The State of the Union; Politics and Reality

The State of the Union
President Obama gave a nice speech last night; unanimous agreement exists in the media.  His major themes were bipartisan in nature and no one could truly disagree that we, as a country, need to move forward, create jobs and continue to focus on the economy and have a renewed and heightened sense of how to manage our dependence on debt.

These are universal themes.  Brian Williams politely, yet adequately, described the speech as “breezy.”

Politics
President Obama and the Democrats are way out in front right now–at least from a perception standpoint.  All in, the lame duck session was quite productive.  As I have observed several times, President Obama has offered multiple overtures to Speaker Boehner and at least in the President’s words to date (and to some extent, actions), has moved more towards the center; but I suspect the President has moved just about as much as he plans to.  Politically, the Republicans have been, well, Republicans.

Perhaps Speaker Boehner and the Republicans have a plan.  As I told some guests a few months ago when they asked what I thought of the mid-terms, ignore all politics until about the middle of February.  This period, particularly after an eventful mid-term election, is more about rhetoric and the proverbial “chest puffing” than any real and meaningful consensus building dialogue.

However, within the next month and with the delivery of the budget, Speaker Boehner and the Republicans have got to noticeably move forward and towards the center.  Speaker Boehner still has time to become the speaker he should and can be, which in my view, is a Republican version of Speaker Tip O’Neil.  If the Republicans continue with this current stance, I think the Republicans, and we as a nation, lose a huge opportunity to move in a more centralist and necessary path.

Reality
A well known philosophy to which I subscribe is “…you need to spend money to make money…”

There are countless examples and successes and failures and CNBC’s Phil LeBeau does a great job in his editorial regarding General Motors (see http://bit.ly/dVqUjo)

I agree with President Obama that this country needs to invest (i.e., spend money) to make progress and enhance productivity.  Although this will be hotly debated over the coming budget cycle, a few key things need to occur, and we are running out of precious time.

We need to invest in Education (Observation to follow)

We need to invest in Energy and its Infrastructure (Observation to follow)

We need Fiscal Responsibility (Observation to follow):  managing health care, social security, Medicare, and managing all expenses including defense and other discretionary spending.

Entitlement programs and defense make up approximately 84% of the federal budget (and keep in mind the Federal Government only collects approximately 60% of the federal budget in revenue, i.e., taxes — the rest is funded through debt).  There will be active and productive debate on the remaining 16%.  President Obama took a meaningful first step in calling for a spending freeze on this 16%.  The real test and the ability to move the needle rests in the remaining 84% – the third rail of politics.

The West Wing remains one of the best television shows, ever.  A great scene amplifying my point was when President Bartlet and his Deputy Chief of Staff Josh Lyman were talking about social security.  The Deputy Chief of Staff was encouraging the President to move forward with bold action on social security reform and the President was quite reluctant.  The President replied, “Josh, social security is the third rail of politics.”  (Insert West Wing creator Arron Sorkin’s amazing use of the Shakespearean pause here.)  The Deputy Chief of Staff responds, “Yes, Sir, but that is where all the power is.”

There will be much more to come in the next few weeks with respect to these critical points.