The Speech - A First Appraisal

Clever! President Obama’s first address to a joint session of Congress was not written –  it was polled. Paragraph by paragraph, the address anticipated the most dangerous objections to the new president’s program and responded to them in turn. The great overarching theme of the speech:

I am a conciliatory pragmatist, not a militant liberal. Have I increased public spending by once unimaginable sums? I did so. Not because I believe in bigger government - I don't. Not because I'm not mindful of the massive debt we've inherited - I am. I called for action because the failure to do so would have cost more jobs and caused more hardships. In fact, a failure to act would have worsened our long-term deficit by assuring weak economic growth for years. Do you fear that I will raise your taxes to finance this spending? Not at all! I know you'll hear the same old claims that rolling back these tax breaks means a massive tax increase on the American people: if your family earns less than $250,000 a year, you will not see your taxes increased a single dime. I repeat: not one single dime. In fact, the recovery plan provides a tax cut - that's right, a tax cut - for 95% of working families. And these checks are on the way. Bracing yourselves for a populist jihad against bankers? Look elsewhere for your class war. I know how unpopular it is to be seen as helping banks right now, especially when everyone is suffering in part from their bad decisions. I promise you - I get it. But I also know that in a time of crisis, we cannot afford to govern out of anger, or yield to the politics of the moment. My job - our job - is to solve the problem. Our job is to govern with a sense of responsibility. … Does it look as if I’ve just spent a trillion dollars on pet Democratic projects – that I will be discarding market discipline for direct government investment and control in energy and healthcare? My only motive is to create jobs! And if there are hidden costs and taxes embedded in these projects, that’s just simple deficit-cutting prudence. Now is the time to jumpstart job creation, re-start lending, and invest in areas like energy, health care, and education that will grow our economy, even as we make hard choices to bring our deficit down.

It will take a sophisticated ear to notice the void at the center of the speech – the void where the financial plan should be. As Federal Reserve Chairman Benjamin Bernanke testified on Tuesday, no recovery plan will work until and unless credit is restored. Over the past four weeks, it has become agonizingly apparent that the Obama administration has no clear idea how to do this. The so-called stimulus bill won’t help: it may mitigate some of the worst distress caused by the downturn, but it will not remotely suffice to end the downturn. The mortgage plan is likewise inadequate. And the main bank rescue plan has followed the Bush trajectory only backward: first giving money directly to banks, then later proposing to buy toxic assets from banks. The Obama address deftly dressed up this uncertainty as a bold three-part plan: First, we are creating a new lending fund that represents the largest effort ever to help provide auto loans, college loans, and small business loans to the consumers and entrepreneurs who keep this economy running. Second, we have launched a housing plan that will help responsible families facing the threat of foreclosure lower their monthly payments and re-finance their mortgages. It's a plan that won't help speculators or that neighbor down the street who bought a house he could never hope to afford, but it will help millions of Americans who are struggling with declining home values - Americans who will now be able to take advantage of the lower interest rates that this plan has already helped bring about. In fact, the average family who re-finances today can save nearly $2000 per year on their mortgage. Third, we will act with the full force of the federal government to ensure that the major banks that Americans depend on have enough confidence and enough money to lend even in more difficult times. And when we learn that a major bank has serious problems, we will hold accountable those responsible, force the necessary adjustments, provide the support to clean up their balance sheets, and assure the continuity of a strong, viable institution that can serve our people and our economy. But the first point hardly begins to substitute for a working private-sector credit system. The second point is only slightly less irrelevant: While the Obama mortgage plan will lower some beneficiaries’ monthly payment, it will not write down their debt – and it is the bad debts on the balance sheets of banks that are clogging lending. As for the third and far away most important point, it amounts to a restatement of the problem, a declaration of goals without any indication of how those goals are to be met. The economic crisis has created an opportunity for a Democratic president and a Democratic Congress to achieve long-standing ambitions in health, education, and energy. None of those things are relevant to the country’s most urgent economic problem, the collapse of the credit market. The Dems are doing what they want and what they can – not what they must. They are elevating ideology over necessity. Barack Obama puts an appealingly conciliatory face on this hard-edged ideological approach to government. What most viewers will remember from this first appearance is this president’s pragmatic style, not his party’s determined substance. Usually the phrase, “a triumph of style over substance” criticizes the lack of substance. In this case, though, the problem is just the opposite – too much substance, but of the wrong kind.