You're Doing a Heckuva Job, Georgie: Debunking the State of the Union
In his Jan. 31 State of the Union address, President Bush spoke on many issues vital to the country including foreign policy, the economy, and health care. As is often the case in the annual address, the president offered far fewer specifics and suggested fewer solutions than many Americans would have liked to hear. Still, the president did manage to articulate a few specific points, some suggesting policies and others spinning the facts. To follow is a look behind a few of the more misleading statements made by the president in the address.Statement #1: "In the last two-and-a-half years, America has created 4.6 million new jobs--more than Japan and the European Union combined."
While the U.S. may have added 4.6 million new jobs over the last two and a half years, there are a number of hidden issues within this statement. The first is that Bush chose to refer only to the last two-and-a-half years, as opposed to the growth during his entire Presidency or to previous economic recovery periods. This is because his record on job growth, in reality, is not all that impressive. Recent job gains lag far behind other post-recession recovery periods. If he had stated job growth from the beginning of his presidency, for example, it would have brought the net number of added jobs down by 2 million over the entire five-year period. The truth is President Bush has presided over one of the worst recovery periods in the history of the country in terms of job creation.
Additionally, it is ironic Bush mentioned job growth in Japan and the EU. Perhaps America has added more net jobs over the last two plus years than these two countries, but what kind of jobs? Do they provide health care? What are the wages?
The minimum wage in America has been stuck at an unacceptable $5.15/hour for almost ten years, and real wages fell by more than 0.5 percent over the last twelve months, after falling by 0.7 percent in 2004. The average American household earns almost $2,000 less now ($44,389) than when President Bush took office ($46,058) after adjusting for inflation. Simply adding jobs, if health benefits and living wages are not taken into consideration, is far less of a triumph than Bush has made it out to be.
Statement #2: "Our government has a responsibility to help provide health care for the poor and the elderly, and we are meeting that responsibility."
This is perhaps one of the most egregious assertions made by the President in the entire State of the Union. He claims the government is meeting this responsibility, yet almost forty-six million Americans live without health-insurance today, eight million of whom are children. Even worse, one day after making this statement, the House of Representatives passed the final version of the budget reconciliation bill, which cuts almost $40 billion from entitlement spending over five years. Medicaid and Medicare shouldered 27 percent of the brunt of those cuts. With forty-six million Americans already uninsured, it is hard to believe that a government so invested in cutting taxes for the wealthy and cutting the budget for everything else is truly dedicated meeting the health needs of the poor and the elderly.
Statement #3: "I ask you to join me in creating a commission to examine the full impact of the baby boom retirements on Social Security, Medicare, and Medicaid. The commission should include members of Congress of both parties, and offer bipartisan answers."
Bush's suggestion of creating a commission to deal with the problem reflects the lackadaisical effort on the part of this administration to seriously explore realistic solutions to what is most likely one of the greatest current threats to the economic stability of our country. Appointing a bipartisan commission to study the long-term sustainability of entitlement programs is an easy answer to a tough problem and it's unclear what this commission will really be able to accomplish. Most likely it will only delay serious negotiations over solutions.
In last year's State of the Union address, the President called for appointing a bipartisan panel to look into reforming the tax code, which he did because "Americans are burdened by an archaic, incoherent federal tax code." A year has now gone by since this panel was convened, and there is nothing to show of it. The President did not even mention tax reform in his State of the Union address and on Feb. 1, former Sen. John Breaux, one of the chairmen of the president's own tax panel, criticized the administration in testimony before Congress for remaining silent on the issue.
It is possible a bipartisan commission could tackle the problem of growing pressure on entitlement programs and come up with an effective solution. It is more likely, however, that their taxpayer-funded efforts will do little more than produce a solution that is not feasible in the current political environment. If Bush were truly dedicated to preparing the U.S. fiscally for the rise in entitlement spending that will take place when the baby boomers retire en masse, he would not be pushing to make his tax cuts permanent--adding hundreds of billions of dollars to the debt every year.
Statement #4: "The American people have turned in an economic performance that is the envy of the world."
It is particularly important to note that Bush chose to frame America's economic performance in a context relative to the rest of the world, as opposed to one comparing current economic performance with that of years past. If the United States were truly performing well economically, national consumption would not be far outweighing national production, which has led to extremely high trade deficits over the past few years.
It is true that productivity growth and inflation under Bush have been relatively good, but it is hard to ignore that the U.S. is racking up debt with foreign countries like China at an unprecedented rate. Foreign countries are financing our current budget deficits, and if Bush succeeds in making his tax cuts permanent they will be financing budget deficits for many more years to come. Bush's claims of a strong economy might be true if looking at a focused picture of just GDP growth or corporate profits. But who is benefiting from any sort of GDP growth? It appears much of the growth is going mainly to a small section of wealthy individuals and corporations, while little of it is materializing in increased assets or savings for those who need it the most.
The national savings rate in 2004, for example, was 1.8 percent (savings is the difference between after-tax income and all expenditures). In 1994 the savings rate was 5 percent, and a quarter of a century ago, savings rates averaged in the double-digits. Over the last five years, the average annual household income has fallen 3.6 percent after adjusting for inflation--dropping from $46,058 to $44,389 according to Census Bureau information. Consumers are still spending, but pocketing less and less, which increases the risk of families experiencing economic failure.
Additionally, a new study by the Center on Budget and Policy Priorities and the Economic Policy Institute indicates that income inequality has grown significantly in the U.S. over the past two decades. Not only is national savings down, but the people who need to be saving the most are finding it harder and harder to do so. Our recent "economic performance" has not been shared by most Americans.
Statement #5: "Our economy grows when Americans have more of their own money to spend, save, and invest... I urge Congress to act responsibly and make the tax cuts permanent."
Statistics show that a majority of the benefits of the tax cuts over the last few years under Bush's leadership have gone to the wealthy; thus they are the ones who get to spend, save, and invest more. The President's first term tax cuts caused individuals earning over $1 million per year to see an average of $103,000 in tax cuts in 2005 alone. In addition, two new tax cuts went into effect this January 1, which give 97 percent of the benefits to households that make over $200,000 annually.
Continuing these trends of rewarding wealth over hard work, the GOP leadership in Congress is anxious to permanently repeal the estate tax, an act that would benefit the wealthiest 0.27 percent of Americans. These leaders also wants to keep tax rates on capital gains and dividends very low, which would mostly benefit a small number of Americans who make their money off their wealth rather than through work.
Further, most studies show any economic benefits brought on by the tax cuts will eventually be erased due to the enormous increase in deficits and the debt that has caused a dramatic decrease in the national savings rate. The Joint Taxation Committee in Congress reported in 2003 the economic benefits were "eventually likely to be outweighed by the reduction in national savings due to increasing Federal government deficits." Outgoing Federal Reserve Chairman Alan Greenspan also repeatedly urged Congress to extend tax relief only if it was offset and did not cause the deficit to grow.
Statement 6: "By passing [cuts to non-defense, discretionary spending], we will save the American taxpayer $14 billion next year--and stay on track to cut the deficit in half by 2009."
President Bush attempted to link non-security domestic discretionary spending to the increases in the deficit, when in fact it has been anything but such spending that is driving the current budget shortfalls. According to the Center on Budget and Policy Priorities and the Center for American Progress, non-defense discretionary spending has dropped 0.1 percent between 1999-2000 and 2006, from 3.2 percent of the economy to 3.1 percent.
Further, the president's continued claims of cutting the deficit in half are closer to fiction than to fact. While it may be possible for the deficit to be cut in half in 2009 using skewed calculations, previously inflated budget projections and harsh cuts to social safety net programs, those same deficits are projected to increase for decades after 2009 if the president's tax cuts are made permanent.
Making the tax cuts permanent would cost more than $2 trillion dollars over the next ten years, further crippling the federal budget while overwhelmingly benefiting high-income Americans, all while providing questionable economic benefits. This would not chart a course to provide fiscal support for the few new initiatives mentioned in his address, or bring the nation's fiscal house into order again. Continuation of this administration's plans, as widely acknowledged by all sides of the political spectrum, will only dig us deeper into huge mountains of debt.
Through the entire State of the Union address, Bush's rhetorical choices give insights into his priorities. He never mentioned the words "middle-class," nor did he explain how his tax policies would help the majority of Americans. Only once during the entire speech did he refer to poor Americans, and that was when he said, "Our government has a responsibility to help provide health care for the poor and the elderly, and we are meeting that responsibility." (see Statement #3 above.) Bush used the word "poverty" only once and it was in reference to foreign regions. He never discussed the steady rise in poverty rates under his leadership or the 37 million Americans who live in poverty every day. He spent hardly any time speaking about the aftermath of Hurricane Katrina and the slow progress being made to reconstruct the Gulf Coast. He failed to speak about fixing the Alternative Minimum Tax, which is ensnaring millions more middle-class taxpayers every year. He also did not mention the transition to the new prescription drug benefit, the implementation of which has caused problems for many already this year.
An address on the state of the union should include the real facts and present a straightforward view of our country for all to see. The American people deserve an honest portrayal of where our country stands, and specific proposals to solve the problems that lie ahead. The president, unfortunately, did not deliver on either front.