Thoughts on Obama’s Budget Address

First off, on the whole, I thought the speech was well crafted and well delivered. I know that most conservatives cringe when I say this, but I think that the Democrats have found their Ronald Reagan. Obama’s ability to communicate is unmatched in anything we have witnessed in American politics over the last 20 years. One of the amazing things about the modern American presidency is the amount of power that can be wielded in the office despite the fact that the office has very little power given to it by the Constitution. This is due to the fact the president can use the “bully pulpit” to advocate for his position. The reason that Reagan and, to a lesser extant, Clinton were so effective was their ability to be persuasive to the American people and, by extension, to Congress. One of George W. Bush’s weaknesses was his inability to effectively articulate his argument – a point not lost on the late night comics.

Obama is such a strong communicator that it is as though he is trying to inspire us out of our current condition much the way Reagan did in the early 1980’s. In fact, I read an interesting article today by Howard Fineman of Newsweek and MSNBC, where he draws this parallel. Fineman’s cautionary tale (and one that I echo) is that while President Reagan did inspire us out of the economic malaise of the late 1970’s and early 1980’s, he never cut spending or got the deficit under control after we recovered. If (& when) we do recover from the current recession, it will be President Obama’s difficult task to try and cut the deficit.

Which brings me to the details of the speech. If you read my post on Tuesday, you will know that I was looking forward to President Obama providing some detail on his pledge to cut the deficit in half by the end of his first term. By my count, he gave eight different ways he was going to do this. They were:

1. Eliminate education programs that don’t work
2. Eliminate payments to agri-business companies that don’t need them
3. Eliminate no bid contracts which wasted billions in Iraq
4. Reform defense spending to stop paying for Cold War weapons we don’t use
5. Eliminate waste, fraud & abuse in the Medicare program
6. Eliminate tax breaks for companies that ship job overseas
7. Eliminate tax breaks for wealthiest 2 percent of Americans
8. Reform in Medicare and Medicaid through comprehensive health care reform which will bring about long term savings
   

Another interesting point he made was what he referred to as the “Deficit of Trust” we have in government when it comes to spending. Along these lines, he is advocating openness and honesty in budgeting, which includes doing ten year projections and including the cost of both wars in our budget projections. The significance of the ten year projections relates to PAYGO, which those of you have read my writing before know, I am a big supporter of. In the early part of this decade, one of the “tricks” that the republicans used to avoid PAYGO was to limit the time of certain spending projects or tax cuts in order to avoid PAYGO which requires an equal offset for every spending increase or tax cut.

Earlier today, President Obama submitted the actual proposed budget to Congress. The total price tag = $4 Trillion. Yes, you read that right. It projects a deficit of $1.75 Trillion. Just for some reference, last year’s budget was $3.1 Trillion with a deficit of $1.3 Trillion. Some of the increases are due to the President’s pledge to be more honest with the items stated above, but make no doubt about it, there are definite increases.

All in all, I thought the President’s address set a perfect tone for difficult times. It also provided quite a few details on cutting the budget, which is what I was looking for. However, as they say, the devil is in the details and I was disappointed when I saw the price tag of the budget that came out today. The bottom line is that we will only know in time whether President Obama will be able to make good on his promise to cut the deficit or whether he will fall prey to the same trap that President Reagan did in allowing the deficit to soar as high as his oratory.

Preview of the President’s Budget Address to Congress

Tonight, President Obama will make his first address to a joint session of Congress as President. Officially, this speech is not a State of the Union Address since he just took office, but it will sound and feel like a State of the Union Address. President Bush gave a similar address about a month after he took office as well, so there is precedent for this kind of speech.

So, what will I be looking for in this speech? In a word, details. You may recall that I commended the President for telling us in his inaugural address that we would need to sacrifice. Yesterday, he was speaking at an economic summit when he vowed to cut the $1.3 trillion deficit in half by the end of his first term.

One of the big criticisms that Republicans had of the stimulus plan was the fact that it would explode this deficit. President Obama seemed to acknowledge this criticism when he said, “If we confront this crisis without also confronting the deficits that helped cause it, we risk sinking into another crisis down the road. We cannot simply spend as we please and defer the consequences.” In other words, the stimulus plan is a temporary fix, but the long term solution is cutting the deficit.

While Candidate Obama discussed many proposals during the campaign of how to fix the deficit, President Obama has been consumed with the stimulus plan and attempting to bring about an economic recovery. As a result, he has not proposed specifics on how to begin cutting the deficit. It is now time for the President to make the shift where he is placing his focus and he seems to be doing that. Tonight, I will be looking for what specifics he will be proposing in order to accomplish his lofty goal of cutting the deficit in half.

Congressional Republicans – Where Do They Go Now?

Throughout the stimulus debate and votes, there was a lot of coverage over the fact that the Republicans stood united in voting against the package. In fact, all the House Republicans voted against it and all but three Republican Senators did likewise. You may recall I did a post after the first House vote criticizing Nancy Pelosi and the Democratic leadership in the House for pushing the bill through without allowing Republicans to be brought in on the process which President Obama was attempting to do. By the time the bill got to the Senate, the spirit of bi-partisanship had gone out the window. However, I still think there was time for the Republicans to try and work with the President if they wanted to.

Many conservative talking heads are saying that this is great as the Republicans are being true conservatives again. The argument goes that during the eight years of the Bush Administration, Republicans had abandoned their principals of limited government and fiscal discipline. By opposing the stimulus package, Republicans were returning to their roots, so to speak. According to these conservative pundits, this was a stand on principal.

I beg to differ. I think it is an extreme return of partisan politicking which is just what we don’t need right now. The Republicans are trying to be the nay-sayers and are opposing this plan basically because it is a spending package put forth by the new Democratic President and a Democratic Congress. If it were Republicans standing on principal, wouldn’t the Republican governors agree? But they are not. According to the New York Times, several of them have openly supported the plan. When I first read this, my initial reaction was that the governors were all from more liberal states, such as California and Vermont. However, there was one big exception – Charlie Crist from Florida, who actually introduced President Obama at a rally in Florida which was for the purpose of drumming up support for the stimulus plan. Charlie Crist is no liberal.

Initially, there was some indications that some of the Republican governors were going to refuse the money from the stimulus plan out of principal. However, many of them have had a change of heart, due probably to the fact that the practical side of their brain woke up. I mean, why would a state want to turn down money when most (if not all) of them are in deficits? In the end, I think you will find that all of the Republican governors will accept the money. For now, they are just grand standing. Which is what I believe many of the partisan minded Republicans are doing. Only the practically minded ones, like Governor Crist, Governor Arnold Schwarzenegger and (yes, Pennsylvanians) Senator Arlen Specter are behaving responsibly.

This all brings me back to the original point of this post: where do the Congressional Republicans go from here? Think about it – basically, the Republicans are now going to be rooting against an economic recovery. That is the only way they will win in this. However, even if the economy does not recover, I think it will be hard for them to profit as Americans blame the Republicans for this mess in the first place, and in my opinion, they are right to do so.

While the Republicans may have scored some political points with their conservative base on this, they did so at a cost. In the long run, I think it would have been better for the Republicans to try and work with President Obama and the Congressional Democrats, so that it looked like they were part of the solution and could have taken some credit for it. Instead, they are forced to root against American interests, and that is never a popular position to take with the electorate. Going forward, I think it would behoove the Republican party to take a cue from the likes of Governor Crist and Senator Specter and try and work with the President to find common solutions. Otherwise, they may be looking more and more like an obstructionist party and there is another word for an obstructionist party – a minority one.

Political Philosophy Quiz

I was doing some research on some Congressmen yesterday when I ran across this website which I found very interesting. You should select political philosophy at the top & then answer the twenty questions below. It will then tell you where you fall on the political spectrum, which are shown in quadrants of Liberal, Libertarian, Conservative and Populist, with a box for moderates in the middle. Anyone want to guess where I fell? Let me know where you fell as well. I'll post my result in a couple days.

What’s a Deficit Hawk to Do – My Position on the Stimulus Plan

In my last blog post, I addressed the lack of bi-partisan cooperation when it came to the House’s passage of the American Recovery and Reinvestment Act of 2009 (“ARRA” also known as the stimulus package). In that blog, I said I was not going to discuss the merits of the bill. In this post, I will provide my thoughts.

For those of you who read my position paper on the 2008 election, you know that one of my biggest criticisms of the Bush Administration was the growing federal budget deficit. Additionally, one of the reasons I supported Barack Obama was his willingness to rollback the Bush tax cuts as a way of bringing the budget closer to balance. I still believe that the budget deficit is one of the biggest reasons why our economy is in the situation it currently is. In looking at the current versions of ARRA (both the House and Senate versions), there is no doubt that this bill will cause the deficit to get worse at least in the immediate future.

You would think that this would cause me to oppose this bill. However, I have come to the conclusion that passage of this bill is better than the alternative, which is doing nothing. The federal budget is already in a deficit and with the economy in a state of recession, that deficit will only get worse, even if we don’t increase spending. This is due to the fact with a recessed economy, incomes are down and growth is down. Since our taxes are built on an income based tax, when these drop off, our tax revenues fall as well. In fact, if the recession deepens, incomes will continue to fall, further reducing tax revenues. Additionally, more people will lose jobs thereby putting a further strain on governmental programs such as unemployment.

So this creates a choice between no short term prognosis for recovery or trying to jump start the economy in the short term. In either scenario, the deficit will increase. In the long term, doing nothing may result in the economy coming back on its own, but this may take years. Doing nothing also runs the risk of things actually getting much worse before a recovery ever occurs. ARRA is designed to provide a jump start, and if that works, it will get us out of the recession much quicker and allow a recovery to take place. Which is why economists from both sides of the political aisle are saying that something should be done sooner rather than later.

What is included in ARRA? According to the White House, ARRA is intended to jumpstart the economy by doing the following:

• Doubling the production of alternative energy in the next three years.
• Modernizing more than 75% of federal buildings and improve the energy efficiency of two million American homes, saving consumers and taxpayers billions on our energy bills.
• Making the immediate investments necessary to ensure that within five years, all of America’s medical records are computerized.
• Equipping tens of thousands of schools, community colleges, and public universities with 21st century classrooms, labs, and libraries.
• Expanding broadband across America, so that a small business in a rural town can connect and compete with their counterparts anywhere in the world.
• Investing in the science, research, and technology that will lead to new medical breakthroughs, new discoveries, and entire new industries.

In addition, ARRA will also extend unemployment benefits and other assistance for individuals. Finally, another large component to the bill are tax cuts aimed and lower and middle income tax payers. All in all, while it is not a perfect bill, it should provide a much needed boost to our ailing economy.

As for the deficit, once a recovery begins to occur, I think it will be imperative for President Obama and Congress to do what it needs to start and bring the budget back into balance. In the meantime, I think it is too important for the government to simply do nothing. ARRA will make much needed investments in infrastructure and new industry. In the process, it will also put much needed money into the struggling economy. For those reasons, Congress should pass the American Recovery and Reinvestment Act of 2009.