Tuesday, January 25, 2011

Promises, Promises

. Tuesday, January 25, 2011

State of the Union tonight. The administration seems to have concluded that we are engaged in a global fight for jobs: "the world has changed. The competition for jobs is real." The NYT even makes the "Global Fight for US Jobs" its online headline. It is all very weird; as they used to say, :this is where I came in. The meme even has Paul Krugman returning to arguments that pulled him from academic obscurity into the punditocracy.

The New York Times has an interesting graphic depicting the frequency of key words in the SOTU going back to Roosevelt. Obama used the word "jobs" more than any other president (31 times). He mentioned the deficit half as often as Clinton did in 1993 in spite of having a deficit that is twice as large as a share of GDP.

The President also offered some rather vague specifics. The highlights:
Mr. Obama outlined initiatives in five areas: innovation; education; infrastructure; streamlining the federal bureaucracy and cutting the deficit. He pledged to increase the nation’s spending on research and development, as a share of the total economy, to the highest levels since John F. Kennedy was president, and vowed to prepare an additional 100,000 science and math teachers by the end of the next decade.

He proposed new efforts on high-speed rail, road and airport construction and a “National Wireless Initiative” that, administration officials said, would extend the next generation of wireless coverage to 98 percent of the population.

Saying it is imperative for the nation to tackle its deficit, Mr. Obama reiterated his support for $78 billion in cuts to the Pentagon’s budget over five years, in addition to the five-year partial freeze on domestic spending.
I might point out that the FY 2010 budget, called "A New Era of Responsibility: Renewing America's Promise" (without a touch of irony), totaled $3.55 trillion. The military's share was approximately $600 billion plus the cost of overseas contingency operations. Trimming $15 billion from that per year is not really a huge reduction, especially as the US winds down its commitment of troops and material to Afghanistan.

And the partial freeze of other discretionary spending programs is supposed to "save" $400 billion over 10 years. That is $40 billion a year, I think. Grand total of proposed economies: $55 billion. Budget deficit for FY 2010? $1.3 trillion. Yes, this improves as the economy recovers. But even assuming this recovery, the deficit remains $440 billion per year in 2014 and then begins to widen again. Let's just call this approach to deficit reduction uninspired.

Other than these "cuts," here is what the President offered:

"This means further reducing health care costs, including programs like Medicare and Medicaid, which are the single biggest contributor to our long-term deficit...To put us on solid ground, we should also find a bipartisan solution to strengthen Social Security for future generations. And we must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market."

All of which brings to mind the following passage from the 1997 SOTU:
Whatever our differences, we should balance the budget now. And then, for the long-term health of our society, we must agree to a bipartisan process to preserve Social Security and reform Medicare for the long run, so that these fundamental programs will be as strong for our children as they are for our parents.
Like I said, I think this is where I came in.


Emmanuel said...

Great post, Dr. Oatley--you don't tolerate mathlexic Cheneynomics.

A quibble though is that the Clinton comparison is a tad unfair. While he may have said essentially the same things as Obama, the former actually eliminated the budget deficit while the latter merely aims to put lipstick on a pig and call it progress.

True, Clinton had several advantages Obama didn't have that improved revenues: presiding over an inflating not a deflating housing bubble; capital repatriation from the financial crisis helping US equities; dot-com boom in progress, etc. Still, Clinton held steady on both tax increases and the Cold War peace dividend.

In contrast, Obama has kept Bush tax cuts (which were made on the incorrect assumption of surpluses far into the future) while not taking the axe to non-discretionary spending which will constitute the bulk of US expenditures.

Certainly, Obama won't be able to point to a Republican-controlled congress as a hindrance since Clinton had the same thing to deal with for most of his time in office. Let's just say Barack Obama is no Bill Clinton.

Promises, Promises




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