The Great Debate

President Barack Obama stirred with an unexpectedly powerful inaugural address – a second effort that far surpassed his first. He summoned great themes of American history to argue cogently for his second-term agenda. Now he has a chance to deliver a State of the Union address that improves on those of his first term, too.

The key to success? Presidents still have the power of surprise. Franklin D. Roosevelt once said, “I am like a cat. I make a quick stroke, and then I relax.” As in his inaugural, Obama should surprise us – this time with new policies and sharp specificity. On the budget, democracy reform and immigration, the president stands well positioned.

Forget the Super Bowl, or even the Oscars. For us policy wonks and ex-speechwriters, this is the biggest event – the time to crack open a beer, microwave the Buffalo chicken wings and settle down in front of the TV for a siege of viewing.

For the State of the Union remains among America’s few civic rituals. It is the one time every year that citizens can hear our leader talk, at length and directly, about where he would take the country. Presidents are ubiquitous nowadays. The idea of an Oval Office address, with everyone hanging breathlessly on the first “My fellow Americans,” is a relic of the Walter Cronkite era.  But television channels across the dial still all tune in to the State of the Union, a rare remaining “roadblock.” And the public still watches. The 2012 speech, largely devoid of controversy, drew 38 million viewers.

I worked with President Bill Clinton on his State of the Union addresses. Clinton relished this combination of politics, policy and showmanship. He prepared for weeks. In fact, he used the speeches to organize his agencies and launch his policy agenda.

By Nicholas Wapshott
The opinions expressed are his own.

You can add to the list of hollow cries from history–such as “Ban the Bomb!” and “Bring the Troops Home!”–the president’s favorite refrain, “Pass the Jobs Bill Now!” Like the rest, Obama’s oft repeated demand is a sham, a mere slogan. Neither he nor his party, and certainly no Republican, believes Congress is going to pass even a small part of the bill, for it combines two elements his opponents detest the most: public works and higher taxes on the rich.

While the GOP squabbles over which of a barely electable field to pick as its candidate, Obama has already begun his reelection campaign in earnest. The simple message he is taking on the road is that Congress should “pass the jobs bill now!” That’s a plea he knows is sure to be ignored, leaving him in a position, he believes, to blame persistent joblessness on the Republican obstructionists. He is onto something. As Jimmy Carter found out, Americans hold their presidents to account when the economy is tanking; they expect them to improve the economy and are prepared to fire them when they don’t. It is a lesson for conservatives who believe that governments can’t and shouldn’t attempt to change the economic weather. Voters blame the government anyway, whether they intervene or not.

Obama, like Franklin Roosevelt, believes in trying to fix the symptoms of a broken economy, while his GOP opponent, whoever it turns out to be, must hold to the Hayekian orthodoxy insisted upon by the Tea Party and the Republicans’ fiscally conservative wing that there is nothing much governments can or should do to improve the economy and that stimulus spending either does not work at all or will only make the smallest of differences in the short term. As Obama gleefully knows, a rival promising austerity, the long haul, a far worse economy before it gets better, and a dim light at the end of a long, long tunnel will be running against the spirit of optimism that Americans feel and like to hear from their leaders.

Keynes and Hayek are back. As rappers. For those who don’t know about these two economists, or can’t keep their philosophies straight, there’s a great rap video just out that clearly explains the warring ideologies of those two men, titled “Fight of the Century: Keynes vs Hayek Round Two.” And it is the fight of the century, or at least, right now. If Hamlet were giving a soliloquy about the economy, it would start, “to spend or not to spend. That is the question.” For John Maynard Keynes, the answer is to spend. For Friedrich August Hayek, the answer is to not.

What is interesting, and less known, about this economic rap video is that the idea for it didn’t come from an economist. Or anyone remotely close to being one. Instead, it came from a video producer named John Papola, who went to Penn State for film. And despite having worked at MTV after graduating from college, it’s also his first dive into rapping.

Papola become interested in economics partly because of the Ron Paul campaign in 2007. He was struck by what Paul was saying and how the economy played out in 2008. “Nobody else was saying what [Ron Paul] was saying,” Papola says.

-The opinions are the author’s own-

By the end of this week, the U.S. will face a government that is unable to act to aid the economy and a Federal Reserve that is unable to stop.

The stock market may well rise on this dysfunctional combination, only serving to prove that the economy and market are becoming fundamentally disconnected.

Tuesday’s election may well deliver a split Congress with the Republicans in control of the House of Representatives and the Democrats clinging to a narrow majority in the Senate. This means that there is no chance of further meaningful stimulus and that Democratic timidity will likely harden into an intransigence to match that of the Republicans.

(James Saft is a Reuters columnist. The opinions expressed are his own)

New studies from the Federal Reserve and European Central Bank show that, whatever else, a recovery in the economy is not being supported by a resumption in bank lending, raising concerns about how exactly growth will become self-sustaining when official stimulus ebbs.

The ECB last week released its loan survey showing banks tightened credit yet again for businesses and consumers, though at a less severe rate than in the previous quarter. Much was made of the fact that banks said they expected to ease terms to businesses, but not individuals, slightly in the last three months of the year.

Days later the Fed was out with its own survey, and again the news is getting worse more slowly, which must mean it is time to pop open the tap water. Banks are tightening terms and conditions to large firms, though fewer are doing so than before. Of course we should be thankful for small mercies, but the fact remains that this is a relative rather than an absolute survey, which means that even if fewer are being tougher the vast majority are being just as tight with money as they were three months ago when things were very tight indeed.

– Agnes T. Crane is a Reuters columnist. The views expressed are her own –

Call it a battle for beginnings and endings, and the Federal Reserve is smack in the middle.

As Fed policymakers convene for a two-day meeting starting on Tuesday, the lines are growing more defined between those who want the Fed to do more to stimulate a still fragile economy, and those who are calling for a defined exit strategy to prevent the global economy from going into an inflation-inducing overdrive.

– James Pethokoukis is a Reuters columnist. The views expressed are his own –

What just happened to American healthcare reform?

The political prospects for major U.S. healthcare reform have taken a decided turn for the worse in recent days (at least from the point of view of many Democrats). And you don’t need to be some totally plugged-in Washington insider to understand that.

Just take a look-see at the stock market performance of industry players such as Aetna Inc, Cigna, UnitedHealth Group, and WellPoint. Shares have been trending higher of late. What’s been slowly dawning on Wall Street is that the legislative process in Washington is unlikely to produce a national public health insurance option that could eventually squeeze out the private sector.

– Christopher Swann is a Reuters columnist. The views expressed are his own –

It’s not just California that threatens to sabotage the Obama stimulus. State and local governments across the nation are gradually unravelling federal efforts to revive growth.

The states have been inveterate stimulus eaters in the past. For most of the 1930s the expansionary policies of the federal government were just sufficient to offset the shrinking of state and local governments. Click here for PDF.

– James Saft is a Reuters columnist. The opinions expressed are his own –

The good news that the United States cannot keep contracting the way it has been is not to be confused with a return to robust expansion, a point financial markets eventually will grasp.

Consumers, the mainspring of the U.S. economy, will see the cash from government stimulus slip through their fingers but will still face very ugly personal balance sheets and a brutal job market. Their party is not going to get started again for some time.