinning visions of the wonders to come.
President Obama’s address last week was more than typical. Electric cars! High-speed rail! Biomedical research! Eighty percent of our electricity from clean sources by 2035! If you bent your mind in a certain way, you could imagine the speech as a promo for a new government-subsidized theme park.
In a way, it was the perfect State of the Union speech. That is, it sounded like a download of what you’ve heard every year since you began paying attention to politics.
For Obama, though, it marked a tremendous missed opportunity.
Only a few weeks ago, a political earthquake swept the nation. The electorate issued a new Prime Directive: cut spending. Now. Voters are unnerved by our rapidly worsening fiscal position. They have seen the riots in Greece. Many are acutely aware of Europe’s ongoing sovereign debt crisis. They worry the same thing could happen here.
Many understand that the modern welfare state is collapsing, and the only difference between Europe and what we’ve built here — in terms of publicly supported retirement and social benefits — is that Europe’s version is even more costly than ours. It’s a difference of degree, not kind.
Obama appointed a special commission to look at the problem, and the panel defied expectations: It produced a report that actually moved the debate. Members of both parties endorsed proposals, including a Social Security reform, that few on either side would have countenanced only a few months earlier.
Another bipartisan panel offered a plan for reforming Medicare, which on its current course will basically eat the federal budget some day. Instead of an open-ended entitlement, the panel said we should move toward fixed government contributions — a system of “premium support” — allowing beneficiaries to buy policies with federal dollars.
The dominant issue in politics now is how you stand on our collapsing entitlement state. It has grown beyond the capacity of the tax base to support, and the debate is between those who seek to repair the safety net and make it sustainable, and those whose instinct is to defend open-ended entitlements regardless of the cost or the risk to the nation’s financial position.
In his speech last week, Obama essentially said he’s going to sit this one out. His main response to the immediate fiscal crisis was a laughable five-year freeze of non-defense discretionary spending — at the current high levels. With the ground for entitlement reform prepared by two bipartisan commissions that won buy-in from key players among Democrats and Republicans, the president took a pass.
Obama’s debt commission proposed a Social Security plan that would gradually raise the full retirement age and reasonably reduce future benefits for more affluent workers. Obama dismissed the panel’s work in a few sentences, and offered the anodyne observation that we need to “find a bipartisan solution to strengthen Social Security for future generations.” Ya think?
Worse, he repeated the whopper that the health care reform law would slow rising costs in Medicare (not so, says Medicare Chief Actuary Richard Foster), and then cited a flawed Congressional Budget Office report that said repealing Obamacare would add to the deficit. The CBO report, however, was based on the dubious assumptions written into the law.
Former Bush economist Greg Mankiw penned an amusing reply to the repeal-boosts-the-deficit argument.
“The health care reform bill passed last year increased government spending to cover the uninsured, but it also reduced the budget deficit by increasing various taxes as well,” Mankiw wrote. “Because of this bill, the advocates say, the federal government is on a sounder fiscal footing. Repealing it, they say, would make the budget deficit worse.”
Which prompted Mankiw to suggest a fiscal reform much like that of the health care law: The government should write him a check for $1 billion and finance it with a $2 billion tax increase. Voila! Less red ink!
A few days ago we learned this year’s deficit would reach nearly $1.5 trillion. Is that a problem? Most people believe it is. Unfortunately, the president of the United States had absolutely nothing useful to say about it.