Obama's State of 'The One' Speech Preview

No president has ever been more desirous of a large prime-time audience than Barack Obama, and the president will get his biggest audience since his inauguration with his first State of the Union address tonight. These speeches are almost always too long and boring, not even counting the dozens of standing ovation interruptions that will be led by Speaker Nancy Pelsoi and Vice President Joe Biden.

Already the Obama administration has released a list of initiatives to be highlighted in the speech, suggesting it is not totally tone-deaf to the public’s growing concerns over the huge jumps in federal spending the last two years and the record annual federal deficits ($3 trillion in total for fiscal years 2009 and 2010).

Obama will endorse a three-year freeze on some areas of federal discretionary spending, representing about a sixth of the federal budget. It is worth noting that during his campaign for the presidency, Obama repeatedly attacked such a plan. After the three-year period, the total amount of spending in these categories could increase no faster than the general inflation rate for the next seven years.

Considering that Obama proposed a 7.3% increase in these categories of spending  just a few months back, the change, if adopted, will save some money -- in total about $250 billion over the next ten years. Put another way, the increase in the federal debt during this period will now be only $8.75 trillion, rather than $9 trillion, and the accumulated federal debt at the end of the ten-year period will be about one percent less than it would have been without the "freeze" at just over $21 trillion.

This modest effort should not cheer the hearts of deficit hawks concerned with the overall level of federal spending (now well over a quarter of GDP) that is creating annual deficits and total debt that will make the country a permanent debtor nation, at the mercy of purchasers of our bonds. But Obama will have the platform. He will spin himself as a serious and committed deficit hawk who needed to spend a lot last year to save the country from a second great depression caused by the policies of his predecessor.

To cement this notion, Obama will point to how bad things were when he took office -- the monthly job losses, declining GDP, falling stock market levels, etc. -- and tell the American people that, while much more needs to be done on the jobs front, the great crisis has been averted.

It will be important to add up the cost of new spending initiatives announced in the speech, many of which will be labeled as programs for the hard-pressed middle class. Without a doubt, the cost of the new programs will dwarf any purported savings from the freeze on discretionary spending accounts.

In 2009 and 2010, federal tax revenues will be barely half of federal spending. The left’s answer to the spending versus taxation gap is to significantly increase taxes and to make the federal tax rates much more progressive (with far higher tax rates on higher-income Americans). The president and liberals in Congress share this goal, but the State of the Union address is not a suitable venue to propose raising income tax rates. (In fact, if Congress does nothing, income tax rates will rise for all Americans who pay them after 2010 and many will be added to the tax roles, with the expiration of the 2001 Bush tax cuts).