The Speech Obama Should Have Given Tonight (courtesy of Andrew Shephard)

Author: Daniel Alpert  ·  July 26th, 2011  ·  212http%3A%2F%2Fwww.economonitor.com%2Fdanalperts2cents%2F2011%2F07%2F26%2Fthe-speech-obama-should-have-given-tonight-courtesy-of-andrew-shephard%2FThe+Speech+Obama+Should+Have+Given+Tonight+%28courtesy+of+Andrew+Shephard%292011-07-26+02%3A55%3A05Daniel+Alperthttp%3A%2F%2Fwww.economonitor.com%2Fdanalperts2cents%2F%3Fp%3D212 › Share This Print

OK, Mr. President – apparently your cabinet and advisors aren’t able to tell you how to rise to a challenge and give a real partisan barnburner of a speech. Or perhaps you just don’t understand how to speak to the American people when you want to go over the heads of the opposition in Congress.

So, with no disrespect to the Presidency, here is what you probably would have been better off saying tonight from your “bully pulpit.” It goes something like this:

“Good evening. I am speaking to you tonight from the White House in order that you may better understand the conflict you have been reading and hearing about between certain Republican members of the House of Representatives and a majority of the rest of your elected officials here in Washington.

You are undoubtedly aware that, as the result of a decade during which we doubled the amount of private debt in this country, and went from federal government budget surpluses and low amounts of national debt to the massive deficit and growing debt I inherited when I entered this office, our economy and the fiscal situation of our government is under great stress.

Added to that has been the additional money our government has been forced to borrow or print to forestall even greater financial disaster as a result of the worst recession since the Great Depression (the effects of which still weigh on employment and other measures of economic condition), and I probably don’t need to tell you that we are in a situation in which our financial options have narrowed considerably.

But, my fellow Americans, there are a few things I think I do need to tell you about the intense political divide in the federal government over economic policy. A substantial number of the members in the House are acting in a manner that is contrary to your best interests and the interest of this great nation, and is therefore not deserving of your support.

As a country, we have experienced two great debt crises over the past 30 years – during which both government and the private sector borrowed too much, saved too little and consumed substantially more than we, as a nation, produced. The first such debt bubble and ensuing crash came in the late 1980’s and early 1990’s, the second – substantially larger than the first – we are still dealing with.

In both cases, the debt taken on by households and businesses produced a false prosperity – of the type enjoyed by someone who obtains a credit card with a large credit line and proceeds to spend it with no clear plan of how to repay the debt – other than the notion that there will be another credit card, or home mortgage loan, in his future and that the debt-induced prosperity will see trees grow to the moon with no competition from other nations.

In the case of the federal government, the saga began when President Reagan lowered the top marginal tax rates in this country – at the time as high as 70% – during the recession he inherited in 1981 and ’82. The Reagan tax cuts had favorable results and were clearly popular with politicians who latched on tax cutting as a mantra certain to be popular with you, the people who send us here to Washington. I don’t know of anyone – myself included – who doesn’t welcome a tax cut.

Over time, the initial tax rate reductions grew into greater reductions – and, with growing defense and other spending and the continuation or expansion of government programs such as Social Security, Medicare, and other aid that a large majority of our fellow citizens continue to support as avidly as you support tax cuts, our government continued and expanded deficit spending – spending more than we bring in as revenues – even after we recovered from the recession of the early 80’s. Government and the private sector began, figuratively and literally, mortgaging its future, and – ultimately – when the debt became too onerous, we suffered the stock market, real estate, savings and loan crises of the late ‘80’s and early 90’s.

Some of us learned our lesson, but those seeking to find simpler ways of getting elected never gave up on the notion of tax cuts as their primary policy offering – even if it meant continued deficit spending. They told you that government had to shrink – that lowering tax revenues, in addition to being universally popular, would “starve the beast” of government. The only problem with that notion being the inconvenient truth that the vast majority of you want to maintain the programs and services that government provides. And few in Washington were interested in ending those programs – even while they insisted on lowering tax rates and revenues.

Moreover, those promoting tax cuts at all costs – sold the American people on a notion that the first President Bush correctly called “voodoo economics” and – after 30 years of experimenting – has been proven demonstrably false: That cutting taxes would always produce economic growth and so-called trickle down benefits for all.

Sure, growth was impaired by the punitively high 70% top rates during the 1970’s. And maximizing growth and tax revenues is more properly accomplished at rates much lower than that. But there is no research that shows, and our history has proven false, that a cut in a top marginal tax rate of – for example – from 40% to 35%, does anything more than reduce government revenues and put extra money in the pockets of those who in the top bracket who are more likely to save it than spend it and have it “trickle” anywhere. To believe otherwise is simply not supported by what has transpired.

Fortunately, we were given another chance in the 1990’s. The first President Bush and President Clinton raised some tax rates and not only closed the budget deficits, but during the Clinton administration delivered budget surpluses and vastly reduced the national debt. The late 1990’s saw a dramatic expansion in our economy and our global competitiveness, and – yes – tax rates were increased and private and public sector debt decreased so that all the prosperity of that period was bought and paid for with hard work, ingenuity and a fair sharing of the burdens of government.

And, as has proven usual in recent history, instead of using that real prosperity to further pay down our debt and shore up the enormous weaknesses in the social security system – the immediate instinct was to take the surplus and send it back in additional tax cuts. After all, tax cuts are very good for electoral politics.

But something else lurked in the background even then. For beginning with the Reagan administration, those on the right, the so-called “conservatives” – subsequently joined by several very prominent Democrats – began to dismantle decades of prudent banking and other regulation that set us up for the disaster that followed in the first decade of this century, when the proponents of cutting taxes to please the electorate once more took control of our national agenda.

This time – beginning in roughly 2002 – we not only ran deficits to fund two wars following the horrors of 9-11, but our lack of meaningful oversight of the financial sector, together with an enormous acceleration of the global economy that cost us many jobs, saw the “something for nothing” crowd take their boldest step ever with the tax cuts proposed by the Bush administration. But again, the tax cuts didn’t work their expected magic, our economy and wages, adjusted for inflation, stagnated for years. And the only way that you – and your government could make ends meet was by borrowing vast sums of money. Household debt doubled during that period, and federal government debt grew as well – and then grew even faster as a result of the bail out from the Great Recession that followed.

You had plenty of cash, as banks lent your households nearly $7 trillion more dollars from 2000 through 2007 ($1 trillion a year on average) – but you remain heavily in debt and many of you underwater on your homes, now that the unsustainable bacchanalia has come to an end. You felt prosperous for the first few years of this century, but that prosperity was overwhelmingly false.

There is only one answer, we must live within our means at home and must agree to pay for the government programs that we want and need. The more fortunate among us – consistent with our progressive taxation system – should pay modestly more of their income in taxes than those less fortunate, as they traditionally have. If we want to have a robust social safety net – social security and Medicare, a strong military and the best education for all our children, we must pay for these things. If we want government to provide less, we can pay less in taxes.

But the legacy of “don’t tax, but spend anyway” must end here, just as the irresponsible cycle of lending and borrowing amounts that households could not sustain has been broken and needs to remain an unfortunate event in our history.

Many Republicans tell you that “Obama wants to raise your taxes,” that “Obama wants to maintain unnecessary spending,” that “Obama is to blame for a crisis of indebtedness” that their wrongheaded policies brought us not just once, but twice, in the past quarter century.

There is no shortage of pandering “don’t tax but spend anyway” members of the other party. They don’t want to cut the programs that you want to protect, because they want to be re-elected, and some of them want to be your president. And they want you to think that you don’t have to pay for them either.

Well my friends, I am serious about fair taxation and sensible spending. I am not going to allow this country to default on its debt or to throw the average middle class citizen into the gutter so that we can sustain a level of taxation that is already the lowest among developed nations. Not on Barack Obama’s watch….and right now, despite Republicans’ wishes to the contrary, I AM the President.”

Yes, I did see the movie.