Last night, as everyone knows, President Obama made another in a series of pitches to gain support for a massive tax hike on Americans under the guise of addressing the debt problem he created. As Ian noted, Governor Palin will appear on Fox News tonight with Greta Van Susteren to provide her take on the issue and Obama’s latest antics. Prior to that appearance, I thought it would be useful to do a round up of the reactions by several prominent personalities in the new and old media to what amounted to nothing more than a campaign speech by someone in hopelessly over his head. But first, a few brief thoughts of my own.
Obama began his presentation, as is his custom, by blaming Bush for his predicament. How Bush is responsible for Obama adding $3.7 trillion to the national debt in a scant 30 months he didn’t specify. But then he really didn’t specify anything, did he? I guess that’s one of the hazards of having no plan of your own or, for that matter, no plans to even develop a plan as Obama’s press secretary Jay Carney was forced to admit today. The excuse? The leader of the country can’t put forward a plan to avoid what he has called ”Armageddon” because if he does it will be “politically charged” or something. I’m not making this up. But Obama’s not the only Democrat without a plan. None of them have one. (Harry Reid’s plan is not a plan — see below.)
The main thrust of Obama’s speech is his desire to raise taxes by at least $1.2 trillion in the hope he can keep most or all of his spending in place. Of course he didn’t use the word “taxes”, preferring instead to use meaningless, poll-tested verbiage such as ”balanced approach” and “compromise” as surrogate words for tax increases. One wonders if Obama really believes that the roughly 50% of those who actually pay federal income taxes would be fine having more of their increasingly hard-earned money confiscated to pay for more Hope and Change as long as he doesn’t explicitly utter the word “taxes”. I doubt it. But leaving aside the fact that a massive new tax increase would destroy what’s left of the Obama Economy, it simply makes no sense. Even Obama’s own party is coming to this realization as the only person still clinging to the idea of more taxes is Obama.
Raising taxes to solve the unrelated problem of too much spending is akin to attempting to wean a drug addict by giving him access to Bill Gates’ bank account. This only makes sense if you don’t believe that spending is the problem, as is clearly the case with Obama. At the end of last night’s performance, Obama seemed to express interest in Harry Reid’s farcical $2.7 trillion deficit reduction plan, nearly half of which is accounted for by claiming ”war savings” on wars we weren’t going to be paying for anyway. John Hayward explains:
At any rate, Reid is actually willing to insult the American people by claiming over a trillion dollars in “spending reduction” from wars that were ending anyway. He gets it by assuming all current spending on Afghanistan and Iraq remains constant for the next decade. Anything less than that represents a huge “budget cut.” That’s like getting your car totaled, and counting all the money you would have spent on gas over the next ten years as a budget reduction… even though you bought another car, and you’re filling it with gas.
That’s an excellent analogy, as Reid’s supposed budget savings are as ludicrous as claiming spending cuts over the next ten years by not re-fighting the Vietnam War or re-launching the Apollo space program. In short, there are little or no spending cuts in Harry Reid’s plan, and it amounts to nothing more than smoke and mirrors which, naturally, is why it appeals to Obama. But even if Reid’s plan actually contained $2.7 trillion in legitimate deficit reduction over ten years, what’s the point if it’s accompanied by a $2.7 trillion increase in the debt ceiling? Doesn’t that necessarily mean we’re planning on adding another 2.7 trillion to the existing $14.3 trillion national debt between now and early 2013 (when it’s expected the debt ceiling will need to be raised again)?
So, even if we take Harry Reid’s magical deficit reduction claims at face value, Obama is advocating that we ”cut” $2.7 trillion from projected deficits over the next ten years so that we can add $2.7 trillion to projected deficits over the next 18 months. To be sure, most of the so-called debt-ceiling deals being floated, including Boehner’s, contain this irreconcilable absurdity in one form or another. Isn’t this going backward? I’ve never understood this kind of thinking and would be grateful if someone, anyone, would explain to me how this will help put us on a path to fiscal sanity and sustainability?
A few final thoughts. First, what’s most important for Obama is that we (U.S. taxpayers) give him a credit card large enough so that he doesn’t have to ask for another debt-ceiling increase until after the 2012 election. There is zero economic reason to choose that date. It’s all about Obama’s reluctance to ask for another increase during an election campaign. This is far more problematic to team Obama than the default fear-mongering he’s peddling to America’s seniors and military personnel by implying he’ll withhold their checks if he doesn’t get a blank one for himself. A few days ago ABC’s Jake Tapper toyed with Jay Carney over this very point. Enjoy:
Second, Obama keeps insisting that credit ratings agencies will downgrade our debt solely on the basis of the debt-ceiling impasse or how long into the future a new deal extends. Depite the musings of useful idiots such as those at CNN, this is nonsense and John Hayward did an excellent job highlighting why yesterday in a piece in Human Events. Credit ratings are based primarily on the borrower’s debt overhang and perceived ability to repay it, not so much on the quantity of unused credit they can access, as Ben Baden explains in a piece in U.S. News & World Report:
The major factor driving credit quality is the relatively high level of debt and the difficulty in significantly cutting spending. We are taking a negative action not based on the delay in raising the debt ceiling but rather our concern about the high level of debt to GDP in excess of 100 percent compared to Canada’s 35 percent.
Think about it. If an individual is deeply in debt and has demonstrated no inclination to get his or her spending under control, would a credit rating agency recommend said individual take on more debt? Of course not, but that’s the logical end to Obama’s argument that we can solve our debt problem by taking on trillions of dollars more in debt. Obama doesn’t seem to understand the truism that you can’t borrow your way out of debt.
Finally, there were a couple humorous moments in last night’s speech. The first was when he attempted to compare himself to Ronald Reagan and even implied that Reagan would support his tax hikes. The second was when he told a national audience to swamp Congressional switchboards today, presumably to demand that Congress raise our taxes. How’d that work out? Well, let’s just say that Obama still doesn’t understand the law of unintended consequences, heh.
Now, as promised, here are a few reviews of last night’s campaign speech by Obama:
For the fifth time in three weeks, Barack Obama seized the bully pulpit in the debt-ceiling debate, this time using a prime-time speech instead of a press conference to do so. And for the fifth time in three weeks, Obama literally did nothing with it except to utter the same platitudes and clichés as he did on the previous four occasions. Obama offered no solutions, no specifics for a solution, and spent 15 minutes avoiding both.
The simple answer: Obama doesn’t want the responsibility for raising the debt ceiling, cutting spending, and/or raising taxes. This is what passes for leadership in the era of Hope and Change — voting present.
In terms of blatant, cynical, political demagoguery, the speech was par for the course. Substantively, Obama threw his support behind Harry Reid’s proposal in the Senate, but did not explicitly threaten to veto a short-term debt increase (as outlined in Boehner’s plan). Either way, it’s a little late in the game at this point to try to reframe the debt debate, especially with the looming apocalypse the White House insists will ensue if nothing is done by August 2.
Apart from shifting blame for any debt default, the speech was also an attempt to inoculate Mr. Obama in case the U.S. loses its AAA credit rating. He cleverly, if dishonestly, elided the credit-rating issue with the debt-ceiling debate. But he knows that Standard & Poor’s has said that it may cut the U.S. rating even if Congress moves on the debt ceiling. Mr. Obama wants to avoid any accountability for the spending blowout of the last three years that has raised the national debt held by the public—the kind we have to pay back—from 40% in 2008 to 72% next year, and rising. This will be the real cause of any downgrade.
Obama does not want anyone to think about the debt again until after the 2012 election. Washington could have reached a deal on a short-term debt-limit hike weeks ago — if the president were not so consumed with thoughts of himself.
There was nothing new in Obama’s address, and I mean that literally. Every single phrase was something we’ve heard before, from his focus-grouped “balanced approach” code phrase from tax hikes, to cobwebbed class warfare about “the wealthiest Americans” who “don’t pay their fair share.” The man who makes non-negotiable demands for tax increases once again lectured everyone else about the importance of “compromise.”
Obama’s speech on Monday was not a serious attempt, by a nonpartisan overseer of the national interest, to bring Democrats and Republicans together. It was a partisan attack on Republicans.
He delivered a campaign speech that emphasized themes lifted from his reelection effort. It may help Obama in his bid for a second term, but its chances of producing a debt limit compromise to Obama’s liking are just about nil.
John Podhoretz (emphasis added):
It wasn’t just a bad speech. It was a glaringly ineffectual speech. And it adds to a growing impression of the Obama White House that threatens the president’s reelection chances now more than anything else: The impression that he simply doesn’t know what he’s doing. The damage done to him and his party by his ideological overreach was done in 2010; now he is going to be judged on the practical results of his presidential policies. Right now, with economic growth slowing and unemployment actually rising and no serious proposals or plans on the table to help speed up job growth, that’s not looking too good for him. And one gets the sense that, in response, he and his team are improvising wildly, looking for political advantage. The problem with political improvisation is that it only works well when your instincts on how to sell the public on what you’re pitching are sound.
It is not a sound strategy for a president to deliver a speech bemoaning the chaos in the Washington over which he presides; such a speech is practically an open admission of impotence.
Podhoretz has it about right. Obama is impotent and has no idea what he’s doing. The two are related, I’m sure, and is manifest in the fact that he has no plan, nor even sees the need to have one. As Governor Palin noted a few days ago, he’s leading from behind which, of course, is what followers — not leaders — do. Now if only Obama knew who to follow…
Update: I meant to include this in the original post but for whatever reason neglected to. Obama has been consistently threatening that the U’S. would default absent a tax increase / debt ceiling deal when he has known all along that default is not, nor was it ever, going to happen. Via Fox News:
While officials from the Obama Administration raised their rhetoric over the weekend about the possibility of a debt default if the debt ceiling isn’t raised, they privately have been telling top executives at major U.S. banks that such an event won’t happen, FOX Business has learned.
A senior banking official told FOX Business that administration officials have provided guidance to them that even though a default is off the table, a downgrade “is a real possibility for no other reason than S&P and Moody’s have to cover (themselves) since they’ve been speaking out on the debt cap so much.”
This guidance is a big reason why Wall Street has largely dismissed the possibility of default, and though the markets have been jittery amid the talk of default, they haven’t imploded as would be the case, many economists fear, if the nation missed a payment on its debt.
The banking official said the administration understands that if there were to be a default, it would likely spark another financial crisis.
“They also know they can pay the debt with cash on hand,” this official told FOX Business. The Treasury collects around $2 trillion in tax revenues, and is scheduled to pay out $200 billion in interest to bond holders. In order to meet its obligations to contractors, social security recipients and others, the administration would have to raise another $1 trillion either through cuts, higher tax revenues, the issuance of debt or a combination of all three.
Fox News also explains that the potential downgrade in the U.S. credit rating has nothing to do with the debt-ceiling as Obama claims, but rather with the staggering pace at which our debt has been accumulating:
Major ratings firms — namely Standard & Poor’s and Moody’s — have said even if the country raises the debt ceiling and doesn’t default, there’s a strong likelihood that the triple-A bond rating will be cut to double-A unless a budget can be crafted that results in $4 trillion in savings, the result of the massive debt load the country has accumulated in recent years. The nation’s outstanding debt is more than $14 trillion.
Translation: It’s the spending, stupid. Exit question: Given that Obama knows that the U.S. is not going to default on it’s sovereign debt, why does he continue to scare everyone with tales of skyrocketing interest rates and economic calamity if he doesn’t get his cherished tax increase?