A Few Residual Thoughts on SOTU

January 30th, 2014 at 4:25 pm

Here it is Thursday and at least some of us are still discussing the President’s big speech from Tuesday night.  Talk about staying power!

Subsequent events could easily prove me wrong, but I’ll bet you that for all the criticism of how the shrunken President has been forced into the small ball of executive orders, the impact of this speech will stick around, longer, in fact, than previous SOTUs.  The reason is that the President has pivoted from an abstract and deeply misunderstood problem—debt and deficits—to a concrete and acutely felt set of problems around incomes, earnings, jobs, opportunity, and mobility.

Let me explain (and I’m riffing a bit off of Greg Sargent’s incisive analysis as well here).

A confluence of events have pushed the national economics debate away from debt and deficits and towards the more pressing economic challenges noted above:

–One thing I haven’t seen much of in the reporting on the surfacing of this debate: the fact that the budget deficit has fallen from 10% of GDP in 2009 to 4% in 2013, the largest four-year decline since 1950.  That’s making it a lot harder to sustain fiery hair of fiscal rectitude and it’s created some space in the debate for discussing more immediately germane issues.

–The President’s inequality speech in December set the table.  His follow-on points Tuesday night were a lot less focused on inequality itself than on its impact.  As I and others have stressed, this is the more effective framing of the issue.

–The data!  As I show here, it’s clear that the benefits of the growth we’ve seen thus far in this expansion have flowed to profits, not wages.

When the debate is on the deficit turf, it’s a debate about cutting spending or raising taxes, one that demonstrably leads to the black hole of the grand bargain: R’s won’t countenance tax increases and D’s won’t agree to cuts in entitlements that compromise the security of economically vulnerable households.  In the meantime, that debate elevates deficit reduction uber alles, and even absent the elusive grand bargain, that in turn has led to a deep spending cuts in the non-defense discretionary side of the budget (defense has taken some hits too), where, paradoxically, many of the programs designed to promote upward mobility reside.

Conversely, when the debate instead turns to sticky poverty rates, more jobs at better wages, and an “opportunity agenda,” it is on a turf that has the potential to lead somewhere.  One is tempted to argue that this turf favors Democrats, as the recent Republican policy consensus reduces to trickle-down tax cuts and repealing stuff the President supported.

In this regard, it was interesting to hear the official Republican response to the SOTU, by Kathy McMorris Rodgers.  Amazingly, I found neither the words “deficit” nor “debt” in her response.  She did, however, talk about “opportunity inequality” but didn’t have much to say about what to do about it, beyond “we have plans!”

But before you conclude that R’s are stuck with an agenda that offers no more than tax cuts for the rich and shutters for the EPA, consider this piece from today’s WaPo.  It notes Sen. Rubio’s advocacy of an expanded EITC for childless adults, Rep. Ryan’s support for job training, expanding the child tax credit, and more:

Other conservative policy analysts are focused on historically high levels of long-term unemployment. Some have even committed the conservative heresy of advocating more government spending to help out-of-work Americans, for example by using taxpayer dollars to subsidize salaries, provide relocation assistance or directly create jobs.

OK, now before you revoke my credibility card, I fully recognize, and have written many times in these pages that such ideas are way out of sync with recent Republican budgets, so no question that the threat of bait-and-switch here is real, as is “just say any damn thing to stop sounding so damn out of touch.”

But my argument does not hinge on conservatives necessary figuring out how to thread whatever needles they’ve stuck in themselves.  My argument is that not only are we now be having the debate we need to have, but both sides are introducing solutions that are targeted at increasing economic security as opposed to reducing budget deficits.

I thought that was a strong theme with the SOTU and I suspect it will remain so for a while.  Like I said, I could be wrong, and if so, I’m sure you’ll tell me.

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5 comments in reply to "A Few Residual Thoughts on SOTU"

  1. Robert Buttons says:

    Deficits really don’t matter—until they do. Greece learned this lesson and Puerto Rico is learning it. Of course, some economists point out these nations can’t print their way out like we can. But can we? Turkey, India, Argentina, Venezuela and (soon) Hungary are evidence against this notion.

    But if we really are able to spend ourselves into prosperity. What do we buy? Nina Munk’s excellent book “The Idealist: Jeffrey Sachs and the Quest to End Poverty” teaches us a valuable lesson in the folly of economic planning. There are only so many fake alien invasions we can prepare for.

    I may be constructing a strawman, but it seems to me the basic premise underlying the aggressive fiscal action crowd is “We’re inherently a strong economy that just needs a jumpstart to reach full potential.”. But if, in fact, “We are a middling economy that has been living far beyond its means”, then we will have foisted an unsustainable debt load on the next generation.

  2. urban legend says:

    Democratic Congressional candidates need a lot of help in the way of raising favorable views toward the ACA. The President did only a fair job on this as far as meeting relatively low-information potential voters where they are. He should have engaged head-on some of the negative publicity — like the bogus stories of massive rate increases — and spoken directly to skeptical people describing examples of what they will find at what rates in the exchanges. Telling people they can find correct information on a non-government website like Kaiser’s would have helped him be more convincing to people who have heard all the horror stories but are also somewhat skeptical about those as well.

    Even more important strategically, however, is that the law needs to be packaged as benefiting everyone, not just the poor and down-an-out. There are specifics, such as the fact that nobody, even people with insurance through their employer, is at risk of having an insurance company stop paying for a really serious medical problem because of a lifetime cap. People with teenage or college age children need to be told directly that if they have a problem finding a good job out of school, they will not be kicked off their parents’ policy before ACA, as they used to be right out of school before ACA. Yes, he said that, but he didn’t say it to people in the TV audience, he told it to the chamber.

    Most important, to reach the great mass of people who think they have been unaffected by the law and therefore are not highly invested or favorable towards it, they have to be reminded directly that “even if you have coverage through your employer, you now have the peace of mind knowing that if you lose your job — and who is 100% confident that could not happen? — or even if deep in your heart you want to start your own business or go into self-employment, you are now assured of being able to get insurance at reasonable rates regardless of your medical condition. You will not have to face financial disaster if you lose your job, as millions of people were before this law went into effect.”

    This universality of the benefits of the law — for 300 million instead of 50 million — needs to be pounded in over the summer and fall: even if you have insurance through your job now, you now have assurance of being able to get insurance coverage for you or your family no matter what happens, and you should not let Republicans keep trying to take that away from you.

  3. smith says:

    I don’t get the argument for expanding EITC to single people without dependents, without children. I understand the need for jobs, full time jobs, so people can support themselves. I understand the need for single parents perhaps getting EITC because the demands of childcare prevent them from full time work. I understand the need for full time jobs to pay enough to support oneself (which the proposed $10.10/hour seems to minimally fulfill). I also understand the need for programs to help long term unemployed, under skilled, or difficult to hire, to help find work (which is different from a wage subsidy, which penalizes easy to hire applicants).
    Where is the logic for wage subsidies for businesses that underpay full time workers and drive employers paying fair wages out of business?
    Again, the goal of government should be to reduce programs like EITC (wage subsidies) and SNAP (food stamps) by having people climb out of poverty. The goal is not to end poverty with a more generous safety net. The fact that conservatives favor EITC shows big business sees the corporate welfare benefits all too readily.