Market summary: Buoyed by a very strong economy, U.S. stocks are moving ahead. It turns out that the...
Rhetoric Vs. Reality
02/01/2010 12:01 am EST
President Obama took a decisive step back to the center in his State of the Union address last week. If actions didn’t speak louder than words, you might have thought he’d become a fiscal conservative.
On the subject of taxes, the President stressed his tax cuts (which are really credits for lower-income earners), and he bragged that he hadn’t raised income taxes a single dime.
He acknowledged that “the true engine of job creation is American business,” saying that “government’s role is to create the conditions for job expansion by small business.” He promised small business tax credits for hiring, and the elimination of capital gains on small business investment.
Even his attack on the banks was muted, as he acknowledged that “we all hated the bank bailout.” It was hard to disagree when he defended his proposal to put new fees or taxes on the large banks, saying “they can afford it, if they can afford to pay huge bonuses” to their employees, as a result of the taxpayer rescue.
And he managed to make redistribution seem appealing when he suggested using some of that repaid bailout money to give to community banks, which would presumably be more willing to make loans.
The President’s appeal had a broad populist streak—promising something for almost everyone—except, of course, for those earning over $250,000. They presumably would be asked to pay the tab for a $10,000 college tax credit (which would replace bank subsidies for handling student loans) and more support for military families—all good causes, to be sure.
Health care reform would protect Americans from the insurance companies—and, he said, save a projected $1 trillion over the next ten years, based on estimates from the nonpartisan Congressional Budget Office. Military families would receive more support. Only underwater homeowners were left out, with just a vague promise to make refinancing easier.
His fiscal oratory included a spending freeze-though technically on only a small portion of the budget. But he got a real laugh (well, more like a snicker) when he explained that his proposed freeze would take effect only in 2011 “when the economy is stronger.” Any consumer trying to budget in this weak economy knows that you can’t wait to cut your spending until better days come along.
The oratory was heartwarming—especially if you don’t stop to think about how all these promises will be paid for. When you turn the health care bill into promised savings, when you promise investment credits to business and forgiveness of college loans to students, and when you plan to lay out more money for education and green technology, the money MUST come from somewhere.
The contrast between rhetoric and reality was especially pointed when on Thursday, the day after the President spoke, Senate Democrats passed a bill to raise the ceiling on the national debt to an astounding $14.3 trillion—an increase of $1.9 trillion—just enough to get us through the end of this year!
That surely belies the President’s strong promise in his speech, the one that received huge applause, when he said: “I refuse to pass this [fiscal] problem to another generation of Americans.”
But the numbers speak for themselves. What do you think? Please have your say and join the conversation.
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