…because I’m an economist and a mom–that’s why!

The President’s SOTU Speech: Specific on Tax Cuts, Not So Specific on How to Reduce the Deficit

January 27th, 2010 . by economistmom


The President said some good things tonight about fiscal responsibility, and he endorsed the fiscal commission as well as statutory PAYGO budgeting.  He just didn’t get very specific about the types of tough choices the commission would have to recommend (that we will have to reform our entitlement programs and raise taxes), or exactly which tax cuts and spending would have to be paid for under PAYGO and which would not.  And I definitely heard more bipartisan applause for all the tax cuts he mentioned (especially the capital gains tax cuts) than for any part of his fiscal responsibility talk.

Some of these fiscal policy highlights from the President’s speech (emphasis and notes added to the CNN transcript):

That’s why we…passed 25 different tax cuts.

Let me repeat: We cut taxes. We cut taxes for 95 percent of working families. We cut taxes for small businesses. We cut taxes for first-time homebuyers. We cut taxes for parents trying to care for their children. We cut taxes for 8 million Americans paying for college.

I thought I’d get some applause on that one… [and he did]…

So tonight, I’m proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat. I am also proposing a new small business tax credit — one that will go to over one million small businesses who hire new workers or raise wages. While we’re at it, let’s also eliminate all capital gains taxes on small business investment; and provide a tax incentive for all businesses, large and small, to invest in new plants and equipment…

To make college more affordable, this bill will finally end the unwarranted taxpayer-subsidies that go to banks for student loans. Instead, let’s take that money and give families a $10,000 tax credit for four years of college and increase Pell Grants. And let’s tell another 1 million students that when they graduate, they will be required to pay only 10 percent of their income on student loans, and all of their debt will be forgiven after 20 years — and forgiven after 10 years if they choose a career in public service…

[I]t is precisely to relieve the burden on middle-class families that we still need health insurance reform.

Now let’s clear a few things up — I did not choose to tackle this issue to get some legislative victory under my belt. And by now it should be fairly obvious that I didn’t take on health care because it was good politics…

[E]ven as health care reform would reduce our deficit, it’s not enough to dig us out of a massive fiscal hole in which we find ourselves. It’s a challenge that makes all others that much harder to solve, and one that’s been subject to a lot of political posturing.

So let me start the discussion of government spending by setting the record straight. At the beginning of the last decade, America had a budget surplus of over $200 billion. By the time I took office, we had a one year deficit of over $1 trillion and projected deficits of $8 trillion over the next decade. Most of this was the result of not paying for two wars, two tax cuts, and an expensive prescription drug program. On top of that, the effects of the recession put a $3 trillion hole in our budget. That was before I walked in the door.

Now if we had taken office in ordinary times, I would have liked nothing more than to start bringing down the deficit. But we took office amid a crisis, and our efforts to prevent a second Depression have added another $1 trillion to our national debt. That too is a fact.

I am absolutely convinced that was the right thing to do. But families across the country are tightening their belts and making tough decisions. The federal government should do the same. So tonight, I’m proposing specific steps to pay for the $1 trillion that it took to rescue the economy last year.

Starting in 2011, we are prepared to freeze government [non-security discretionary] spending for three years. Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected. But all other discretionary government programs will. Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t. And if I have to enforce this discipline by veto, I will.

We will continue to go through the budget line by line to eliminate programs that we can’t afford and don’t work. We’ve already identified $20 billion in savings for next year. To help working families, we will extend our middle-class tax cuts. But at a time of record deficits, we will not continue tax cuts for oil companies, investment fund managers, and for those making over $250,000 a year. We just can’t afford it.

Now, even after paying for what we spent on my watch, we will still face the massive deficit we had when I took office. More importantly, the cost of Medicare, Medicaid and Social Security will continue to skyrocket. That’s why I’ve called for a bipartisan fiscal commission, modeled on a proposal by Republican Judd Gregg and Democrat Kent Conrad. This can’t be one of those Washington gimmicks that lets us pretend we solved a problem. The commission will have to provide a specific set of solutions by a certain deadline. [NOTE: No mention of cutting Social Security or Medicare benefits or raising taxes.] Yesterday, the Senate blocked a bill that would have created this commission. So I will issue an executive order that will allow us to go forward, because I refuse to pass this problem on to another generation of Americans. And when the vote comes tomorrow, the Senate should restore the pay-as-you-go law that was a big reason why we had record surpluses in the 1990s. [NOTE: No mention of PAYGO exemptions.]

I know that some in my own party will argue that we can’t address the deficit or freeze government spending when so many are still hurting. I agree, which is why this freeze won’t take effect until next year, when the economy is stronger. But understand — if we don’t take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery — all of which could have an even worse effect on our job growth and family incomes.

From some on the right, I expect we’ll hear a different argument — that if we just make fewer investments in our people, extend tax cuts for wealthier Americans, eliminate more regulations, and maintain the status quo on health care, our deficits will go away. The problem is, that’s what we did for eight years. That’s what helped lead us into this crisis. It’s what helped lead to these deficits. And we cannot do it again.

Rather than fight the same tired battles that have dominated Washington for decades, it’s time to try something new. Let’s invest in our people without leaving them a mountain of debt. Let’s meet our responsibility to the citizens who sent us here. Let’s try common sense.

To do that, we have to recognize that we face more than a deficit of dollars right now. We face a deficit of trust — deep and corrosive doubts about how Washington works that have been growing for years…

Incidentally, if we follow the suggestion that we can keep cutting taxes and yet manage to reduce the deficit to a more sustainable (or even zero) level, we’re liable to end up with a proposal like Rep. Paul Ryan’s (R-WI) “roadmap” plan, which CBO released their analysis of today.  Ryan holds federal revenues at 19 percent of GDP going all the way out to 2080, yet he manages to completely pay down the federal debt.  How does he do it?  By cutting Medicare spending from its projected 14.3 percent of GDP in 2080 down to just 3.5 percent of GDP (see Table 1 on page 6)–a cut of more than three-fourths and 10.8 percent of GDP! (Medicaid gets a similar percentage cut.)  This is “bending the health cost curve” all the way down to flat-lining it–an outcome I have publicly proclaimed as “impossible” if our society is a “compassionate” one.  (Wow.) But I’ll have more to say on the tax-side versus spending-side approaches to deficit reduction–using CBO’s baseline and Ryan plan analysis–in a later post.   Now I’ve got to hear what all the late-night talking heads have to say about the SOTU speech.

27 Responses to “The President’s SOTU Speech: Specific on Tax Cuts, Not So Specific on How to Reduce the Deficit”

  1. comment number 1 by: SteveinCH

    Interesting Diane,

    My fiscal read of the speech is we’re probably worse off now than when we started. On the revenue side, it’s probably a wash between ending some of the Bush tax cuts and the new tax cuts he proposed.

    On the revenue side, it’s a net negative. The new jobs program more than offsets any savings from the freeze and several new programs were proposed as well.

    As always, it was a very good speech. The substance was very depressing to me.

    To your comment on Ryan’s plan (which I will now have to read), I certainly hope your proposal is not for the 10 pp of GDP to be simply grandfathered in more taxes.

    I’m also not sure that Medicare couldn’t be cut dramatically over a multigenerational period, particularly if we started to change perspectives on how guaranteed healthcare will be and should be for seniors. Medicaid to me is a different conversation since it is based explicitly on need rather than on status.

  2. comment number 2 by: Jim Glass

    Obama’s got a pretty challenging circle to square to keep his oft repeated tax & deficit promises — and not get hammered on the one he breaks.

    He’s going to bring the deficit under control, reducing it to a sustainable level, and not increase taxes on anyone except the over-$200,000 of income “rich”. Let’s see…

    Over at Tax Vox they report Tax Policy Center analysis on how much taxes will have to increase, under different policy scenarios, just to get the deficit down to a sustainable 2% GDP post-2015, from today’s starting point (not counting the flotilla of new tax breaks and spending programs he just promised)…

    The Congressional Budget Office projects an average deficit over the 2015-2019 period of … 6 percent of GDP [if] Congress follows current policy and makes both the Bush tax cuts and AMT patches permanent as the president has proposed.

    … that 6% clearly being unsustainable.

    What if, as per Obama’s promise, the tax hikes hit only persons making over $200,000?

    Their rates would go up … more than 150 percent under current policy. In other words, the top tax rate would return to the bad old days of 90 percent. Even if we go for the Administration’s more modest goals — start with current policy and aim for deficits averaging 3 percent of GDP — those top tax rates would have to more than double, taking the top rate over 75 percent.

    And our estimates ignore behavioral response … cranking the top rate up to 90 percent would lead to a massive reduction in taxable income and hence a lot less additional revenue than we found.

    Ouch. What if Obama breaks his promise and increases everybody’s rate up from “current policy” levels?

    rates would have to jump nearly 50 percent. In other words, the 10 percent bracket would become nearly 15 percent and the 35 percent top rate would go to 52 percent.

    Uh, a full 50% across-the-board income tax increase? I think even the left side of the left would gag on that.

    (I’ll mention, for the record, “what if the Bush tax cuts are not renewed, and there are no more AMT fixes” — though in reality that would be part of #2 “increase from current policy”. It requires another 15% tax increase for everyone on top, which again totals to the equivalent of the 50% across-the-board increase from current policy, only with the impact shifted around somewhat.)

    What if we got rid of “tax breaks for the rich”. Heck, get rid of tax breaks for everybody

    eliminating all itemized deductions … wouldn’t yield enough revenue under current policy. Besides, wiping out popular deductions for home mortgage interest, state and local taxes, charitable contributions, and other expenses would never fly. We even looked at capping the tax-reducing value of itemized deductions to 15 percent, but that wouldn’t raise nearly enough under either current law or current policy. (Last year, Obama proposed a more lenient 28 percent cap.)

    Conclusion: We’ve finally reached the point where no imaginable income tax increase(!) can do the job by itself.

    Our simple exercise yields two important messages: We can’t balance the budget with income tax increases alone. We also have to cut spending and perhaps look for another revenue source as well. VAT, anyone?

    Although nobody’s discussing those options either. Instead, they are still competing for votes by ladling on promises of more spending and more tax cuts for everybody except the over-$200k crowd.

    Has the budget finally mathematically reached the “out of control spiral” point?

    It’s simple arithmetic that Obama can’t come even anywhere close to meeting his two promises of (1) reaching sustainable deficits and (2) not increasing taxes on anybody but the over $200k-ers. One’s gotta go overboard. Probably both.

    He’ll be making populist promises of more spending, more tax cuts, and no tax increases for anyone but the over $200k-ers from now until November, for obvious reasons.

    But it’s still short-sighted. When in 2012 his own re-election is approaching, he is going to be way off from his promise on the deficit or on taxes, if not both — and the problem he had with his “I’ll negotiate it all on C-SPAN” broken promise may be as nothing compared to the problems from that.

  3. comment number 3 by: economistmom

    Steve: your comment:

    To your comment on Ryan’s plan (which I will now have to read), I certainly hope your proposal is not for the 10 pp of GDP to be simply grandfathered in more taxes.

    No, that’s not going to be my proposal. I think that if you combine the CBO projections for Ryan’s plan with the CBO long-term projections of current law OR current policy extended, what becomes very clear (to me at least) is that the only reasonable course of action is to allow both taxes to rise and entitlement spending to be damped down. Taxes are the most immediate policy lever available, and per Jim’s concern about jacking up rates, no, I would argue that we try to stick to current-law baseline revenue levels for the ten-year budget window but not necessarily get there by just not doing anything and letting the Bush tax cuts expire (although Clinton-era tax rates are nothing to freak out about). We can raise revenue in a more efficient way via the income tax by reducing tax expenditures (such as the exclusion of employer-provided health care). But beyond the ten-year budget window, we’ll need to start bending (down) that Medicare/Medicaid cost curve (and health spending in general), and we’ll need to look to additional revenue sources beyond the income tax (so yes, a VAT &/or a carbon tax, etc.). I’ll be writing more on this often over the next YEAR(!), but my general point is that letting taxes/GDP come up to current-law baseline ASAP is important because it allows us to start saving on the compound interest right away!

  4. comment number 4 by: economistmom

    And of course, if I’m talking about a solution that involves both tax increases and spending reductions, that necessarily requires bipartisanship and a form of “compromise” that we haven’t seen: the Rs giving up their “no tax increase” stance in exchange for the Ds giving up their “hands off benefits” stance. Everything has to be on the table, or we have no feasible solution.

  5. comment number 5 by: Brooks

    Re: He just didn’t get very specific about the types of tough choices the commission would have to recommend (that we will have to reform our entitlement programs and raise taxes)

    Exactly. As I remarked (more briefly than the below) on another blog shortly after the speech…

    President Obama spent 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, self-serving rhetoric from a politician if he had the guts to talk straight to both ideological sides/extremes (speaking mainly to the public and media rather than to the politicians, since the latter’s “views” and actions are derivative of the former), telling them that we are headed toward fiscal and economic disaster if they continue to refuse to face the reality that the only politically plausible way to avert such disaster is compromise — “progressives” need to accept that we cannot deliver all future seniors all the entitlement 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 should 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.

    Similarly, he should have talked straight to the American people as a whole – pulling a quasi-Bulworth – and instead of his usual vague talk about the need for “tough choices”, actually state frankly that what is keeping the politicians from changing our fiscal course is that the politicians expect that they will get voted out if they act responsibly because various segments of voters will focus on the bad news affecting them (having their taxes raised; having spending on some particular program cut) rather than looking at the big picture and escaping the “tragedy of the commons” mentality. I could go on and I could put it in more mass-user-friendly language, but the idea is basically to challenge the American people to grow up, albeit in much more diplomatic and even complimentary language (e.g., “Americans throughout are history have been willing to sacrifice their narrow interests for the future of their country and the futures of their children and grandchildren, and now we must think the same way about necessary sacrifices to keep our national debt from spiraling out of control, and we must vote in elections accordingly”, etc.).

    And instead of vague talk about the big problem of a lack of “trust” in Washington and encouraging Congress to do what it can to contain the effects of the recent Supreme Court ruling regarding corporate political spending, he could have urged a real solution: movement toward a system of voluntary, mostly publicly-funded campaigns. He could have urged passage of the Fair Elections Now Act, both to gain/restore “trust” in Washington, to bring our democracy (yeah, yeah, republic) closer to de facto “one person, one vote”, AND to make it less difficult to achieve fiscal responsibility, both in its direct effects (reducing special interest subsidies, tax breaks, favorable regulations, etc.) and its indirect effects (reducing suspicion among various segments of the public that a plan for fiscal responsibility would force them to sacrifice more than their fair share because some big-money special interests are using the influence of money to escape their fair share).

    But I guess he thought it would be better to just do what everyone else does, albeit with his “chosen one” charisma (insofar as it remains) — 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 be as righteous.

    So here’s my open letter:

    Dear President Obama,

    Please watch the movie Bulworth, and be at least a bit like that yourself if you are going to continue talking big about the need for others to put the country and its future ahead of partisan politics, personal ambition and focus on the next election. Give a speech per the message I’ve described above. Otherwise all your eloquent blah, blah, blah (1) won’t have any effect on policy, and (2) will really annoy me again.

  6. comment number 6 by: Brooks

    Here is link re: the Fair Elections Now Act

  7. comment number 7 by: Brooks

    By the way, it would be comical if it weren’t so sad that immediately following Obama’s urging everyone (albeit in a vague, self-serving, and somewhat ironic way) to put aside extreme ideological/party partisanship so we can reach necessary compromises, one could turn on Fox News and hear folks like Sean Hannity pejoratively caricaturing Obama as a dangerously extreme lefty, and then turn on MSNBC and see folks like Olbermann and Maddow throwing Obama under the bus as some spineless traitor who has all but declared himself a Republican. (Even before the speech professional hyperpartisans of the left were throwing him under the bus for his “non-Defense/security discretionary spending freeze” — e.g., )

  8. comment number 8 by: Brooks

    On a personal note, with the outrageous vote rejecting the commission the other day, and Obama’s big, empty talk speech last night, it’s getting harder and harder to resist using profanity in my comments (but I’ll stay away from it). Given my low opinion of the motives of politicians, I rarely get this worked up about politicians acting like typical politicians, but that commission vote was politician-ness on steroids.

    And I don’t think any part of that profanity-urge is related to the Vikings losing the game because they had 12 men in the huddle. (Geez! 12 men in the huddle when the game is on the line!!??)

  9. comment number 9 by: SteveinCH


    Thanks for your response. I guess my issue is the following. I don’t get how we can put the Clinton tax increases (how I think of them) back in and then add taxes on top. According to the CBO report, the Clinton tax increases (which, in my opinion include the current version of the AMT) bring government receipts to roughly 21% of GDP by 2020. That level of receipts is the highest in the history of the country. I know you think Clinton rates are nothing to freak out about but you know that rates don’t matter, it’s government’s take of the economy that matters and the highest in history is the highest in history despite what rates you use to get there.

    Your argument that we then need to add new taxes on top of this is something I find horribly frightening but I suspect it comes back to a perspective on government. I believe government should only do what it must while I suspect you believe that government should do everything it can. The latter philosophical perspective is always going to result in larger government and the need to pay for same. I also believe the latter perspective is inconsistent with the Federalist founding of the country but it’s probably not surprising I think that way.

    I would also dispute the notion that taxes are the most immediate lever. We could introduce a bill to means test all entitlements this year and have it take effect next year. There is nothing that prevents this and it could have substantial impact, larger even than returning the Clinton tax increases.

    If we’re talking politics and not economics, I don’t think either do x now and y later approach is feasible. The way I read your proposal, it’s tax increases ASAP for some material changes in entitlements in a decade or so. That wouldn’t fly with me unless there was a true guarantee that the benefits would be restrained and I’m not sure how politicians could construct a guarantee that I would believe.

    I believe we need a simultaneous grand compromise to address the politics even if the economics would suggest a solution more along the lines you described above.

  10. comment number 10 by: SteveinCH


    I agree with your perspectives on the speech but I think your expectations were too high. As someone who never believed the rhetoric during the campaign, I didn’t expect anything different from what I saw last night after the first five minutes.

    In the first five minutes, he was either going to “double down” or “pivot”. Once his choice was clear, none of the rest was particularly surprising.

    I’m actually much less concerned than you are about the campaign finance aspects of this simply because I think money will find its way into politics no matter what we do to try to constrain it. In a sense, I think the SCOTUS decision helps. It reduces deadweight loss from circumventing regulation (the current approach) and potentially creates the opportunity for greater transparency.

    I also think, as someone who has done a fair amount of work on marketing for large corporations, that it is highly unlikely that corporations will step in and fund issue adds or even less adds for a particular candidate in a political campaign. The potential reputational risk for them is very high and the benefit is relatively low. Furthermore, regardless of what the blogosphere may think, corporate leadership teams and not simply all republican.

    I don’t think cursing helps. It’s a very vexing problem with no easy solutions and actors on all sides who perpetually disappoint. You can only do what you can do and when you descend into obscenity, you lose all moral authority. I know you know this but I will say that your historical mode of operations puts you in the top 1% of posters I have ever seen on any blog.

    Parenthetically, since I’ve decided to change jobs (maybe not the best timing), I’ve sent my resume to Sens Gregg and Conrad to offer my services on whatever commission gets formed. Likely nothing will come of it but never up never in as my father used to say.

  11. comment number 11 by: Brooks


    [I'm going to see if I've got the right html tag for block quotes. If it doesn't show up as a block, someone please let me know the correct tag]

    rates don’t matter, it’s government’s take of the economy that matters

    The former matter plenty, and while the latter is also important, you may be overstating it’s importance. The rates relate directly to incentives and, in turn, productivity and standard of living (ceteris paribus, of course, such as keeping deficit levels constant, leaving aside high ROI public spending, etc.), and of course also relate in their own way to “fairness” and to libertarian concerns. The aggregate effective tax rate (revenues as % of GDP) also matters to much of the above, but keep in mind that, at least considering a theoretical (and not implausible) scenario, people would generally feel better off with a combination of higher tax rate and sufficiently higher pre-tax income that nets out to higher after-tax income (as long as the higher pre-tax income is not coming from much/any additional work or risk of capital). And even if tax rates were adjusted for inflation, increasing real GDP per capita would result in “bracket creep” and thus a higher aggregate effective tax rate.

    Regarding support of tax increases (or opposition thereof) reflecting one’s ideology, I’m not sure if you were referring to only tax increases, but as you seem to say later in your comment, tax increases need not fit with one’s ideological preference for one to support them as part of a grand compromise including (credible) reductions in projected spending; being realistic on the politics is sufficient.

  12. comment number 12 by: Brooks


    First, thanks for that very nice compliment re: “1%”, and back atcha’ man. I always read your comments with interest and enjoy our discussions. Good luck re: seeking work for a commission or anything else you’d like. By the way, I didn’t know (or forgot) you work in marketing, too. I’ve done brand management and I’m now a marketing strategy consultant.

    it is highly unlikely that corporations will step in and fund issue adds or even less adds for a particular candidate in a political campaign. The potential reputational risk for them is very high and the benefit is relatively low.

    I realize the reputational risk has grown in the age of YouTube, news/opinion media proliferation, social media, etc., but bear in mind that a given corporation in a given industry can run ads and hide behind some wonderful sounding organizational name like “Americans for High Quality Healthcare” (with an ad hoc or ongoing organization for that purpose), pooling funds with other corporations with similar policy objectives, and most people, even in this media age, will never know that Company X or Industry Y is behind it.

    As for the benefit, I suspect that the history of corporate political spending by smart execs indicates significant ROI, and I have no reason to suspect that this ROI is maximized at spending levels and via tactics to which corporations have been constrained thus far.

    Furthermore, regardless of what the blogosphere may think, corporate leadership teams and not simply all republican.

    First, I don’t think the personal politics of the execs matters nearly as much as the financial interests of the company, or more precisely the potential to influence policy in ways that make them personally richer and advance their careers mainly via the impact of such policies on corporate financial performance.

    Second, although in some cases a corporation or industry may lean toward one party or the other, there’s also a big factor of “playing ball” with incumbents of either party to maintain access and influence with the office holder who is there now and will likely be there for a while. And there’s also a lot of giving to both parties to maintain influence regardless of how powerful either party gets.

  13. comment number 13 by: SteveinCH


    Thanks for the thoughts. Here’s what I posted somewhere else as to what my ideal SOTU speech would have looked like.

    “Fellow citizens, we are caught in a great trap, both economic and political. On the economic side, the government over many years has created a situation where the country will eventually bankrupt itself. I am not here to cast aspersion on the past or to attempt to assign blame. There is plenty of that to go around. People in Washington, responding to the American people, have tried to create a systems of low taxes and high services. My fellow Americans, I wasn’t a math major but I can tell you that those numbers don’t add up.

    “To address this issue, shared sacrifices will be required, both on the part of American citizens and on the part of the political class here in Washington. Therefore I propose the following: First, that the Bush tax cuts be allowed to expire as was the course of the law. I am fully cognizant that this will break the pledge I made during the campaign not to raise taxes on people making less than $250,000 but it is a necessary part of the overall solution. In addition, each American family must make a minimum contribution of $100 to the Federal government. We simply cannot have a system where people do not pay taxes at all. It creates mistrust and rancor among our citizens.

    Second, we will implement a system on entitlements where all entitlements are means tested on both income and assets. Any American who is in the top 25% in terms of their income or their wealth will no longer be able to receive social security, medicare, or any other payment from the Federal government. At the same time, we will end all forms of “corporate welfare”. It is not the place of the government of the United States to make decisions about which companies will succeed and which will fail and in addition, this costs us hundreds of billions of dollars.

    “Third, we will accelerate the timeline by which we reduce our commitments to Iraq and Afghanistan. Whatever the merits of these situations, they are optional from the standpoint of the US government and, in the current environment, we cannot afford them.

    “Finally, we will freeze all other elements of the government budget and hold the overall budget for these items to zero growth until such time as these policy elements have created a balanced budget. I do not yet know how long this will take but we must persevere until this happens.

    “Now, there are many who will say (and I agree) that we cannot take such measures in the middle of a recession. I therefore will call for a bill that provides my administration the power to implement the whole package of reforms at the point we decide the economy is sufficiently stable to support them all but no later than January 1, 2012.

    “I recognize that each of you in this chamber and in our country is deeply opposed to some of what I have said and deeply supportive of some of it. That, my fellow Americans is the essence of what we must do. We must all sacrifice our deeply held beliefs to put our nation on a sound economic footing and we must do it together.”

    “I thank you for your attention and I salute you for your shared sacrifice. God bless you and God bless the United States of America.”

  14. comment number 14 by: SteveinCH

    Brooks on corporate contributions…the spending hiding behind nice sounding names already happens today under current law and current interpretation. I don’t see how the SCOTUS decision has anything to do with that.

  15. comment number 15 by: Brooks


    In the first five minutes, he was either going to “double down” or “pivot”. Once his choice was clear, none of the rest was particularly surprising.

    Per my comment upthread* the right is saying (disparagingly) that he did the former, and the left is saying (angrily) that he did the latter. Which are you saying?


  16. comment number 16 by: Brooks


    <blockquoteBrooks on corporate contributions…the spending hiding behind nice sounding names already happens today under current law and current interpretation. I don’t see how the SCOTUS decision has anything to do with that.

    My understanding is that the SCOTUS ruling now enables corporations to use their own treasuries for such spending rather than setting up PACs that have to be funded independently and subject to limitations on individual contributions and other restrictions. Per my understanding, it’s the ability to use much larger and much more easily accessed and directed corporate treasuries that makes the big difference, and that would apply to the type of ads we are discussing.

    By the way, I’ve heard and read that this SCOTUS decision will likely end up applying equally to unions, which I’m not happy about either.

  17. comment number 17 by: Brooks

    darn. Forgot to close the block quote. The quote was the first paragraph above, of course.

  18. comment number 18 by: SteveinCH


    I think the doubled down. I heard two things that could be considered pivot, both of which were small or nonspecific.

    On the small side, we have the “freeze”. It’s a tiny drop in the bucket. Not that I’m not for it but it hardly constitutes a real pivot, even if you assumed Congress would accept it or he would veto it if they didn’t.

    On the nonspecific side was the commentary about nuclear and exploration. Directionally interesting but not specific enough for me to know if it was a real pivot.

  19. comment number 19 by: Brooks


    I like your suggested SOTU speech — the straight talk about living beyond our means and the need for sacrifice that is significant and broad-based in terms of population segments and ideology.

  20. comment number 20 by: Brooks


    Re: double down vs. pivot, have you seen/heard what the left is saying? They’re painting him as either surrendering to the right and acting like a republican, or as never really having been one of them in the first place (see that Krugman link).

    Personally, I saw the speech as pretty much a nothing-burger. Much of it was a lot of posturing and hot air about the need to put country ahead of partisanship and personal ambition.

    He moved slightly rightward (speaking just in terms of direction, not location) on discretionary spending, but handed out assorted goodies as if he is some benevolent entity rather than “providing” everything with money taken from taxpayers today or tomorrow (the latter via incremental debt)*. And by the way, as we’ve discussed before (I don’t recall if, or the extent to which, which reached agreement) special tax breaks for people who buy X or have Y (”tax entitlements”) are essentially no different from subsidies (i.e., spending), but semantics rule in much of public opinion and thus in Congress, so anything called a “tax cut” seems either wonderful or at least quite palatable to many so-called conservatives.

    He pushed a bit for his healthcare/health insurance
    “reform”, (1) enough for conservatives/Republicans to claim he was stuck on this “government takeover of our healthcare system” and claim he was utterly disingenuous regarding being open to including or compromising with Republican ideas, but (2) not enough for liberals to think he’s still fighting for it.

    * I’ve long said that I wish politicians felt obligated to replace “government funded” with “taxpayer funded” (or “future taxpayer funded” in the case of incremental debt, which any incremental spending essentially is), and to say “We made taxpayers pay for X benefit or special tax break (tax expenditure) to people in situation Y or who buy or do Z” rather than “We provided…etc.” In fact, I think it would be fun to copy Obama’s speech to Word and make such replacements. Something tells me far fewer people (and members of Congress) would be smiling, much less applauding.

  21. comment number 21 by: Brooks

    ok, I did some of the insertions (not replacements) I mentioned at my asterisk in comment above. The tense is off in some cases because I didn’t change any words from the text of Obama’s speech, just inserted appropriate phrases. And yes, I’m assuming that, notwithstanding the revenue feedback effect from stimulus, the deficit-financed stimulus has and will come at the expense of future taxpayers. So without further ado, I give you an excerpt of Obamas SOTU speech with true meaning added.

    WE MADE FUTURE TAXPAYERS PAY MORE SO TODAY WE COULD also took steps to get our economy growing again, save as many jobs as possible, and help Americans who had become unemployed.

    That’s why WE MADE FUTURE TAXPAYERS PAY MORE SO TODAY WE COULD extended or increased unemployment benefits for more than 18 million Americans; MADE FUTURE TAXPAYERS PAY MORE SO TODAY WE COULD made health insurance 65 percent cheaper for families who get their coverage through COBRA; and MADE FUTURE TAXPAYERS PAY MORE SO TODAY WE COULD passed 25 different tax cuts.

    Now, let me repeat: WE MADE FUTURE TAXPAYERS PAY MORE SO TODAY WE COULD cut taxes. WE MADE FUTURE TAXPAYERS PAY MORE SO TODAY WE COULD cut taxes for 95 percent of working families. (Applause.) WE MADE FUTURE TAXPAYERS PAY MORE SO TODAY WE COULD cut taxes for small businesses. WE MADE FUTURE TAXPAYERS PAY MORE SO TODAY WE COULD cut taxes for first-time homebuyers. WE MADE FUTURE TAXPAYERS PAY MORE SO TODAY WE COULD cut taxes for parents trying to care for their children. WE MADE FUTURE TAXPAYERS PAY MORE SO TODAY WE COULD cut taxes for 8 million Americans paying for college. (Applause.)

    I thought I’d get some applause on that one. (Laughter and applause.)

    As a result, millions of Americans had more to spend on gas and food and other necessities, all of which helped businesses keep more workers. And WE MADE FUTURE TAXPAYERS PAY MORE SO TODAY WE haven’t raised income taxes by a single dime on a single person. Not a single dime. (Applause.)

    Because of the steps WE MADE FUTURE TAXPAYERS PAY MORE SO TODAY WE COULD took, there are about two million Americans working right now who would otherwise be unemployed. (Applause.) Two hundred thousand work in construction and clean energy; 300,000 are teachers and other education workers. Tens of thousands are cops, firefighters, correctional officers, first responders. (Applause.) And we’re on track to MAKE FUTURE TAXPAYERS PAY MORE SO TODAY WE CAN add another one and a half million jobs to this total by the end of the year.

    The plan that has made all of this possible, from MAKING FUTURE TAXPAYERS PAY MORE SO TODAY WE COULD HAVE the tax cuts to MAKING FUTURE TAXPAYERS PAY MORE SO TODAY WE COULD HAVE the jobs, is the Recovery Act. (Applause.)

  22. comment number 22 by: Brooks

    The above is NOT meant to imply that I’m generally opposed to any deficit-financed stimulus amid recession, just that I wish politicians speaking of new spending and tax cuts weren’t able to somewhat/largely get away with language that positions them as wonderful daddies/mommies who come home with spankin’ new bicycles for us kiddies (at no cost to us).

  23. comment number 23 by: SteveinCH


    I laughed at your creative license above. Thanks for doing it.

  24. comment number 24 by: Brooks


    Thanks. Obama inadvertently helped the humor aspect through his repetition of “We cut taxes” (i.e., WE MADE FUTURE TAXPAYERS PAY MORE SO TODAY WE COULD cut taxes) in the paragraph he follows with “I thought I’d get some applause on that one”.

  25. comment number 25 by: SteveinCH

    More bad news

  26. comment number 26 by: Brooks

    Geez Louise. I’d say “unbelievably lame”, but who knows what the limit may be on the lameness of Congress — these days in particular.

    Couple that with news of something for which the Senate was able to get 60 votes today: raising the debt ceiling beyond the kind of very short-term measure that I assume Conrad was seeking and . I assume Conrad was trying to do what he did last December: get only a temporary measure passed (to avoid default) so that the issue would come up again a couple of months later, and thus there would be another bite at the apple for getting the budget commission created as part of the legislation raising the debt. Apparently the Senate was able to get 60 votes to avoid that scenario. I’d like to know how this played out in terms of what I assume/guess was an effort by Conrad to get only another short-term measure passed. Was there a bill to that effect, and following it’s defeat, Senators were left only with the choice of passing the regular legislation raising the debt ceiling or default, which would make it understandable that even some who voted “yes” on the commission voted to raise the debt ceiling, or did it play out in some way with defections from the 53 who voted “yes” on the commission?

  27. comment number 27 by: Brooks

    Update to my comment above. From CNN:

    Conrad and several of the moderate Democrats who had been resisting the increase earlier ended up voting for it on Thursday.

    Conrad said he got written assurances that Reid and House Speaker Nancy Pelosi, D-Calif., would bring the presidential commission’s recommendations to a vote before the end of the year.

    As for Pelosi’s written commitment, I hope the paper it’s written on is worth something, because otherwise Conrad may be holding something completely worthless.