Obama’s fiscal weak tea

By Felix Salmon
January 26, 2011
State of the Union Address is the same as the bad news: there was really nothing substantive there when it comes to fiscal policy. " data-share-img="" data-share="twitter,facebook,linkedin,reddit,google" data-share-count="true">

The good news about the State of the Union Address is the same as the bad news: there was really nothing substantive there when it comes to fiscal policy.

In a 6,849-word speech, Barack Obama started talking about fiscal policy 4,049 words in — and then spent 668 words on the subject. That’s less than 10% of the total speech, buried deep into what a magazine editor might call the “back of the book”.

There were a lot of expectations, in the run-up to this SOTU, that Obama would present some really substantive proposals on the fiscal front. But it was not to be. There was a very vague hand-wave on the tax front — both corporate and individual taxes should be “simplified”, he said, without giving any details on the kind of loopholes that he wanted to eradicate. (Mortgage interest tax deduction? We can but hope.)

There were no proposals for tax hikes at all, despite the fact that any good-faith attempt to tackle the budget deficit will simply have to raise the tax base. And the spending-cut proposals were pretty weak tea too: the only ones with numbers attached were a spending freeze designed to save $40 billion a year over the next ten years and “tens of billions of dollars” in defense spending. Given America’s trillion-dollar deficits, this kind of thing barely makes a dent.

Obama did address the big elephant of spending — entitlements — but in a very vague way, including this cryptic passage:

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.

The only way of doing this, I think, is to raise the Social Security tax somehow, perhaps by raising or abolishing the cap on income it’s applied to. But if that’s what Obama meant, the fact that he couldn’t bring himself to say it is dispiriting, and suggests to me that nothing is going to happen in reality.

All that said, however, I do feel that the relatively minor place that fiscal policy had in SOTU is entirely appropriate. I would have liked to see more concrete proposals, but I don’t think that fiscal policy is or should be the top priority for the administration right now. I’m a financial journalist, so it’s something I naturally focus on. But the president has a much bigger job. And with the financial-reform bill now passed, along with two big stimulus bills, it’s time for him to concentrate on other priorities too. Fiscal policy is important, but reducing unemployment is much more so.

18 comments

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The lack of discussion about fiscal policy discussion may also be driven by the political reality. Anything that will even smell of tax increase will be killed by congress!

In a sense the SOTU speech has to be the art of the possible, and changing America’s fiscal policy is probably impossible right now.

Had Obama mentioned fiscal policy reform the entire blogoshere would have discussed how he pledge something he couldn’t deliver. Dammed if you do dammed if you don’t scenario

Posted by FitN | Report as abusive

Felix, he can’t propose fiscal solutions to unemployment because your overlords at the Peter Peterson Foundation have made deficits the most important topic in people’s minds.

Remember, a household budget is just like a government budget! I need to pay down my credit cards so the Federal government needs to pay down its “debt”.

It’s surreal but people honestly believe a country with a fiat currency could go “bankrupt”. I would wager 90% of Americans think we have a gold standard.

Posted by petertemplar | Report as abusive

When the economy is where it is right now, you can’t do anything about jobs without using fiscal policy.

Deficits, at this time, don’t matter. If they ever do.

Posted by mlantz | Report as abusive

Exactly fitN. The speech has to be tempered with that in mind. The President has faced some formidable obstacles with one hand tied behind his back, so I think he did surprising well to now, given the opposition.

He is too wimpy for my liking though. I always imagine lighting a fire under his butt when he speaks. He lacks the authority of his position. A fiery speech will light some fires and give people more hope… the fuel they need to do the things the country needs to turn itself around.

If he had laid everything out in concrete, the opposition retorts and media would have torn it apart. There are those who discredit him for for the most petty things (and like it or not his colour) and that rhetoric has hurt him and will continue to do so. There are those who will never give him credit he deserves. Hopefully they are not the ones who will write (rewrite) that history.

Minorities have to work 10 times harder to get respect and as a woman I can say I have first hand knowledge of that. He has buried most past presidents in keeping promises, but few take the time to pause to review them. (But they have an arsenal of nasty names to call him. There are those who sit here on Reuters, blogs and other news sites and reply to anything that is written about Obama, so they can add a vitriolic/racist message and be the first comments that are visible.

Sadlt, the rest of his term the President will be hogtied by the rednecks who want “their country back” and removal of taxes and entitlements, as long as their privileges remain intact. He has to get a handle on Wallstreet before they take down the whole country again. He has to ensure the states and the country remain solvent and not increase the defecit by the trillions. And he has no money to do it with.

A few Republicans are calling for Government restraint. I think he should let them help lead a committee and work on fiscal policies and restraint there, while he figures out the job situation.

As an outsider looking in, I have to say the Republicans garnered some respect from me for the first time in a long time. They were more respectful and (although a few looked asleep though when the cameras dwelled on them?) seeing parties sit side by side was heartening.

See, everyone has an opinion. And even those of us who like and respect him can’t help but critique negatively. He has a more formidable task then most and he knows it. Hard to make a hope speech when the state of the Union looks dismal, but I give him a 85 for presentation and 60 for economic strategy. (and I wouldn’t want to be in his shoes for the next 2 years)

Posted by hsvkitty | Report as abusive

Exactly fitN. The speech has to be tempered with that in mind. The President has faced some formidable obstacles with one hand tied behind his back, so I think he did surprising well to now, given the opposition.

He is too wimpy for my liking though. I always imagine lighting a fire under his butt when he speaks. He lacks the authority of his position. A fiery speech will light some fires and give people more hope… the fuel they need to do the things the country needs to turn itself around.

If he had laid everything out in concrete, the opposition retorts and media would have torn it apart. There are those who discredit him for for the most petty things (and like it or not his colour) and that rhetoric has hurt him and will continue to do so. There are those who will never give him credit he deserves. Hopefully they are not the ones who will write (rewrite) that history.

Minorities have to work 10 times harder to get respect and as a woman I can say I have first hand knowledge of that. He has buried most past presidents in keeping promises, but few take the time to pause to review them. (But they have an arsenal of nasty names to call him. There are those who sit here on Reuters, blogs and other news sites and reply to anything that is written about Obama, so they can add a vitriolic/racist message and be the first comments that are visible.

Sadlt, the rest of his term the President will be hogtied by the rednecks who want “their country back” and removal of taxes and entitlements, as long as their privileges remain intact. He has to get a handle on Wallstreet before they take down the whole country again. He has to ensure the states and the country remain solvent and not increase the defecit by the trillions. And he has no money to do it with.

A few Republicans are calling for Government restraint. I think he should let them help lead a committee and work on fiscal policies and restraint there, while he figures out the job situation.

As an outsider looking in, I have to say the Republicans garnered some respect from me for the first time in a long time. They were more respectful and (although a few looked asleep though when the cameras dwelled on them?) seeing parties sit side by side was heartening.

See, everyone has an opinion. And even those of us who like and respect him can’t help but critique negatively. He has a more formidable task then most and he knows it. Hard to make a hope speech when the state of the Union looks dismal, but I give him a 85 for presentation and 60 for economic strategy. (and I wouldn’t want to be in his shoes for the next 2 years)

Posted by hsvkitty | Report as abusive

I am going to reinstall and hope that helps the double post thing. I do apologize meanwhile)

Posted by hsvkitty | Report as abusive

it was good, it was bad, it was indifferent…
this is politics in Washington DC with little accord or concern for the American citizen trying to get a handle on financial survival…
each party has their agenda with Rep Paul Ryan presenting again the republican side not what America needs; I do like Rep Ryan!
the wonder of it all that consumer confidence surged in December; I am sorry no one is paying attention…
Thank you.

Posted by chapapet | Report as abusive

I didn’t watch the speech nor have I paid much attention to pundits’ ensuing commentary. It’s all just blah, blah, blah.

Nothing of consequence on national fiscal–or any other–policy will occur in the next two years (& maybe longer) as a result of the divided Congress/Executive. . .

. . . and that could be a good thing no matter what your political or economic perspective.

Posted by Lilguy | Report as abusive

Changing the subject a bit, but staying with SOTU textual exegesis: for energy-policy wonks, there was an intriguing bit about biofuels.

“With more research and incentives, we can break our dependence on oil with biofuels.” That, said POTUS, is part of a broader program, “instead of subsidizing yesterday’s energy, let’s invest in tomorrow’s.”

So subsidies, which are bad, represent spending on yesterday and investment which is good represents spending on tomorrow. Got it.

Defining which is which — what is yesterday, what is tomorrow — will be the tricky part. Ethanol has come under broad attack for a lot of reasons, including the obvious fact that it involves burning what would otherwise be somnebody’s food. Last year Al Gore actually apologized for what he called “first generation ethanol”.

The second-generation, presumably, is the cellulosic kind. Does the above passage meanthat this administration wants to kill “subsidies” for bad corn-based ethanol but wants to promote “investment” in good wood-chip based ethanol? And how will that fly?

Posted by Christofurio | Report as abusive

The President did not address my specific fiscal problem, that is the FBI’s ability to have me fired from jobs and tell other employers not to hire me. The President also said when comparing other countries to the US, “If they don’t want a bad story in the newspaper, it doesn’t get written.” Well, if you google search for “Historic cover-up of FBI and police crimes currently taking place” on the Urban 75 message board, you will see that those stories don’t get printed in this country either. Bill Anderson soxin8@hotmail.com

Posted by soxin8 | Report as abusive

“It’s surreal but people honestly believe a country with a fiat currency could go “bankrupt”. I would wager 90% of Americans think we have a gold standard.”

petertemplar, that is an overly simplistic view.

First, sovereign default is a political decision rather than a financial inability to pay. It isn’t a question of whether or not the country CAN pay its debts, but whether or not it is WILLING to pay its debts. And in some circumstances, default is less painful than straight monetization of the debt.

Second, the debt isn’t the real problem. It is the entitlement programs (Social Security, Medicare, and Medicaid), which by one estimate will consume 92% of tax revenues by the end of the decade. All three are effectively cost-indexed, so you can’t simply inflate them away.

I would wager that 90% of Americans don’t realize how expensive these three programs are becoming.

Posted by TFF | Report as abusive

I would wager that more Americans don’t know what a gold standard is than believe we are on one.

Posted by dWj | Report as abusive

Minorities have to work 10 times harder to get respect

Really? So how does President Obama fit into your convenient narrative? Did he really work “10 times harder” to become President?

as a woman I can say I have first hand knowledge of that.

Is that so? So why do you have all this time on your hands to provide us with your banal comments? Shouldn’t you be “working hard”?

There are those who sit here on Reuters, blogs and other news sites and reply to anything that is written about Obama, so they can add a vitriolic/racist message and be the first comments that are visible.

Then there are those who sit here on Reuters, blogs and other news sites and bore us with their sanctimonious and smug comments trying to prove how “morally superior” they are to everyone else. Sound familiar?

Sadlt [sic], the rest of his term the President will be hogtied by the rednecks who want “their country back” and removal of taxes and entitlements, as long as their privileges remain intact.

Who are these “rednecks”? Can you provide us with some web links, or concrete examples? Or are you simply setting up “straw man” arguments?

Are these “rednecks” the same as those mythical “welfare queens” that I’ve also heard of? I’ve also heard of unicorns also, but never seen one……

Posted by Nichols7 | Report as abusive

Reply to @Nichols7.

1) The remarks of anonymous racists, such as, “He is not good enough to even shine my shoes.” is one frequently posted example of disrespect. There are those who will never give him the chance. The President works “10 times harder” just to “be” President. I “see” it; you may not.

2) I am semi retired. I have the luxury of having already worked many years so that I can have all this time on my hands to provide you with my banal comments.

3) Thank you for validating my moral superiority! I think Americans could use ethics courses, don’t you? A few less unethical Wallstreeters might be the result.

4) I am truly sorry that I bore. Opinions tend to be. It is not my fault that my hsvkitty moniker is only added at the end of the comment. I suggest you look there always to avoid and not read me, silly!

5) I can spot a redneck at 1000 paces. I was born on a farm myself, but I wore a large brim straw hat to avoid the sun. Concrete examples:

http://seehere.blogspot.com/2005/12/redn eck-pictures.html

6) When I set up straw man arguments, I do it with a gusto. Did you know as children we laughed a hundred fold more? Pity!

http://www.flickr.com/photos/hamburgerla nd/266985976/

Posted by hsvkitty | Report as abusive

America in a nutshell: the left are whiners and cynical to the max – as such don’t give their leaders a chance; the right are bullies and intolerant – as such they are susceptible to racism, cronyism, and don’t give outsiders a chance. This is why Obama will fail, even though he is a brilliant man who could do great things for America. Shame on all of you. As Bill Maher would say (to paraphrase) ‘the politicians aren’t so great, but the voters are 100 times worse.’ Check yourself and see what YOU are doing for the country instead of complaining what someone else isn’t doing.

Posted by CDN_finance | Report as abusive

> Fiscal policy is important, but reducing unemployment is much more so.

Why do these have to be mutually exclusive? Krugman, for one, doesn’t think they are.

Posted by MarkC123 | Report as abusive

“The remarks of anonymous racists, such as, “He is not good enough to even shine my shoes.” is one frequently posted example of disrespect.”

So what? There’s lots of idiotic comments, on both the left and right. There was plenty of blather from the left during the Bush years, did you complain then? What do you propose doing to these “anonymous racists”? Arrest them? Send them to re-education camps? Would you like to curtail free speech?

“The President works “10 times harder” just to “be” President. I “see” it; you may not.”

Wow! You must have some magic powers! How do you “see it”? The last time you met with Obama at Starbucks? Last week when you passed through the Oval Office? Last month when you carried his golf bag for him? You really are amazing!

“I think Americans could use ethics courses, don’t you? A few less unethical Wallstreeters might be the result.”

Why so? Do you think Americans are any less ethical than say the Chinese? South Koreans? Argentines? Brits? What’s your empirical evidence for such a statement? Or, are you relying on your magical powers again?

“I can spot a redneck at 1000 paces. I was born on a farm myself, but I wore a large brim straw hat to avoid the sun.”

Again, must be your magical powers at spotting straw men, or rednecks as you call them. Do you also have the ability to spot “latte liberals”, “magic negroes”, “welfare queens”, “unethical Wall Streeters” and other caricatures at 1000 paces? Or are your magic powers limited to what you WANT to see?

Posted by Nichols7 | Report as abusive

Tch tch Nichols7, why are you still reading what I write? You really are amusing, but entirely off topic. My answer to most of the above is yes, although my magical powers are limited,

Back on topic: I am looking through my magical looking glass and see you enjoying Michelle Bachmann’s rebuttal. Ahhhh that says a lot! Can you tell me what she meant by her reference to 21 generations? Was it cryptic?

Posted by hsvkitty | Report as abusive