On a purely rhetorical level, President Obama gave a terrific State of the Union address last night. He delivered the usual laundry list of promises but packaged them in a strong framework of optimism and American exceptionalism, two themes that are proven political winners.But we are policy wonks here at the Tax Policy Center, and from a wonk point of view, the speech was disappointing. Here is what I heard tonight, and what I did not:
What he said: The President proposed a five year freeze on some domestic discretionary spending. That is to say, a freeze on what he estimated was about 12 percent of the budget.What he didn’t say: Very much at all about what he’d do about the big entitlement programs, such as Medicare, Medicaid, and Social Security that are swallowing most federal revenues and driving the deficit. This makes Obama the anti-Willie Sutton. He is going whether the money isn’t. Such a plan is also terribly unfair. If you benefit from those programs on the block, you may face significant pain. If you benefit from Medicare, Medicaid, Social Security, or any of the trillion dollars in tax subsidies that are exempt from the freeze, you’ll be unscathed.
What he said: We need a competitive corporate tax system with low rates and fewer tax preferences that raises the same amount of money as the current corporate tax system.What he didn’t say: How we’d get there and–except for a passing reference to ending oil subsidies–which business tax breaks he’d repeal. What role business must play in helping reduce the deficit.
What he said: We should simplify the individual tax code.What he didn’t say: That’d he’d take the lead in such an initiative. Instead he said merely that he would be “prepared to join” a congressional effort to restructure the individual code. This moves the nation about six inches in the direction of a serious rewrite of the tax law.
What he said: Rich people should pay higher taxesWhat he didn’t say: Everybody needs to pay higher taxes
What he said: He’d veto any bill that comes to him with targeted spending earmarks and he’d send a government reorganization bill to Congress and “push to get it passed”What he didn’t say: That he’d show the same commitment and energy when it comes to tax reform or serious deficit reduction.
Finally, a brief word about House Budget Committee Chairman Paul Ryan (R-WI). Ryan made a strong, if conventional, GOP argument for smaller, less intrusive government in his rebuttal to Obama’s address to Congress.What he said: We should cut spending, cut spending, and cut spending.
What he didn’t say: That balancing the budget is as important as merely cutting the size of government, or that unsustainably low taxes play any role in the huge deficits whose consequences he so eloquently described. Spending cuts alone won’t set us free.So we ended the evening pretty much where it began. Both parties vow to address the budget deficit but neither will say how. Both parties disagreed without being disagreeable. But neither is budging to narrow the policy chasm that separates them.