Pete Sepp is executive vice president of the National Taxpayers Union.
In last year’s State of the Union address, President Obama pledged to “out-innovate, out-educate, and out-build the rest of the world” and “make America the best place on Earth to do business.” One year later, however, the promise has borne little fruit. With Congress’s help, Washington’s signal achievement in 2011 seems to have been to “out-spend” itself; to do better, President Obama’s speech tonight must set a bold tone.
Just last week, the House registered its disapproval with President Obama’s decision to raise the debt limit by another $1.2 billion, atop a recent $900 billion request, but the practical impact of that vote is negligible. The borrowing binge will continue, as Ohio Rep. Jim Jordan noted, until federal leaders “stop the crazy spending.” Washington has been exceedingly lucky in being able to service this debt, because the current interest rate it pays to borrow has been running less than half the historic norm. Economist Lawrence Lindsey projects that should the rate return to its customary average level, federal debt service costs would be $420 billion higher in 2014 and $700 billion higher in 2020.
Some specific detailed proposals to actually cut spending in tonight’s speech--not just slowdowns in the growth rate, as the Budget Control Act’s “sequester” might begin achieving in 2013--could help show the president is embarking on a new path of fiscal discipline.
Undoubtedly the president will also reiterate his jobs creation platform; but that too requires a new and different commitment if it is to succeed. One problem has been the administration’s stubborn focus on so-called “green jobs” and its disdain for turn-key job generators like Keystone XL. Even The New York Times reported that green jobs have failed to live up to the hype.
If the president is serious about jobs, he must lower taxes and adopt regulatory reform, as well as stop singling out for punishment those industries that have traditionally shown strong job growth. That includes the oil and natural gas sector.
Last year the president also called for flattening and simplifying the tax code. Yet over the course of 2011, the White House remained a staunch advocate for discriminatory tax policy. One example: his proposals to selectively repeal “dual capacity”--a provision that ensures U.S.-based energy (and other) firms operating and earning abroad are not double taxed. A law like this might not be necessary in a “territorial” tax system that treats overseas income fairly--one which many of our trading partners use in some form. Here again, the president must make a change if he wants to lead a bipartisan overhaul of tax policy.
The president could also demonstrate leadership by repudiating a new proposal from Ohio Rep. Dennis Kucinich and five other House Democrats to implement a “Reasonable Profits Board”--an advisory committee that would regulate the profits of the oil and gas industry (which, by the way, has a much lower profit margin than other nearly 100 other sectors).
Since 1999, the National Taxpayers Union’s research affiliate has “costed out” the spending proposals (cuts and increases) that presidents have made in their State of the Union speeches. Last year the plans Barack Obama outlined in his address would have increased annual federal outlays by $21.35 billion. One proposal that could not be quantified was his call to “merge, consolidate, and reorganize the federal government.” Taxpayers are still waiting for more efforts on this front, from both Congress and the White House.
To avoid more disappointments, President Obama must become a champion of pragmatic policies for 2012 and beyond. This includes embracing debt reduction; promoting serious job-generating projects; and taking action instead of just making speeches about a collaborative tax reform effort with Congress.