Wonkbook: So much State of the Union
The question that gets asked of every investor is the same: "How much?" Investments, after all, primarily matter for how much capital they give their beneficiary access to. But "how much" was a question that President Obama studiously avoided answering in last night's State of the Union. And without knowing what Obama is actually asking from Congress, it's hard to know what his vision amounts to. Yes, it would be good "to out-innovate, out-educate, and out-build the rest of the world," and yes, public policy has a role in helping us do that. But a small commitment to public investment is very different than a big commitment to public investment. Obama, after all, is not the first president to make competitiveness a theme of his State of the Union. The question is whether he'll be the first to actually do something serious about it.
The specificity gap was clearest when compared to the president's proposals for deficit reduction. In that arena, he called for to "freeze annual domestic spending for the next five years," which "would reduce the deficit by more than $400 billion over the next decade." He also called for the expiration of the Bush tax cuts for income over $250,000, an effort at corporate tax reform, and a look at individual tax reform, but he was careful not to mention the need for new revenues from those who aren't rich. The president could've been similarly detailed on the investment side of the ledger. He could've said, for instance, that for every three dollars we cut, one will be invested in our future. Or that following the recommendations of the CEO-led Council on Energy Innovation, we should invest $16 billion annually in clean energy research. But he didn't.
To some degree, this reflects his position as head of a divided government. Much of the specificity in the 2010 State of the Union came from asking the Senate to pass legislation that the House had already voted on, like the cap-and-trade, jobs, and financial regulation bills. This year, of course, Obama does not have a Democratic House passing congenial legislation. That means there's no one to say what the administration's preferred investments would look like but, well, them. And the administration promises that they will do exactly that, and soon: More specifics will be forthcoming in the 2012 budget. But until those specifics emerge, it's hard to say anything concrete about the president's agenda for the next year.
Read the text of Obama's speech from last night: http://wapo.st/hxibam
Watch the speech on YouTube: http://bit.ly/fWf8bi
Obama called for a five-year freeze on non-security discretionary spending, though he also promised to make room for new "investments", report Anne Kornblut and Scott Wilson: "President Obama sought to rouse the nation from complacency in his State of the Union address Tuesday, urging innovation and budget reforms that he said are vital to keep the United States a leader in an increasingly competitive world. 'Sustaining the American dream has never been about standing pat,' Obama said...Obama repeatedly declared the imperative to 'win the future,' comparing the current need for innovation to the space race against the Soviet Union in the 1950s and '60s... Facing steep budget deficits, Obama did not call for massive new programs, instead proposing a five-year freeze in most discretionary spending and tens of billions of dollars in defense cuts."
Rep. Paul Ryan's response said increased spending will contribute to American decline: http://wapo.st/fyIFC6
The austerity measures Obama embraced in the speech could backfire economically, reports Lori Montgomery: "For the first time in his annual address to the American people, President Obama did not hail a newly passed "recovery act" or call for a 'new jobs bill.' Instead, he called for a five-year freeze in domestic spending, except for 'investments' in education, infrastructure and research...Hours before Obama spoke Tuesday, the House approved a resolution calling for domestic spending to be cut to 2008 levels for the rest of the fiscal year, and Republicans are discussing reductions of at least $60 billion. Cuts of that size would trim domestic programs to their lowest level as a share of the economy in more than 30 years, according to an analysis by the liberal Economic Policy Institute, endangering as many as 600,000 jobs...with the unemployment rate still hovering at 9.4 percent, neither the president nor congressional Republicans are offering a clear strategy to create jobs in the short run, economists said"
Obama called for an overhaul of government agencies in the speech: http://wapo.st/hENj2J
The text of the president's speech, edited down to the specific positions, proposals and requests, and sorted by issue area: http://wapo.st/i4nDWC
Obama's economic proposals are good, but may not lead to domestic investment, writes Harold Meyerson: "All of these proposals are well and good, and a distinct improvement over the Republicans' alternative program of disinvesting public funds in the nation's future in hopes that the private sector will take up the slack. But making America more open for business addresses just one part of our national economic decline. The other challenge is how to make our corporations more open to doing business in America."
The speech and Ryan's response signal both parties want to delay action on the deficit, writes Ross Douthat: "From Barack Obama, we heard a reasonably eloquent case for center-left technocracy and industrial policy, punctuated by a few bipartisan flourishes, in which the entitlement issue felt like an afterthought... Ryan owes his prominence, in part, to his willingness to propose a very specific blueprint for addressing the entitlement system’s fiscal woes. But in his first big moment on the national stage, the words 'Medicare' and 'Social Security' did not pass the Wisconsin congressman’s lips... It’s clear that both parties have decided that a period of divided government twelve months before a presidential election is the wrong time to make big moves on entitlements and the deficit."
"Meh," writes Paul Krugman: "We’re going to invest in the future — but we’re also going to freeze domestic spending. So mixed signals — and although there were no numbers, given the further assurance that the freeze won’t affect anything important, this has to mean that the investment plans are small change...I have no idea what the vision here was. We care about the future! But we don’t want to spend! Meh."
This is the time for vague speeches that sound good, writes Matthew Yglesias: "It was a good speech; an example of trying to govern from the White House. I would say that zero percent of the speech was dedicated to building support in congress for concrete pieces of legislation that the President hopes to sign into law. And it’s too bad that the president’s not in a position to promise to shepherd big bills through congress. But the reality is that he’s not. So he’s wisely floating above the fray, issuing “sounds good but hard to do in practice” calls for smart infrastructure investments, tax reform, less oil subsidies, etc. Most likely none of it will happen. But it will definitely sound good, and if the president’s lucky some of it will happen!"
Obama sounded like the CEO of a failing company, writes Megan McArdle. "So what do those CEOs do? They spend a lot of time talking about their company's proud history, even if that history only stretches back a few years. They lavish extravagent praise on their awesome, dedicated workforce. And they deftly avoid talking about the big problems, for which they have no solutions, by talking about strategic areas for potential growth ("green jobs"), and going over a laundry list of new initiatives that do nothing to solve any of the core problems. When they are forced to talk about the core problems--and if the company is big enough to attract analyst coverage, they will rudely draw his attention to the problematic areas on the financial statements during the Q&A--he responds in vague generalities that restate the problem as if doing so constituted a solution"
Live in studio interlude: Chairlift plays "Bruises" on at Abbey Road studios..
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Still to come: The Financial Crisis Inquiry Commission concluded that the crisis was avoidable; Obama expressed a willingness to change health care reform in the State of the Union; White House domestic policy adviser Melody Barnes expects bipartisan action on education; Obama used the speech to push for a clean energy standard; and Japanese schoolchildren engage in a 31-person race.
The Financial Crisis Inquiry Commission finds that the crisis was avoidable, reports Sewell Chan: "The 2008 financial crisis was an “avoidable” disaster caused by widespread failures in government regulation, corporate mismanagement and heedless risk-taking by Wall Street, according to the conclusions of a federal inquiry. The commission that investigated the crisis casts a wide net of blame, faulting two administrations, the Federal Reserve and other regulators for permitting a calamitous concoction: shoddy mortgage lending, the excessive packaging and sale of loans to investors and risky bets on securities backed by the loans...While the panel, the Financial Crisis Inquiry Commission, accuses several financial institutions of greed, ineptitude or both, some of its gravest conclusions concern government failings, with embarrassing implications for both parties."
The House will vote on a stop-gap spending measure next month: http://bit.ly/efreKl
Rep. Barney Frank warns that budget cuts could undo new derivatives rules, reports Phil Mattingly: "Parts of the Dodd-Frank financial services overhaul face a 'potential undoing' by Republican proposals to cut spending, senior House Democrats said. Representative Barney Frank, the top Democrat on the House Financial Services Committee, said today that the Securities and Exchange Commission and Commodity Futures Trading Commission are underfunded already as they work on implementing the derivatives rules required in the financial services law....'A dramatic spending increase to fund the SEC and CFTC, as envisioned by the authors of the Dodd-Frank legislation, would further the mindset that our nation’s problems can be solved with more spending, not more efficiency,' Representative Scott Garrett, chairman of the Financial Services subcommittee that oversees the SEC, said today in a statement."
Housing prices are falling in all major cities: http://wapo.st/fuaSdz
Sen. Rand Paul has announced a plan to cut $500 billion from the federal budget in one year, reports David Rogers: "Not to be outdone, Republican freshman Sen. Rand Paul introduced legislation Tuesday that seeks to cut $500 billion from government spending in one year alone, wiping out three cabinet departments and the entire foreign aid budget while sparing neither the Pentagon nor 2011 war-related funding for overseas military operations...At one level Paul follows the House Republican standard of rolling back appropriations for many agencies to the levels set three years ago under the Bush administration. But elsewhere, he clearly goes much further, folding the Energy Department into the Department of Defense and wiping out most of the Education Department but for Pell Grants to low income college students."
Business groups want an administration push behind the South Korea, Colombia, and Panama trade deals: http://on.wsj.com/dXZJO6
The Republican position on investment isn't serious, writes Steven Pearlstein: "Republicans, it turns out, have no public investment strategy, just as they have no health-care strategy and no agreed-upon blueprint for reducing federal spending. What they have are poll-tested talking points, economic delusions and an overwhelming partisan instinct to say 'no' to anything Barack Obama proposes. In their response to the president's State of the Union message, they remind us once again that they are not serious about economic policy and not ready to govern."
Focusing on corporate tax reform has political, not policy, merit, writes Howard Gleckman: "His real reason for focusing on the corporate side is that White House strategists feel it is better politics. It puts pressure on both congressional Republicans and the (largely-Republican) business community to try to build consensus for a plan among their own widely divergent interests. If they can’t, Democrats will happily blame them for the collapse of the initiative. Even better, focusing on corporate taxes allows the President to dodge the nastier political minefields of individual reform. After all, it is so much easier to talk about closing corporate loopholes than curbing the mortgage interest deduction. Regardless of the politics, does it make sense to split corporate and individual reform? I don’t think so."
Adorable children getting extreme interlude: Japanese schoolchildren conduct a 31-legged race.
The State of the Union signaled a willingness to change health care reform, reports David Nather: "President Barack Obama made two things clear about health care in his State of the Union speech: he is willing to change it around the edges and he is ready to put it in the rearview mirror. 'Instead of re-fighting the battles of the last two years, let’s fix what needs fixing and move forward,' Obama said...Obama challenged Republicans Tuesday night to help him 'improve' the health care law, and offered to work with them on two changes he’s suggested before: adding medical malpractice reform and getting rid of an unpopular paperwork requirement for small businesses. But Obama insisted he’ll fight any efforts to repeal or otherwise block his signature legislative achievement."
Read all of Obama's comments on health care in the State of the Union: http://bit.ly/i8dKSi
Republicans are not being honest about health care reform, writes Michael Kinsley: "According to the official stats of the Congressional Budget Office, Obamacare will actually reduce costs and save the government money over 10 years. Not so, say Republicans (who voted last week in the House to repeal the whole thing). The accounting is phony. The Democrats are giving themselves a four-year head start...If you go to the Congressional Budget Office documents, you see that the CBO estimates that the revenue from penalties on corporations and individuals for not carrying insurance are exactly $0 for the first four years...On the 10-years-in-six business, there are only two possibilities: Either supporters or opponents of Obamacare are attempting a laughably obvious deception.
Vermont's representatives in the House and Senate introduced a bill to let it implement single-payer: http://bit.ly/hbzFyo
White House domestic policy adviser Melody Barnes predicts bipartisan action on education, report Mike Allen and James Hohmann: "Melody Barnes, the president’s Domestic Policy Adviser, is 'very, very hopeful' about the chances for bipartisan cooperation on education this year...The director of the White House Domestic Policy Council said she believes Republicans will go along with some proposed fixes to the controversial 'No Child Left Behind' law when it comes time for re-authorization. 'We’ve learned a lot in the years since No Child Left Behind was signed into law [in 2001],' Barnes said. 'And, one, people think the idea of accountability that was established there was a smart one, and we want to maintain that. But people also recognize that there are things that have to be fixed, that we need greater flexibility for those schools that are doing well.'"
Senate Democrats opposed Obama's call to veto bills with earmarks: http://politi.co/fFWXtn
Sen. Tom Udall is throwing in the towel on filibuster reform, report Scott Wong and Manu Raju: "Sen. Tom Udall (D-N.M.) conceded Tuesday night that the fight to overhaul the filibuster was essentially doomed this Congress, saying he was settling for more modest reforms worked out by the leaders from both parties...The proposed changes - negotiated by Sens. Chuck Schumer (D-N.Y.) and Lamar Alexander (R-Tenn.) -- would limit the number of executive branch nominations subject to Senate confirmation; make it more difficult for senators to anonymously block legislation or nominees; and end a stall tactic that lets senators force clerks to read aloud the complete text of a bill if the measure has been made public."
Regulators could mandate that cars "talk" to each other to avoid crashes: http://wapo.st/fc4Frh
Democrats and Republicans should be able to agree about investing in education, writes David Leonhardt: "Education is the single best investment a society can make. High school became universal in the United States in the early 20th century, when other countries viewed universal schooling as wasteful, which goes a long way toward explaining our economy’s 20th-century success. Likewise, the slowing increase in the number of new college graduates in the 1980s and ’90s helped contribute to the slow economic growth of the last decade. So protecting higher education from across-the-board budget cuts, as Mr. Obama is urging, makes sense. But the status quo is not worth protecting. Both the federal government and the states spend money on higher education in terribly wasteful ways."
Mystery Science Theater 3000 interlude: The '50s short film A Case of Spring Fever gets dissected.
Obama pushed Congress to pass a "clean energy standard" in the State of the Union, reports Darren Samuelsohn: "President Barack Obama nudged lawmakers on Tuesday night to take another swing at several high-profile energy ideas, including phasing out of billions of dollars in oil subsidies, ramping up use of biofuels and electric vehicles and setting a nationwide goal for 'clean energy sources' that includes nuclear and 'clean coal.'...The president sought to make a direct link between economic growth and clean energy policies, while studiously avoiding picking favorites among several different power sources that can quickly prompt bitter regional fights, as well as partisan ones... House Republicans have not been so keen to embrace new national energy mandates, even if it covers some of their favorites like coal and nuclear power."
Newt Gingrich wants to abolish the EPA: http://politi.co/hQPEG9
The State of the Union upset both energy and environmental lobbyists, reports Peter Wallsten: "If President Obama was looking for the political (or policy) center in his State of the Union address, there was an early sign that he may have succeeded - with rumblings of dissatisfaction coming quickly Tuesday night from environmentalists and oil lobbyists alike. On one side, oil allies were miffed that Obama called for an end to federal oil subsidies and even took a dig at the industry by noting companies are 'doing just fine on their own' and waving them off as 'yesterday's energy.'..Environmental advocates were pleased that Obama, despite calling last week for a government-wide review of regulations, appeared to defend restrictions on greenhouse gases and other pollutants...But those same activists were disheartened when Obama embraced nuclear energy and coal as examples of 'clean energy sources.'"
Republicans in Congress will push to permanently strip the EPA of regulatory authority over climate change, reports Andrew Restuccia: "A coalition of Republicans will outline a proposal in the coming weeks to permanently block the Environmental Protection Agency from regulating greenhouse gas emissions. House Energy and Commerce Committee Chairman Fred Upton (Mich.), the panel's energy subcommittee Chairman Ed Whitfield (Ky.) and Sen. James Inhofe (Okla.) said Tuesday that they are working together on the proposal...Upton had previously signaled his support for a proposal to block EPA's authority until relevant lawsuits snaked their way through the courts. But it now appears that he and his colleagues will push to permanently block the agency's climate authority."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: Toni L. Sandys / The Washington Post
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