Charles Rowley's Blog

When a President talks in vacuous phrases – Obama referred to ‘winning the future’ on some 12 occasions in his address -  and when he falls back on over-used verbal garbage – Obama  advised once again that ‘Sustaining the American dream has never been about standing pat.  It has required each generation to sacrifice and struggle, and meet the demands of a new age’ without providing any realistic suggestions as to why private markets are not already offering such opportunities to aspiring individuals, one knows that he is out of ideas, that his mind has morphed into a vacuum.  Such was evident in last night’s State of the Union address.

Let me briefly outline the missing content from Obama’s address:

“My fellow Americans:  When I assumed office in January 2009, the U.S. national debt was equal to 41 per cent of gross domestic product.  As a direct consequence of my own actions, the national debt was equal to 60 percent of gross domestic product in December 2010.  According to projections from the White House, the policies that I have set in motion, if unadjusted, will increase the national debt to 90 percent of gross domestic product by 2020. And that is based on highly optimistic rates of economic growth. At this level, there is no realistic prospect of preserving the international reserve status of the U.S. dollar.

Let me present to you some admittedly unpleasant fiscal arithmetic, for which my administration is partly responsible. If federal tax revenues are held to the historical limit of 18.3 percent of gross domestic product, and if social security, medicaid and medicare increase together from 7.4 percent of gross domestic product to 10 percent  of gross domestic product by 2020, as is projected, a fiscal nightmare arises for this country. By that date, balancing the budget while maintaining those three programs whole, will require one of three extremely unpleasant alternatives, namely (1) raising taxes by the 2010 dollar equivalent of $12,630 per annun for each household; (2) eliminating every federal program other than social security, medicaid and medicare; or (3) increasing the level of the national debt to catastrophic rates of gross domestic product.

My fellow Americans:  The sooner we act to avoid such a dreadful choice, the better. I ask Congress to work with me to move to full budget balance, including all off-budget items, by December 2016. I recommend tax reforms allowing for tax revenues to stabilize at 20 percent of gross domestic product, and public expenditure cuts designed to lower federal outlays to 18 percent of gross domestic product until the national debt has been reduced to 30 percent of gross domestic product, when federal expenditures may rise to 20 percent of gross domestic product.

In such circumstances, there is no scope for any increased federal expenditures  in any area of the economy for the foreseeable future.

I understand that such measures will call for significant sacrifices on behalf of our non-voting future generations. But I have to advise you that the recently-elected British government has already put in place budget adjustments similar in magnitude to those that we confront. Surely, we do not wish to be left in the fiscal dust by our friends and allies across the Atlantic Ocean.”

Tags: no plan for debt reduction, Obama abandons the fiscal ship, Obama vacuous in union address, sets course for a fiscal iceberg

This entry was posted on January 26, 2011 at 4:02 pm and is filed under budget deficits, do well while doing good, economics and public choice, political philosophy, relevance of economic knowledge, Uncategorized, weakening of the dollar. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.