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The State of the Union Address -- Quick Reactions

28 Jan 2010
Posted by Andrew Samwick

I give President Obama high praise for the parts of his speech this evening where he chastised his own party in the Congress for its ineffectiveness and for telling the Senate Republicans that if they are going to insist on supermajorities to get any policy passed, then they are going to have to share in the responsibility for governing.  Good for him.  Nobody's perfect, but I cannot help but think that the conduct of the Congress in recent years, and the Senate in particular, would be enough to make a Founding Father vomit.

Despite the unusual circumstances of January 2010, much of the speech was the standard fare in January -- everybody should go to college, everybody should be healthy, the environment should be clean, people should save for retirement, and I've got the token programs in my budget to give me the credibility to pay lip service to it.  And, new this year, we will do all of these token programs and giveaways while insisting that we will freeze non-defense discretionary spending at current levels.

One item that stood out as different was the acknowledgement that we are on our way to export-led growth, if we are to have growth at all.  President Obama sounded like a good old-fashioned mercantilist with his claim that we would double exports in five years and support 2 million more jobs through those exports.  I don't think that's a reasonable projection, but it does signal a different way of talking about what's important in economic policy.

On the important issues of the moment -- financial industry reform and health care reform -- I didn't hear much that gave me hope.  On the former, I simply do not believe that the need to stabilize the financial system required us to prop up the large, failing institutions within that financial system.  Bailout in lieu of bankruptcy is simply not an appropriate policy, no matter how many times the Treasury Secretary claims otherwise.  On the latter, the near-term emphasis should be on the design of health insurance markets, not funneling more money into a system that is known to waste that money in all sorts of ways.

And don't forget his spending

And don't forget his spending a substantial portion of the speech urging Congress to put "country first, and politics as usual dead last". Oh wait, that was President Clinton 15 years ago Oh, and also just about every other politician in D.C. for a long time.

I could respect such self-righteous, self-flattering rhetoric from a politician if he had the guts to talk straight and tell both ideological sides/extremes that if they continue to refuse to face the reality that the only politically plausible way to avert eventual fiscal and economic disaster is compromise -- that "progressives" need to accept that we cannot deliver all future seniors all the benefits they'd get per current law, and conservatives need to accept that we can't (politically) solve the problem entirely on the spending side, so taxes will have to go up. He could have urged purists (a nice way to say extremists) on both sides to discard their delusion, fed by professional hyperpartisans in the media and in politics (what I call the "Partisan-Industrial Complex"), that if they just hold out a bit longer, they can get their ideologically pure solution.

But I guess he thought it would be better to do what everyone else does: just posture as the lone (or one of the few) unselfish soul(s) in Washington who puts country ahead of partisanship and personal ambition and is urging others to do the same.

Doubling exports

Between 2003 and 2008 the nominal value of exports rose by 75%, so it's not that much of a stretch to think that they could double in the next five years, especially if we have significant dollar depreciation.

Deeds, Not Words

Get Congress to toe the line and pass bold legislation. Obama has to step up.

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