The State of the Union Address -- Quick Reactions

Thu, 28 Jan 2010 04:44:33 +0000

I give President Obama high praise for the parts of his speech this evening where he chastised his own party in the Congress for its ineffectiveness and for telling the Senate Republicans that if they are going to insist on supermajorities to get any policy passed, then they are going to have to share in the responsibility for governing.  Good for him.  Nobody's perfect, but I cannot help but think that the conduct of the Congress in recent years, and the Senate in particular, would be enough to make a Founding Father vomit.

Despite the unusual circumstances of January 2010, much of the speech was the standard fare in January -- everybody should go to college, everybody should be healthy, the environment should be clean, people should save for retirement, and I've got the token programs in my budget to give me the credibility to pay lip service to it.  And, new this year, we will do all of these token programs and giveaways while insisting that we will freeze non-defense discretionary spending at current levels.

One item that stood out as different was the acknowledgement that we are on our way to export-led growth, if we are to have growth at all.  <!--break-->President Obama sounded like a good old-fashioned mercantilist with his claim that we would double exports in five years and support 2 million more jobs through those exports.  I don't think that's a reasonable projection, but it does signal a different way of talking about what's important in economic policy.

On the important issues of the moment -- financial industry reform and health care reform -- I didn't hear much that gave me hope.  On the former, I simply do not believe that the need to stabilize the financial system required us to prop up the large, failing institutions within that financial system.  Bailout in lieu of bankruptcy is simply not an appropriate policy, no matter how many times the Treasury Secretary claims otherwise.  On the latter, the near-term emphasis should be on the design of health insurance markets, not funneling more money into a system that is known to waste that money in all sorts of ways.