"even More Of A Hodgepodge Than Usual"

On State of the Union night, Americans witnessed two President Bushes. The first President Bush delivered a firm foreign policy message in tones of passion and commitment. The second President Bush dragged his way wearily through a domestic agenda that seemed to interest him as little as it excited Congress.

The first President Bush pledged himself to bold free-market reforms in health care--including the removal of a treasured but destructive tax loophole from the wealthy and powerful. The second President Bush proposed to regulate America's way to energy security with a plan that might have been dusted off from the Carter administration.

The first President Bush insisted that the budget can be balanced without raising taxes. The second shrugged off Medicaid, Medicare and Social Security as problems for later.

The first President Bush spoke with realism about the generational struggle against Islamic extremism. The second President Bush offered false hopes about the good intentions of the government of Saudi Arabia and other sometime allies.

There is a famous story of President Franklin Roosevelt listening to a passionate debate between protectionists and free-traders. As the argument ended, he turned to his speechwriters and said: "Weave them both together." All States of the Union mix the high and the low, big ideas and petty compromises, soaring rhetoric and Baby Einstein bathos. But SOTU 2007 seemed even more of a hodgepodge than usual--and much will turn on whether it is the first or second George Bush who sets the nation's course in the 24 months ahead.

Compare and contrast the president's health and energy ideas. On health care, he focused intensely on the fundamental problem in the American system: Tax subsidies have encouraged Americans to demand that their employers buy health insurance for them rather than shopping for themselves. That core error is responsible for almost everything wrong with the health market in the U.S. It dulls consumers' sensitivity to the cost of insurance. It discourages insurers from competing against each other. It tempts state legislators to pile appealing but expensive mandates onto insurance companies. I might want to buy a cheaper policy without acupuncture coverage, but I'm not paying attention and the acupuncture lobby is.

The president's plan identifies the problem and responds to it in a targeted way, by taking the first step toward negating the distorting subsidy. The ghost of George Stigler is smiling somewhere.

But now look to the president's misdirected, wasteful energy proposals. The president wants the country to use 20 percent less gasoline in 10 years. To that end, he proposes that government regulators tell Americans which fuels to use, which cars to buy and which industries should grow. This time, Stigler was not smiling--but Iowa's Sen. Chuck Grassley practically danced a jig.

Does 20 percent over 10 years sound like a lot? After the Iranian oil shock of 1979, Americans cut their gasoline use by 15% in just two years--and they did not catch up again to their 1978 levels of gasoline competition until 1993.

The "energy policy" that accomplished this amazing conservation achievement can be summed up in two words: higher prices. When energy prices rise, consumers conserve and substitute. When energy prices drop, consumers don't bother. And guess what? These market processes still work. Americans used less petroleum in 2006 than they did in 2005. Reduced demand led to lower prices.

If policy makers fear that today's lower prices will induce consumers to stop conserving, they do not need to reinvent Jimmy Carter's Moral Equivalent of War. Just slap a tax on gasoline at the pump, or on petroleum by the barrel, or on Venezuelan, Russian and Persian Gulf imports, or even on all forms of energy, period--and consumers and producers will respond the way they always do. No regulations, no bureaucracy required.

The President Bush who delivered the health-care portions of the State of the Union clearly understood the power of pricing. Why not the president who delivered the energy portions?

The answer may be revealed by the contrast between president's listlessness as he discussed domestic policy and the vigor with which he addressed national security. With Congress in opposition hands, with his own agenda completed or discarded, and with a huge and difficult war to fight, the president's attention has focused abroad. That often happens to second-term presidents--but rarely as completely as with George W. Bush. As he tersely noted, the fight America entered in Iraq is not the fight America is now in. The U.S. has stumbled into a much bigger and more dangerous war than the administration expected or planned for. Its political opponents believe the war already lost. The first President Bush is still fighting to win. It was powerfully symbolic of the difference between the president and his critics that Democrats declined to rise and applaud his call, "Let us find our resolve, and turn events toward victory."

Yet with his presidency and place in history dependent on Iraq, the president still finds it difficult to shake the restraints and illusions that have done so much damage to America's efforts since 9/11. He acknowledges that the deadliest insurgents in Iraq are supported by Iran. Yet he did not use this fact to rally public support for a more assertive approach to the threat.

He accepts that the U.S. is waging a global struggle not just against terrorism but against "extremism"--and though he will not call it "Islamic extremism" he did refer to "Shia and Sunni extremists," which represents at least a fair approximation.

But then, why does Saudi Arabia rate a mention as a partner in that generational struggle? Especially when, as by now the whole world knows, Saudi Arabia is the leading bankroller of the global system of propaganda and incitement behind Sunni extremism? The president calls the war a "global struggle against extremism"--and immediately names Saudi Arabia a partner in the struggle. And while he declines to name Pakistan as a partner, neither will he publicly acknowledge how much the re-emergent Taliban owe to the support and protection of a country that he praised as a coalition partner in his State of the Union of 2005.

Perhaps the answer to all these questions can be found in this: The sixth and seventh years of a presidency are the years when presidents discover their office's limits--and their own. All presidents end up trying to stretch too little sheet over too much bed. We want them to be bold but not adventurous, flexible but not vacillating, resolute without stubbornness, confident without cocksureness. Above all, we want them to pursue great and uncertain goals--and yet to achieve consistent success. The men and women who seek the office believe themselves capable of all those things. They have to, or they would not dare. And then they, and we, know great disappointment.

But that is not usually the end of the story. The story ends much later on, when partisan rancor cools, when the results come in, and the record can be read in full. When that day at last arrives for this president, perhaps all Americans will be able to agree that this most divisive of figures united in himself both the first President Bush and the second, both the president who sometimes erred and stumbled--and also the man who nonetheless kept fighting. George W. Bush has always been at his best in adversity. Americans face no shortage of adversity now.