The State of the Union is...

Yesterday, President Obama gave his first official State of the Union address, outlining his agenda for the rest of the year. We watched the speech closely (and even tweeted on it), and were impressed overall. Although President Obama argued that "jobs must be our number one focus in 2010," he paid particular attention to the deficit. As the President explained:

[The deficit] is a challenge that makes all others that much harder to solve.

...if we don't take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery -- all of which would have an even worse effect on our job growth and family incomes.

In a press release we issued following the State of the Union, CRFB pointed to three policies in particular which seemed like promising steps in the right direction:

  • A three-year non-security discretionary spending freeze, beginning in fiscal year 2011, and enforced by a veto, if necessary;
  • A bipartisan fiscal commission – created by executive order and fashioned after the Conrad-Gregg proposal – to provide a specific set of solutions to our fiscal problems;
  • The reinstatement of statutory pay-as-you-go laws (although as we’ve mentioned before, we are concerned about the large number of exemptions).

We also appreciated President Obama's pledge to go line-by-line through the budget (he claims to have identified $20 billion in savings already), to enact measures to repay borrowing for the TARP program, to discontinue certain tax breaks (for oil companies, investment bankers, and those making over $250,000 a year), and to further reform earmarking.

But we also have some concerns. President Obama spent an awful lot of time bragging about all the taxes he cut, but very little on how he would reform the tax system to raise sufficient revenue without burdening the economy. He proposed a number of new and potentially expensive initiatives -- including for college students, farmers, small businesses, parents, savers, homeowners, veterans, and others -- but little mention of how these initiatives would be paid for. And while he did announce that he would create a commission, he spent only one line discussing the dangers of growing Social Security, Medicare, and Medicaid costs -- let alone solutions for controlling them.

Still, the President outlined some positive steps. We hope to see more in his Budget, next Monday.