Tuesday, August 9, 2011

Obama, The Downgrade And An Absolute Lack of Leadership

THE PRESIDENT: Good afternoon, everybody. On Friday, we learned that the United States received a downgrade by one of the credit rating agencies — not so much because they doubt our ability to pay our debt if we make good decisions, but because after witnessing a month of wrangling over raising the debt ceiling, they doubted our political system’s ability to act. The markets, on the other hand, continue to believe our credit status is AAA. In fact, Warren Buffett, who knows a thing or two about good investments, said, “If there were a quadruple-A rating, I’d give the United States that.” I, and most of the world’s investors, agree. Did Buffett mention that he is the largest shareholder of Moody's, a competitor to Standard & Poor's? Did Obama or Buffett mention that compared to other countries with a sovereign rating of AAA, the U.S. has the highest Net Debt as a percentage of GDP and the highest deficit as a percentage of GDP? S&P stated that the plan attached to the debt ceiling increase was insufficient to stabilize America's long-term debt problem. It seems like the Tea Party, if it got its way it may have helped the U.S. to avoid the downgrade.

That doesn’t mean we don’t have a problem. The fact is, we didn’t need a rating agency to tell us that we need a balanced, long-term approach to deficit reduction. Balanced to Obama means tax increases, and long-term means after Obama is no longer President. That was true last week. That was true last year. That was true the day I took office(Blame Bush). And we didn’t need a rating agency to tell us that the gridlock in Washington over the last several months has not been constructive, to say the least. Didn't the Liberals contribute to the gridlock, voting against the Paul Ryan budget plan, or ignoring the Cut Cap and Balance plan, both of which would have satisfied Standard & Poor's. We knew from the outset that a prolonged debate over the debt ceiling — a debate where the threat of default was used as a bargaining chip — could do enormous damage to our economy and the world’s. Remember Obama in his own words from 2006, "The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure…Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.” That threat, coming after a string of economic disruptions in Europe, Japan and the Middle East, has now roiled the markets and dampened consumer confidence and slowed the pace of recovery.

So all of this is a legitimate source of concern. But here’s the good news: Our problems are eminently solvable. And we know what we have to do to solve them. With respect to debt, our problem is not confidence in our credit — the markets continue to reaffirm our credit as among the world’s safest. Our challenge is the need to tackle our deficits over the long term. Where is Obama's plan?

Last week, we reached an agreement that will make historic cuts to defense and domestic spending. But there’s not much further we can cut in either of those categories. Really? Is that a claim that has been verified by the CBO? What we need to do now is combine those spending cuts with two additional steps: tax reform that will ask those who can afford it to pay their fair share and modest adjustments to health care programs like Medicare. Hearing Obama talks abut tax increases on the "Rich" reminds me of the following commentary by Peter Ferrara:

"Official IRS data showed that for 2007 the top 1% of income earners paid more in federal income taxes than the bottom 95% combined. The top 1% paid 40.4% of all federal income taxes that year, almost twice their share of income. The middle fifth of income earners, the actual middle class, paid 4.7% of federal income taxes. Deck stacked against the middle class in favor of the wealthiest few?

Moreover, the bottom 40% of income earners as a group paid no federal income taxes that year. They instead received net payments from the IRS equal to 4% of total federal tax revenues. As my book explains, this was actually the result of nearly 30 years of Reaganomics. Today close to 50% of Americans pay no federal income tax.

Making these reforms doesn’t require any radical steps. What it does require is common sense and compromise. There are plenty of good ideas about how to achieve long-term deficit reduction that doesn’t hamper economic growth right now. Republicans and Democrats on the bipartisan fiscal commission that I set up put forth good proposals. Republicans and Democrats in the Senate’s Gang of Six came up with some good proposals. John Boehner and I came up with some good proposals when we came close to agreeing on a grand bargain.

So it’s not a lack of plans or policies that’s the problem here. It’s a lack of political will in Washington. It’s the insistence on drawing lines in the sand, a refusal to put what’s best for the country ahead of self-interest or party or ideology. And that’s what we need to change. Is Obama assuming that this didn't apply to himself or his fellow Liberals?

I realize that after what we just went through, there’s some skepticism that Republicans and Democrats on the so-called super committee, this joint committee that’s been set up, will be able to reach a compromise, but my hope is that Friday’s news will give us a renewed sense of urgency. I intend to present my own recommendations over the coming weeks on how we should proceed. And that committee will have this administration’s full cooperation. And I assure you, we will stay on it until we get the job done. Until it starts to interfere with his tee-times or campaign fund raisers.

Of course, as worrisome as the issues of debt and deficits may be, the most immediate concern of most Americans, and of concern to the marketplace as well, is the issue of jobs and the slow pace of recovery coming out of the worst recession in our lifetimes. How many times has Obama talked about creating jobs, while his anti-business policies result in the opposite effect?

And the good news here is that by coming together to deal with the long-term debt challenge, we would have more room to implement key proposals that can get the economy to grow faster. Specifically, we should extend the payroll tax cut as soon as possible, so that workers have more money in their paychecks next year and businesses have more customers next year. So, he is in favor of tax cuts that result in consumer spending, but he is for tax increases for the rich because they might save it? Obamanomics writ large!

We should continue to make sure that if you’re one of the millions of Americans who’s out there looking for a job, you can get the unemployment insurance that your tax dollars contributed to. That will also put money in people’s pockets and more customers in stores.

In fact, if Congress fails to extend the payroll tax cut and the unemployment insurance benefits that I’ve called for, it could mean 1 million fewer jobs and half a percent less growth. Is this another phony assumption? Again, please cite CBO analysis. This is something we can do immediately, something we can do as soon as Congress gets back.

We should also help companies that want to repair our roads and bridges and airports, so that thousands of construction workers who’ve been without a job for the last few years can get a paycheck again. That will also help to spur economic growth. Stimulus Version 2.0? We now know Stimulus I was a bust.

These aren’t Democratic proposals. These aren’t big government proposals. These are all ideas that traditionally Republicans have agreed to, have agreed to countless times in the past. There’s no reason we shouldn’t act on them now. None.

I know we’re going through a tough time right now. We’ve been going through a tough time for the last two and a half years. And I know a lot of people are worried about the future. But here’s what I also know: There will always be economic factors that we can’t control –- earthquakes, spikes in oil prices, slowdowns in other parts of the world. But how we respond to those tests — that’s entirely up to us.

Markets will rise and fall, but this is the United States of America. No matter what some agency may say, we’ve always been and always will be a AAA country. Ignore the S&P downgrade! For all of the challenges we face, we continue to have the best universities, some of the most productive workers, the most innovative companies, the most adventurous entrepreneurs on Earth. What sets us apart is that we’ve always not just had the capacity, but also the will to act — the determination to shape our future; the willingness in our democracy to work out our differences in a sensible way and to move forward, not just for this generation but for the next generation. So, now that the U.S. has been downgraded Obama worried about our generation and the next generation.

And we’re going to need to summon that spirit today. The American people have been through so much over the last few years, dealing with the worst recession, the biggest financial crisis since the 1930s, and they’ve done it with grace. And they’re working so hard to raise their families, and all they ask is that we work just as hard, here in this town, to make their lives a little easier. That’s not too much to ask. And ultimately, the reason I am so hopeful about our future — the reason I have faith in these United States of America — is because of the American people. It’s because of their perseverance, and their courage, and their willingness to shoulder the burdens we face -– together, as one nation.

One last thing. There is no one who embodies the qualities I mentioned more than the men and women of the United States Armed Forces. And this weekend, we lost 30 of them when their helicopter crashed during a mission in Afghanistan. And their loss is a stark reminder of the risks that our men and women in uniform take every single day on behalf of their county. Day after day, night after night, they carry out missions like this in the face of enemy fire and grave danger. And in this mission –- as in so many others -– they were also joined by Afghan troops, seven of whom lost their lives as well.

So I’ve spoken to our generals in the field, as well as President Karzai. And I know that our troops will continue the hard work of transitioning to a stronger Afghan government and ensuring that Afghanistan is not a safe haven for terrorists. We will press on. And we will succeed.

But now is also a time to reflect on those we lost, and the sacrifices of all who serve, as well as their families. These men and women put their lives on the line for the values that bind us together as a nation. They come from different places, and their backgrounds and beliefs reflect the rich diversity of America.

But no matter what differences they might have as individuals, they serve this nation as a team. They meet their responsibilities together. And some of them — like the 30 Americans who were lost this weekend –- give their lives for their country. Our responsibility is to ensure that their legacy is an America that reflects their courage, their commitment, and their sense of common purpose. Obama could honor their service by showing some leadership. Even Liberals are acknowledging his lack of leadership. Coming from a fellow Liberal it is very amusing.


  1. The job creation policies remind me of a quote by Milton Friedman:

    If all we want are jobs, we can create any number--for example, have people dig holes and then fill them up again, or perform other useless tasks. Work is sometimes its own reward. Mostly, however, it is the price we pay to get the things we want. Our real objective is not just jobs but productive jobs--jobs that will mean more goods and services to consume."

  2. From Michael Tanner (CATO Institute):

    Simply look to those European countries today that have adopted such a “balanced” approach to debt reduction. Britain, Greece, Portugal, and Spain have all included major tax hikes as part of their austerity packages. The result across the board has been anemic economic growth and scant progress toward debt reduction. Britain, for instance, imposed a new 50 percent top income-tax rate, hiked the capital-gains tax rate from 18 percent to 28 percent, and increased the VAT rate from 17.5 percent to 20 percent. The result: During the first quarter of 2011, the British economy grew at just 0.5 percent, barely enough to offset the 0.5 percent decline during the last quarter of 2010.


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