Friday, January 21, 2011

Anticipating the State of the Union address

The White House is pointing reporters toward his speech of December 6, 2010 in Winston-Salem as a prelude to his State of the Union (SOTU) address next Tuesday (Remarks by the President on the Economy in Winston-Salem, North Carolina Forsyth Technical Community College). It contains a lot of boosterism rhetoric about keeping the country competitive. And it uses the theme of "our generation's Sputnik moment", referring to the Cold War rallying moment when Soviet Russia seemed to be achieving superior scientific development to the US by launching the Sputnik satellite:

So 50 years later, our generation's Sputnik moment is back. This is our moment. If the recession has taught us anything, it’s that we cannot go back to an economy that's driven by too much spending, too much borrowing, running up credit cards, taking out a lot of home equity loans, paper profits that are built on financial speculation. We’ve got to rebuild on a new and stronger foundation for economic growth.

We need to do what America has always been known for: building, innovating, educating, making things. We don’t want to be a nation that simply buys and consumes products from other countries. We want to create and sell products all over the world that are stamped with three simple words: “Made In America.” That's our goal.
Being in a generally unenthusiastic mood at the moment, I'm going to grumpily observe that the inspiration of the original "Sputnik moment" gave us such dubious phenomena as the "missile gap", which turned out to a phony concern, but not before it gave a big boost to a lot of dubious military spending increases.

The best news is that Obama steered clear of any suggestion of phasing out Social Security, though he did include a reference to the pro-Phaseout Catfood Commission:

Now, I want to emphasize I say this knowing full well we face a very difficult fiscal situation. I'm looking at the books back in Washington, and folks weren't doing a real good job with their math for the last decade. (Applause.) So now that the threat of a depression has passed, and a recovery is beginning to take hold, reducing our long-term deficit has to be a priority. And in the long run, we won't be able to compete with countries like China if we keep borrowing from countries like China. (Applause.) We won't be able to do it. (Applause.)

So we've already started making some tough decisions. And they’re unpopular and people get mad, but we’ve got to make some decisions. I've proposed a three-year freeze in all spending that doesn't have to do with national security. And I proposed a two-year freeze in the pay for federal workers. That’s why we’re currently studying recommendations of the bipartisan deficit reduction panel that I commissioned. We're going to have to be bold and courageous in eliminating spending and programs that we don't need and we can't afford.

But here's where there's going to be a debate in Washington over the next year and over the next couple of years and maybe over the next five years, because I will argue and insist that we cannot cut back on those investments that have the biggest impact on our economic growth ... (applause.)
This expresses an over-optimistic view of the economy's health. And policies based on this general approach are likely to unnecessarily prolong the Great Recession.

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