Wednesday, January 25, 2012

Sizing Up the SOTU

President Obama was in high dudgeon last night as he delivered his 3rd State of the Union address, and it is worthwhile to examine the content and the tenor of the speech as well as the GOP comebacks.

First, I thought Obama did indeed strike a populist stance in noting that "American values" inherently call for "fair play". That means if a citizen works hard, keeps his nose to the grindstone, and does his best, he should at least not be left behind while high octane millionaires (one of whom is actually running for the Republican nomination) joke about making $10,000 bets, or pooh-pooh an amount of $340,000 for speaking fees as "not being that much money". Especially when that amount clearly exceeds most Americans' net worth!

I had hoped Obama would also cite the Constitution (which the Repukes are so big on) by noting in the Preamble the role of government to "promote the general welfare" . He could also have argued staunchly that his Affordable Health Care Act (which the Goopers wish to abolish) is going to do just that. He might also have argued that Social Security, Medicare and Medicaid are also promoting the general welfare.

One mistake made in this context, at least I and many others (e.g. Bernie Sanders, Jeff Madrick, Elliot Spitzer, Robert Reich etc.) believe it to be, was mentioning possible "reforms to entitlements". Let us note here that neither Social Security or Medicare are "entitlements" and neither needs "reform" in the sense of cuts (which a change in COLA would do to S.S.) or privatizing. Indeed, all Americans have paid payroll taxes for at least a decade to receive these benefits, and in the case of Medicare, must bear extraordinary out of pocket costs amounting to nearly $200,000 over two decades. "Entitlements" meanwhile, suggests these benefits are unearned or dispensed gratis like welfare and then one falls right into the GOP language trap.

Second, Obama was absolutely correct about the "trickle down economics" of his Republican predecessors not working. In face, he might have mentioned that all the evidence shows the Bush tax cuts haven't worked, and hence there is no need to extend ANY of them - whether for the wealthiest 1% (which lowest threshold level begins at $340,000/yr) or the middle class. In a blog last year, I detailed the reasons why all of the Bush tax cuts need to be terminated. See, e.g.

This was based on an extensive analysis by The Financial Times. Obama in his speech noted the rich need to pay more, indicating taxes ought to be at least at the "30% level" with no loopholes, but this ought to have been bolder! In fact, if the Bush tax cuts are all sunset, as they ought to have been last year, the wealthiest would be paying at the 39.5% marginal rate and the "no loopholes" provision could have been added to this.

But as others have pointed out (e.g. Jeff Madrick, Bernie Sanders, Elliot Spitzer) the math simply doesn't support that raising taxes only on the wealthiest one percent will do the trick. Madrick points out that this will save an increment of barely $700 billion over ten years, while repealing ALL the Bush tax cuts would save $3.3 trillion and essentially solve this ongoing battle about finding "1.2 trillion" to solve the initial deficit problem. Madrick isn't reciting anything new, as The Financial Times has been harping for more than 3 years that Obama needs to eliminate all Bush tax cuts and cease "playing politics" by obsessing only on those for the wealthiest.

Last night would have been an excellent time to treat all Americans as grown ups, and tell them straight they need to make a choice: Do you want more tax cuts, giving you maybe $500-1,000 more in your pockets each year, OR do you wish to preserve your Social Security and Medicare benefits. You can't have both! Make a choice! But that moment never came, so once again, the Bush tax cuts can be expected to be at the center of another year of horse trading political games with the repukes, and more likely all will once again be extended ....with little economic benefit and even greater deficits demanding further cuts down the line.

Meanwhile, Bernie Sanders has correctly questioned the wisdom of the payroll tax cuts - as I have, e.g.

since they are what provide the dedicated funding for Social Security. If they are extended, and not terminated soon, then Goopers will make the logical case that Social Security needs to be cut since it no longer is bringing in the money to support itself. The next step, a draconian one, will be for Social Security annual funding to be approved by congressional bean counters each year. Again, Americans need to be treated like grown ups and asked what they want: minor immediate gratification from a "payroll tax holiday" or to secure their future benefits when they will most need them.

Third, Obama gave some great narratives (with personal examples) while expatiating on how to rescue American jobs and how he wants "an economy built on American manufacturing, American energy, skills and American workers" and he gave terrific recommendations that companies, corporations should no longer be getting tax writeoffs for outsourcing jobs. Rather companies that set up jobs in this country ought to reap the tax breaks. This is just common sense, but the Republicans in the audience had expressions resembling those who were told they'd no longer be able to spend money on elections!

Obama moved onto shakier ground in several other areas:

1) He opined on using federal land to develop wind farms and solar energy. However, the problem with these alternate forms of energy is they simply don't provide the energy density needed to support a civilization, society like ours. There is no way wind engines, or solar cells will ever power glass or automobile factories, far less the machines to manufacture the new F-35 fighter bombers. If maximum energy capacity is measured in exajoules, then wind, solar and geothermal together barely make the cut collectively at 3 EJ. Meanwhile, our civilization, industrial society (especially if we intend to remain a high octane weapons nation) requires at least 50EJ per year. Only coal and oil can meet that demand, if massive conservation isn't factored in.

2) He warned colleges and universities that they risk losing federal funding if they do not keep tuition costs down. But that is not the fault of most of the universities. For example, here in Colorado the University of Colorado at Boulder, in order to keep its premier staff of professionals, and facilities, needs yearly outlays to support them in the form of tuition. Historically this came from state taxes, but since TABOR (Taxpayer's Bill of Rights ) was passed in 1991, wherein state revenue growth wasn't allowed to exceed inflation rate plus population they've been left behind. Add to that voters' repeatedly turning down tax hikes and there has been no other choice except to raise tuition ...and often by amounts that the taxes would have provided. This has led one Colo. state legislator to ask: What do Coloradans want? Lower tuition and higher taxes, or lower state taxes but much higher tuition?

Again, a difficult choice, but people need to be made to understand that these are the fiscal realities. Americans have to be led by the hand by their leaders to see these realities, as opposed to retreating to la-la land.

3) Obama declared at one point that the nation was not in decline and emphatically stated (true to the ongoing spirit of entrenched American exceptionalism, as if we are somehow historically different from the British and Dutch of past centuries) "Anyone who says America is in decline doesn't know what he is talking about". But I am afraid, Mr. President, that this falls on you. The nation certainly is in decline and has been for decades as I have noted, with extensive reasoning, examples, in earlier blogs, e.g.

4) An unwise (to me) declaration was Obama stating he would do "whatever it takes" to ensure Iran gets no nuclear weapons capability". But this is not being geo-politically practical and takes no account of the fact that the Russians (especially ) have vested interests there, and their Security and Defense chief has already stated that any overt or aggressive intervention by other states will "lead to an all out wider war". What none of us want to see manifested here, is a playing out of the horrific 1983 Brit movie, THREADS. (Which began with a blockage of the straits of Hormuz, led to a NATO bombing of a nuclear plant at Isfahan, then culminated in a full scale nuclear exchange. The actual events in the film center around a family in Sheffield, England and how they get through it all. Let us hope Obama's words were just "macho" talk and none of us ever will!)

The GOP Response:

As predicted, the Republican response was totally predictable, delivered by the clueless governor of Indiana, Mitch Daniels. According to Daniels:

"No feature of the Obama presidency has been sadder than its constant efforts to divide us, to curry favor with some Americans by castigating others"

But Obama didn't "castigate" others, only said that all Americans need to pay their fair share. The fact of the matter is that currently inequality is at an all time high. In the past ten years most Americans' wages and benefits have gone down or remained stagnant while the top 1% have seen their increase 23%. Our Gini index, the main indicator of inequality, now approaches that of Mexico and the Philippines. The main source of this has been the ongoing Bush tax cuts which have delivered the equivalent of a new Lexus each year to the top one percenters, (more like the equivalent of a new yacht to each top 0.01 percenter) while awarding only "chump change" to the average $50k /yr or under earner...and this also at the cost of future benefits.

As for "class warfare" it is the wealthy and the GOP who are carrying that out on the rest of us, e.g.

The GOP candidates lumped Obama into the group with "Saul Alinsky radicals" but these guys would remake our whole economic system so no middle class can exist. I will get into this in a future blog on Mitt Romney's planned policies, he who paid more in taxes in 2010 than the average American earned in his lifetime!

Could any American in his right mind elect some $42 million a year financial maven who would have no possible comprehension of the ordinary American's plight? Who knows? But I do hope people treat this next election seriously. As noted from his SOTU, Obama may not be perfect, but he is a damned sight better choice than any of the goopers on offer. We had better hope he gets in office again, or our decline as a nation will alter from a slow roll to a downhill acceleration!

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