State-of-the-Union speech paints vision and ignores political realities by Marjorie Arons-Barron

The entry below is being cross posted from Marjorie Arons-Barron’s own blog. Check it out.

State-of-the-union speeches are supposed to be inspirational, and last night’s by President Obama achieved that goal. It certainly spoke to his Democratic base and evoked a vision of what those center and left-of-center want their country to be and do. The problem is that the President glided over the lessons of the 2011 annus horribilis and even 2010, when many of the ideas he floated last night were soundly rejected.

It’s fine that he portrayed his values, including a more active government role in job creation, supporting renewable energy and eliminating oil subsidies, growing the manufacturing sector, expanding the federal role in financing higher education. But he has to know that it’s likely that little will happen in a Presidential election year, that any of the larger items of his program won’t go through either branch of Congress now that it’s Republican-controlled, or at least dominated by Republican vetoes. Heck, he couldn’t get some of those same ideas through Congress when both branches were Democratic. On many issues, regional politics trumped partisan affiliation. Energy producers on both sides of the aisle are opposed to ending subsidies. And the Republicans see ending subsidies to oil companies as a tax increase, and everyone knows they reflexively refuse to support any tax increase.

Obama’s pitch to reform the tax code and the unfairness of the system will figure prominently as the Presidential campaign proceeds, and there are certainly many inequities that need to be addressed. But fairness for some means an increase for the wealthy, and, again, that’s not going to sail in the current political environment. It’s reassuring that the President is willing to take the criticisms of “class warfare” head on. (Who knew such inequities would also figure prominently in the GOP primaries?)

Obama didn’t just glide over the hugely negative political realities in Washington. He indulged in a kind of magical thinking worthy of Latin American authors. A major part of his approach to financing his programs was to take the money we will no longer be spending on Iraq and Afghanistan, use half to reduce the deficit and the other half to do “nation building here at home.” The fallacy here is that we have been deficit-financing the two wars. Not making the huge expenditures there doesn’t translate into money in the bank. The money was never there in the first place. Those wars plus the Bush tax cuts and an underfunded Medicare Part D together account for the expansion of the federal debt. So in the real world, rhetoric aside, there’s no net savings here to be achieved.

In the end, however, the State-of-the-Union address was an opportunity to paint a vision of values, if not a portrait of political possibilities. And, if the President had watered down that vision, cravenly bending to the negative atmosphere in Washington, he would have unacceptably moved the needle on where potential compromise might start and sold out the dreams of his most ardent supporters before the 2012 game had even begun.

Please let me know your thoughts in the comments section below.

3 Responses to State-of-the-Union speech paints vision and ignores political realities by Marjorie Arons-Barron

  1. Joe S. says:

    I think the tax issue has to be shaped along the lines of eliminating loopholes and preferences that are only enjoyed by the rich, as opposed to raising the tax rates.

    For one, make carried interest ordinary income – there is no reason to give anyone the capital gains tax break when it is not their money at risk in investments.

    Another possibility is to modify the capital gains preference to a percentage lower than the otherwise tax rate instead of a fixed percentage. For example, a 15% capital gain preference would allow the 15% bracket taxpayer to pay nothing on capital gains income, the 25% bracket would pay 10% on that income and so on, so that the 35% bracket taxpayer would pay 20%. I expect that it would be revenue neutral or even a plus for the Treasury.

  2. Joe S. says:

    “If elected president, Mitt Romney might consider ending a tax break that helped the former Massachusetts governor accumulate his fortune, an aide suggested Tuesday.”

    “If”, “might”, “consider” – three good reasons to reject Romney’s candidacy.