"The Speech"

Sydney M. Williams

Thought of the Day

"The Speech"

January 27, 2010

In order to fix the major, long term financial risk facing the United States – the threat of insolvency – one must first confront two root causes that have led to this predicament: impediments to faster economic growth, such as over-reaching regulations that stifle innovation, and a tax code that discourages investment and encourages consumption; and secondly, an entitlement system that promises more than it can deliver and diverts funds from badly needed investments. Unfortunately, neither the President's State of the Union speech, nor Representative Paul Ryan's response squarely addressed these issues.

The first should be easily addressed – providing regulation, that besides being fair and enforceable, but recognizes the changed nature of our economy and the global competition we face.  The tax code can be simplified and redesigned to encourage investment and discourage consumption. The second cause – known understandably as the “third rail” of politics – is far more difficult.  It is far easier for politicians to offer their constituencies goodies than it is to ask them to sacrifice, to wean them from entitlements they have come to expect as their right, to ask them to become more self-reliant and personally responsible.  Yet it is what must be done. For example, raising the age of retirement – not by one year over  the next sixty-five – but by, say, five years in the next twenty is a concept people could comprehend. People implicitly understand that the current system does not work.  A means test for Social Security could be employed. Again, there may be some backlash, but people again understand that the current system, left alone, will implode. More generous IRA and 401K plans could be offered, providing the incentive to save, rather than spend.

Medicare and Medicaid are two important entitlements, but the consumer needs to be more involved in the decision making, in terms of what moneys are paid against what care is received. Generally, it is catastrophic, rather than comprehensive, insurance that most people require.  Yet simple solutions, like permitting insurance companies to compete across state borders, were left unmentioned. Again, means tests, and health savings accounts, could apply.  The new healthcare plan will no doubt morph into another entitlement, which is why its implementation is being challenged by so many.

It was encouraging that the President did suggest simplifying and lowering the corporate tax rate, but he said nothing about individual rates, other than defiantly promising to raise them for “millionaires.”  He also added, belatedly, that he will work with Republicans in dealing with obscenely costly medical malpractice law suits.

The President spoke eloquently of the need to invest in education, high-speed rail, renewable energy programs, infrastructure and high-speed wireless Internet connectivity – all laudable goals.  He compared today's challenges to two generations earlier when the 1957 advent of the Soviet manned spacecraft, Sputnik, launched the race to space.  He did not add, however, that today's entitlement spending has restricted the ability of the government to respond in the manner it did in the late 1950s and early 1960s. We simply don't have the options today that we did then.

I was pleased to see the President emphasize the need for change in schools – allowing principals and superintendents to fire teachers based on competency, not on longevity.  But I heard nothing of the ruinous role played by unions in fighting this change. I was pleased to hear his emphasis on offering citizenship to college and university graduates, instead of sending these talented young people back to the countries from which they came.  But the goal of having the highest proportion of college graduates in the world is not as important as having the world's best universities and attracting the best students from all over the world...and then keeping them.  While we need more scientists and engineers, not everyone will become one. Like all societies, we need workers at every level.  But most of all we must offer opportunity for those who aspire to success. A five year freeze on “some domestic programs” is better than nothing, but the $400 billion savings over ten years represents, annualized, one percent of last year's budget – not nearly enough. I was pleased to hear Mr. Obama acknowledge the Tunisian citizens who are fighting for their freedom, but I heard nothing about similar situations and missed opportunities in places like Iran. 

While the biggest applause came when he appropriately recognized our men and women in uniform and when he urged the return of ROTC to all campuses,  it was accompanied by him applauding his  “politically correct” initiative of allowing gays to serve openly in the military.  He avoided the term of “exceptionalism,” as it applies to America, but he received a big round of applause when he declared that “nobody here would trade places with any other place on earth.”

Mr. Obama is an eloquent speaker and, as he speaks most every day, he gets plenty of practice.  But it is action, not words, that people want. Unfortunately the speech avoided any serious discussion as to how we extricate ourselves from the financial plight we face, how best do we grow the economy and a recognition that the “third rail” of politics cannot be ignored.  “We do big things,” he said.  The President should take his own advice. Like after any big rally, we feel better at the time, but when we awake in the morning the problem is still with us.