President Barack Obama hardly mentioned the national debt in this second inaugural address on Monday which is nearly $16.5 trillion and rising. Rather he emphasized progressive social issues which he believes require collective action. “Now, more than ever, we must do these things together, as one nation and one people,” he said.
The Democrat, who was reelected in November with a 51 percent majority, talked about climate change, limiting gun ownership, improving minority rights, including gay marriage, income redistribution, “fair pay” and a foreign policy of engagement instead of warmongering. But arguably the greatest challenge facing the United States, its dire public finances, were virtually absent from the speech.
In terms of fiscal consolidation, the president did reiterate the need for the wealthy to pay more but taxes on the rich were raised earlier this month when the top income tax rate was increased from 35 to 39.6 percent and the capital gains tax from 15 to 20 percent. Obama campaigned aggressively on making the wealthy pay their “fair share” toward deficit reduction and accomplished it before he even began his second term. If he intends to raise taxes further, he will find a Republican majority in the House of Representatives almost unanimously opposed to it.
Republicans argue that now is the time for deeper spending cuts. The federal government borrows nearly one dollar of every three it spends and has run deficits in excess of $1 trillion throughout Obama’s first term in office. The nation’s debt has grown nearly $6 trillion since he assumed the presidency.
Entitlement programs, including food stamps, health care for the elderly and poor, public pensions, Supplemental Security Income and unemployment insurance, already account for more than two-thirds of federal spending and are projected to increase further as the population ages. Yet the president paid only lip service to the need to rein in health-care costs and chastised Republicans when he said, “We reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future,” even if no Republican argues for such a choice.
Obama also cautioned against mistaking “absolutism for principle” and substituting “spectacle for politics or treat name calling as reasoned debate” when he has resorted to both to advance his own agenda and Republicans’ “absolutism” hasn’t stopped them from compromising on fiscal policy with his administration time and again in the last four years.
Throughout his first term, the president said repeatedly that he was willing to make the “hard choices” necessary to balance the budget. Before he was even elected, he described the spendthrift of his Republican predecessor as “unpatriotic.” Before he assumed office, he told The Washington Post that the government was “not in a position to kick it any further,” referring to the need for fiscal consolidation. Yet as president, he spent nearly $800 billion in economic stimulus and enacted sweeping health insurance reform which could add as much as $500 billion to federal spending over the rest of the decade (although estimates vary). Federal discretionary spending, excluding defense, grew nearly 25 percent under his watch.
The president created a deficit reduction committee — whose recommendations he summarily ignored in late 2010.
He rejected Republican criticism of his administration’s unprecedented levels of deficit spending as “impatient” and argued in July 2011 that he still hadn’t seen “a credible plan” from the opposition to reduce the shortfall — when his own budget was voted down unanimously in the Senate where members of his Democratic Party are in the majority.
In an interview with Time magazine in January of last year, the president said once again he was prepared to do entitlement reform. “The only reason it hasn’t happened,” he said, “is the Republicans were unwilling to do anything on revenue.”
Except House speaker John Boehner was willing to raise revenue by several hundreds of billions of dollars and part of his Republican conference voted to raise taxes earlier this month. So will Obama finally embrace entitlement reform now Republicans have backed tax increases? His inaugural address didn’t suggest that he will.