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Friday 22 August 2014

Obama fails to declare true State of the Union

US economy suffering 'financial dry-rot' and in dire need of a fix

Peter Foster in Washington

Published 17/02/2013 | 04:00

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President Barak Obama

WHEN Barack Obama won a second term in office last November a tiny, guttering flame of hope was observed in the breasts of many hard-pressed Americans who wanted common sense to prevail.

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That hope centred not on any naive expectation that Democrats and Republicans would suddenly learn to love each other, but that Mr Obama, freed from having to run for office again and in search of a personal legacy for his presidency, might start to show some leadership.

Last week, sad to report, those hopes died when Mr Obama delivered a State of the Union address that showed he has no intention of getting serious about arresting America's financial death-spiral.

This was an infuriatingly dishonest speech. Mr Obama spelled out very clearly America's impending demographic crunch – too many baby-boomers, not enough money to pay for their benefits – but then falsely pretended the problem could be solved by tinkering around the edges.

"Medicare must embrace the need for modest reforms," he allowed, warning that failure to fix America's unsustainable entitlement system would "crowd out the investments we need for our children, and jeopardise the promise of a secure retirement for future generations". All true, except for that one word, "modest". There is nothing modest about the size of America's financial problems, as Doug Elmendorf, the director of the non-partisan Congressional Budget Office, explained last week when he was up on Capitol Hill.

As Mr Elmendorf told the Senate Budget Committee: "It's very difficult, if you look at our projections, to see how you can put the budget ultimately on a sustainable path, without making significant changes in either those large benefit programmes or in the taxes paid by the broad cross-section of Americans." In plain English, that means either less-generous benefits delivered at a later stage in life or higher taxes across the board; or in a common-sense world, a bit of both. But whatever the combination of spending cuts or new revenues, the changes required are "significant", not "modest", and the longer America waits, the more painful and damaging those costs will be.

Put another way, America, the standard bearer for the free-world, is suffering from financial dry-rot. If some curative treatment is not applied, by the end of the next decade, Mr Elmendorf calculates that the US will be "bearing risks of a sort that we have not [had] in our history except for a few years around the end of the Second World War". This is where Mr Obama comes in. Or could have, had he chosen a more courageous path last Tuesday night and dared to take on the left wing of his party who continue to delude themselves that America doesn't really "have a spending problem". It does, which means by definition it also has as a taxation problem which the Republican Party, in its refusal to countenance any further revenue raising, is being just as one-eyed and intransigent about. But in the middle of that spectrum sit more than three-quarters of hard-working Americans who, according to a poll released last week, are deeply unsatisfied about the workings of their Congress.

For their sake, Mr Obama had a chance to offer a real fix and call the bluff of Republicans. But he ducked it. He had a fleeting chance to save the entitlement system his party cherishes.

He elected not to take it; preferring to tell America you can still have your cake and eat it. So what is the true State of the Union? Like one of those morbidly obese folk you see all too often here, waddling up to the fast-food counter to order a super-sized meal and then taking a diet soda on the side, because they're "watching their weight", it is dangerously self-deluded.

By Peter Foster Telegraph.co.uk

Irish Independent

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