Obama’s Social Justice Agenda Is Unaffordable – But The Republican Message Of Fiscal Responsibility Has No Traction The country does not appreciate the combined threat of high debt and low growth

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By Paolo von Schirach

Related story:

http://schirachreport.com/index.php/2013/01/21/obamas-second-inaugural-address-focused-on-equality-issues-noble-goals-however-unless-the-american-economy-grows-while-washington-fixes-spending-and-taxes-there-will-be-nothing-to-redistribute/

January 22, 2013

WASHINGTON – President Obama’s priorities, as outlined in his Inaugural Address, (see above link to related piece), are in line with the political Zeitgeist that his first term contributed to create. And here they are: more government, strong defense of existing entitlement programs, more support for the needy, pushing a green energy agenda. All this is popular in America, and Obama’s re-election attests to this.

Unaffordable

The problem is that single mindedly pushing policies focused on these goals of social justice, equality and what not will lead America to fiscal disaster. We run out of money long ago. Irrespective of the noble goals, the notion that it is possible –indeed morally righteous– to defend an essentially unchanged (and unaffordable) system of costly entitlements in a country drowning in debt (mostly because of entitlement spending) is almost surreal.

More will than wallet

Does President Obama know that, in part thanks to his actions, America is running trillion dollar deficits every year? Does he know about the size of the national debt, ($ 16 trillion plus), a big chunk of it added during his first four years in office? I presume he does know. But I also think that the President, following I have no idea what kind of logic, believes that America’s deteriorating fiscal position is just a small detail that we shall attend to at a later date. Securing benefits is priority one. Paying for them is a secondary matter.

America believes we can afford anything

This is border line insane. And yet the President won re-election on his pledge of defending the welfare state as we know it against the vicious attacks of the mean spirited Republicans. Against all odds, President Obama managed to obfuscate his own mediocre record as steward of the US economy, while extolling his role as champion of the poor and disadvantaged. And he won.

Debt: termites in the basement

But how is it possible that America approves all this when you look at the fiscal disaster building up because of entitlement spending and debt trends? Well, it is quite possible. A mounting fiscal crisis is painless until it breaks out. And so it can be ignored. As someone said ”Debt is not the wolf at the door. It is more like termites in the basement”. If you do not know the termites are there, you see nothing and fear nothing. In the meantime, they are literally eating your home. When you find out, it is too late.

For the time being, ordinary people do not feel the pain of a mounting national debt. A mixed blessing in all this is that (thanks to the Fed) interest rates on US Government Bonds are ridiculously low and so Uncle Sam keeps borrowing, paying only a small price in terms of interest on these loans.

Wise people call for action

All the wise people, (think of the Simpson-Bowles duo, co-chairs of the “Debt Commission”), have said and repeated that this course is unsustainable and that we should act now in order to “bend the spending curve”.

We do not need to all of it at once. But we need to act now, so that public spending in the future will be substantially reduced, giving us a chance to regain fiscal balance.

Grow the economy

And the wise people also tell us that we should incentivize enterprise, business creation and innovation –-the proven drivers of wealth creation and more widespread prosperity. A major overhaul of our complicated and outdated tax system would help to secure these goals. Well, except for subsidies targeting his pet green tech/renewable energy projects, President Obama is essentially silent on this.

Does he really think that the current lackluster 2% growth is optimal, when the post war average was 3%? But there again, the public likes his social justice message, the media and most opinion makers nod, and few dare challenge his agenda in which more equality can and will be achieved via more debt and a mediocre economy.

Republicans in a pickle

And here is the immense challenge for a disoriented and fractured Republican Party, at times dominated by the voices of strident ideologues.

When Ronald Reagan run for office in 1980 his slogan of “Getting the Government off the backs of the people was a stirring cry for unleashing the power of American free enterprise. Big Government produced by the liberal left was the enemy. And most voters agreed with him. So, at that time, deep spending cuts and even slashing and burning were seen as smart, high minded, morally superior and liberating.

Well, not today. After the shock of the 2008 financial crisis, the private sector lost its lustre and indeed its respectability in America. Making no distinctions, the public dislikes business in general and not just the reckless Wall Street bankers and sub prime mortgage companies.

Private sector is bad

In the aftermath of the financial crisis we have established a new narrative. The private sector is made out of greedy people who couldn’t care less about the common folks who work for them.

And so the poor and the disadvantaged need the Government to protect them against the rich and ultra-privileged who –as we all know– long ago gamed the system so that it works only in their favor: they get all the money and pay essentially no taxes.

This is the narrative. The private sector is the villain. Mitt Romney, the country club vulture capitalist with horses, luxury cars, too many homes and off shore bank accounts is its personification.

Benign and thoughtful Big Government led by caring Obama is the defender of the oppressed. Thank God that we have this good man, (a former Chicago community organizer who learnt the ropes by helping the poor), in the White House to help us out.

Can the Republicans be fiscally responsible and popular?

Yes, this is an incredible and dangerous distortion of reality. But this is what most Americans believe today. It will take a heroic effort for the Republicans to build a new, credible and compelling image as the party of growth and fiscal sanity; but also as the party of fairness, inclusiveness and real opportunity for all Americans.

As of today, any Republican policy mix that includes any spending cuts will be not just unpopular; it will be portrayed as vicious and mean spirited.

That said, Obama’s agenda is good politics but terrible policy.

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