Clinton (1996) vs Obama (2013)

What a difference 17 years makes! Note the substance and tone of Bill Clinton's 1996 State of the Union address, and compare it to the tack taken by Barack Obama--

President Clinton's 1996 State of the Union Address as delivered:

" . . . . We live in an age of possibility. A hundred years ago we moved from farm to factory. Now we move to an age of technology, information, and global competition. These changes have opened vast new opportunities for our people, but they have also presented them with stiff challenges. While more Americans are living better, too many of our fellow citizens are working harder just to keep up, and they are rightly concerned about the security of their families.

We must answer here three fundamental questions: First, how do we make the American Dream of opportunity for all a reality for all Americans who are willing to work for it? Second, how do we preserve our old and enduring values as we move into the future? And, third, how do we meet these challenges together, as one America?

We know big government does not have all the answers. We know there's not a program for every problem. We have worked to give the American people a smaller, less bureaucratic government in Washington. And we have to give the American people one that lives within its means.

The era of big government is over. But we cannot go back to the time when our citizens were left to fend for themselves. Instead, we must go forward as one America, one nation working together to meet the challenges we face together. Self-reliance and teamwork are not opposing virtues; we must have both.

I believe our new, smaller government must work in an old-fashioned American way, together with all of our citizens through state and local governments, in the workplace, in religious, charitable and civic associations. Our goal must be to enable all our people to make the most of their own lives -- with stronger families, more educational opportunity, economic security, safer streets, a cleaner environment in a safer world.

To improve the state of our Union, we must ask more of ourselves, we must expect more of each other, and we must face our challenges together.

Here, in this place, our responsibility begins with balancing the budget in a way that is fair to all Americans. There is now broad bipartisan agreement that permanent deficit spending must come to an end.

I compliment the Republican leadership and the membership for the energy and determination you have brought to this task of balancing the budget. And I thank the Democrats for passing the largest deficit reduction plan in history in 1993, which has already cut the deficit nearly in half in three years. Since 1993, we have all begun to see the benefits of deficit reduction. Lower interest rates have made it easier for businesses to borrow and to invest and to create new jobs. Lower interest rates have brought down the cost of home mortgages, car payments and credit card rates to ordinary citizens. Now, it is time to finish the job and balance the budget.

Though differences remain among us which are significant, the combined total of the proposed savings that are common to both plans is more than enough, using the numbers from your Congressional Budget Office to balance the budget in seven years and to provide a modest tax cut.

These cuts are real. They will require sacrifice from everyone. But these cuts do not undermine our fundamental obligations to our parents, our children, and our future, by endangering Medicare, or Medicaid, or education, or the environment, or by raising taxes on working families.

I have said before, and let me say again, many good ideas have come out of our negotiations. I have learned a lot about the way both Republicans and Democrats view the debate before us. I have learned a lot about the good ideas that we could all embrace.

We ought to resolve our remaining differences. I am willing to work to resolve them. I am ready to meet tomorrow. But I ask you to consider that we should at least enact these savings that both plans have in common and give the American people their balanced budget, a tax cut, lower interest rates, and a brighter future. We should do that now, and make permanent deficits yesterday's legacy. . . . "

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How to shrink government

It's a problem--government "deficit spending"--which means the government spends more than it takes in (revenue=taxes + fees). Although nobody (or at least Obama) wants to fix the problem now (it could lead to layoffs and an increase in unemployment to make government more efficient, leaner, etc.), Gallup has uncovered in an opinion poll the path (together with tax reform) "forward:"

A majority of Americans (54%) believe the government is trying to do too many things that should be left to individuals and businesses, down from earlier this summer. About half say the government has too much power. Read more at GALLUP.com.

In other words, reduce the "tasks" and "power" of government--and then you don't need such a "big" and "expensive" government. Who knows, we might even get a government we can actually afford.

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Deficit Spending - Bush v Obama

When the Democrats took over Congress in Jan 2007, after 12 years of prosperity, unemployment was at 4%, the DJIA was at a record high, we had had 54 straight months of economic growth and a boom housing market.

The recession and mortgage meltdown started in late 2007, almost a year after the Democrat Congress took power. Their predecessor Republican Congress had 4 budget surplus years, and left in 2006, with the DJIA at a record high, unemployment under 4%, moderate deficits, and 52 straight months of economic growth.

Bush -- 2001 $127.3 Billion Surplus
Bush -- 2002 $157.8 Billion Deficit
Bush -- 2003 $374 Billion Deficit
Bush -- 2004 $413 Billion Deficit
Bush -- 2005 $319 Billion Deficit
Bush -- 2006 $248 Billion Deficit
Bush -- 2007 $162 Billion Deficit
Bush -- 2008 $455 Billion Deficit
Obama - 2009 $1.416 Trillion Deficit
Obama - 2010 $1.294 Trillion Deficit
Obama - 2011 $1.299 Trillion Deficit
Obama - 2012 $1.330 Trillion Deficit
(source)

8 years of Bush: total net deficit--$2 trillion dollars
4 years of Obama: total net deficit--$5.3 trillion dollars

At this rate, Obama (if re-elected) will accumulate a total deficit in excess of $10 trillion dollars in 8 years!

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Government We Can Afford

For those of us living in the United States and watching the travails of Europe, it is too easy to overlook our own fiscal cliff looming right before our eyes.  The problem has been festering for years. What's the problem? We have a government we can't afford. 

This problem has variously been referred to as "our fiscal crisis" or "fiscally unsustainable government spending" etc.  Bottom line, federal spending has increased, government revenues haven't kept up. Simpson-Bowles provided a framework to navigate out of this mess. But no one in Washington, from the President on down, has the courage to steer the vessel to a sustainable future.

What to do? In simplest terms, the thing to do is figure out the priorities, fund them, terminate spending for everything else. How much total can we allow for "spending?" About 22% of GDP (2011 it was 24% of GDP--historically federal spending is 21%). Paul Krugman says in addition, right now, we need stimulus--OK, we can also have (in addition to the 22% of GDP spending above) infrastructure spending by borrowing at historically low rates on 30 year bonds--this would provide stimulus through spending on, and only on, needed infrastructure--e.g., updating to 21st Century standards the mass transit systems of our 50 largest MSAs.

If we can agree on the foregoing, then we need to raise revenue annually equal to about 20% of GDP (Paul Krugman says a small deficit is "OK"). How to get there? Abolish all payroll taxes, all capital gains taxes--capital gains, like everything else (including interest and dividends) would be taxed as "income"--why should a billionaire speculator on Wall Street pay a lower tax rate than our best "brain surgeons?" Abolish all tax "expenditures" (deductions, exemptions, special tax breaks, etc.). Only two tax brackets for all taxpayers--individuals, corporations, etc. (which would be territorial taxation only) plus an "employer tax:"

a) First $200,000 in income -- 16% tax rate (withheld by employers and other payors);

b) Income over $200,000 -- 24% tax rate (withheld by employers and other payors).

c) Employer tax: this tax on employers would be equal to 8% of gross "U.S. employee wages and inducements" including "wages, stock options, bonuses, and other corporate executive inducements" but excluding the income of self-employed individuals (which is equivalent to a dividend paid to a corporation stockholder). This tax provides that businesses including corporations, and non-profit corporations, as well as governmental entities, will contribute to the social security and health care costs of the population as well as other costs of government from which they benefit.

I'll let the "wonks" crunch the numbers--adjusting the "rates" is OK--but that's the framework. One benefit of the above is that no annual federal tax return would be required of employed individuals making less than $200,000 a year!

OK that covers "comprehensive tax reform" --what about entitlement reform and other "sacred cows?" I'll cover those over the next few days:
Social Security and Pensions--what's the future?
Education--an easy solution.
Defense--what and how much do we need?
Health care--yes it's a mess (and expensive!)

If you've got any ideas on any of this, feel free to leave a "comment" below.

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