What President-Elect Obama Should Have Said

Do you think President-elect Barack Obama's speech yesterday used scare tactics in order to mask what it really was--a sales job to wheelbarrow out a huge fiscal stimulus package that is growing in size even as you read this column?

Do you think that the idea that we need another stimulus package, when there is already $8.4 tn in rescue packages from the U.S. government in the pipeline, is more of an appeal to your emotions and not your common sense?

The official version that, we need an ever-growing fiscal stimulus package, a package that has potentially blossomed in size in a matter of days from $775 bn to now over $1 tn, has taken on a relentless, perverse logic all its own.

Do you believe that only big government spending can save us, that only "investments" made by politicians produce returns?

If government spending created economic growth, Sweden would be the number one economic superpower.

Ask proponents of this fiscal stimulus package why they think that their blind faith in government, in these ever-growing sums are needed, when we already have primed the pump with massive amounts, and you'll find that following their logic is like following someone down a highway who always has the right blinker on.

Politicians Will Call the Shots

Yes, a fiscal stimulus package is needed, tax cuts and targeted spending. But not on pork items such as palm trees to line highways in Missouri.

Remember, politicians will be calling the shots on spending. Remember, too, that the inside joke in West  Virginia is that drivers often get lost motoring around in circles, as they exit the Sen. Robert Byrd Highway to the Robert Byrd parkway to Route Robert Byrd.

Don't forget that there is pressure, too, to deliver on campaign promises, whereby the President-elect set out to raise expectations on the campaign trail, to the point of contracting rhetorical swollen glands, and he did raise them.

Expectations are impossibly high. Now the game is on, governing is far different from campaigning, and the question is, can the President-elect manage the electorate's potential disappointment?

President Reagan Weighs In

Listen to what Ronald Reagan said starting in the early ‘80s, when the wheels were spinning off the economy.

"The nine most terrifying words in the English language are: I'm from the government and I'm here to help."

"A taxpayer is someone who works for the federal government, but doesn't have to take the civil service examination."

"Government is like a baby: An alimentary canal with a big appetite at one end and no sense of responsibility at the other."

"The nearest thing to eternal life we will ever see on this earth is a government program."

"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

Here's What President-Elect Obama Should Have Said

My fellow Americans,

We are a great nation now caught in what feels like a vise-like grip of a protracted, sobering banking crisis.

But know this, nothing, not even this crisis, can stop the powerful engines of the US economy. The last century saw more than a dozen such crises, and each time the world economy pulled through.

We will pull through this one together, because we are a land of freedom and opportunity, of courage and daring.

We, too, are a nation filled to brimming of a kind, generous and gifted people, a people of compassion, a people of fire-tested gold, to quote St. Peter.

We are a nation that believes compassion, liberty and the entrepreneurial spirit are as vital as oxygen.

And we are a nation that has proven time and again that the might and power of the human heart can withstand any blow, any financial hurricane, that comes our way.

And because we are a forgiving people, I ask you to bear with me.  

I have humbly changed course. Yes, during the campaign, I too, have fallen prey to living for the quick adrenaline shot of approving a government spending program, and not the calamitous revelations of self-examination, of discovering how wrongheaded these moves can sometimes be.

The Renaissance scholar Montaigne, like the great scholar Socrates before him, once said that ignorance aware of itself is the only true knowledge.

I see that now.

I see now that high-tax, big-spending policies force the economy to lose momentum as they have done in Europe, where growth in government spending outstrips revenues.

Where fiscal and trade deficits soar. Where public debt, excessive taxation and unemployment followed. Where central banks try to solve the problem by printing money.

Where international competitiveness was hurt, the currency depreciated, and the system fell moribund.  

I remember the courage of those who, by the force of their will and might, stared down these problems. How Margaret Thatcher took on the unions and slashed taxes to restore growth and jobs in Great Britain.

I remember, too, how Germany a few years ago under Social Democrat Gerhard Schroeder defied his party's dogma and loosened labor's grip on the economy.

How Presidents John F. Kennedy and Ronald Reagan saw that a tax system that had grown like kudzu was smothering your financial lives, and was strangling growth.

I see my original tax cut plan didn't go far enough. I see how easily my spending plans may derail. But don't forget what I am trying to do for you.

Banking crises, as I've said, are excruciating, but we've been here before.

As the past has shown, you can expect GDP to decline on average for two years. Expect house prices to fall on average, by 35% over six years, so perhaps we've got four more years to go since the housing peak in the summer of 2006. Expect stock prices to careen from pillar to post.

Again, the world has endured such crises before.

The fundamental problem--too much debt, too many cars, too many houses, now too many dollars to fix those problems--still plague the economy. 

But the government has already moved to take care of the problem. Depending on how you count the various Federal Reserve and Treasury programs, the bailout is either $7.8 tn or $8.4 tn.

The sum of $8.4 tn "is more than the costs of rebuilding post-WWII Germany, the Louisiana Purchase, NASA's combined budget since its inception, the savings and loan crisis bailouts, the New Deal, the Korean War, the Vietnam War, the Gulf War, and the Iraq War-combined. In fact, the bailout spending is more than double the combined inflation-adjusted total of all those projects, a mere $4 tn," says Reason Magazine.

Again, I remind you my fellow Americans, that history shows, as well as study after study, that those who believe that big government spending can save us, that only "investments" made by politicians produce returns, have been proven wrong.

Numerous studies show tax cuts provide a quicker and in fact more bang for the buck, along with targeted fiscal spending.

So, I have humbly decided to keep the Bush tax cuts, to help Americans who have saved and invested their hard earned dollars and who didn't consume beyond their means, because I do not want to force them to pay the tab for those who did.

Remember, 12 Senate Democrats voted for the same Bush income tax cuts in 2001, cuts I vilified during my campaign. These Democrats saw how they would help small businesses create jobs.

Remember, then Democratic Senate Finance Chairman Max Baucus of Montana said this in voting for the 2001 Bush cuts:

"... entrepreneurs and small businesses ... will receive 80 percent of the tax relief...Experts agree that lower taxes increase a business' cash flow, which helps with liquidity constraints during an economic slowdown and could increase the demand for investment and labor."

What the good Democrat is saying here is that lower taxes on small businesses can create jobs.

And also, I was wrong to say in my campaign I wasn't going to raise taxes on the middle class, when in fact I was.

What do I mean?

I have decided not to kill the Bush capital gains tax cut, I will not raise capital gains taxes, because I see many middle class Americans live off of their capital gains, that a capital gains tax hike will hurt middle class elderly people, retiree pensions and middle class retirement savings in things like 401ks.

I see, too, that  higher capital gains taxes cause people to sit on potentially bad stocks, as they seek to take advantage of lower, long-term rates.  

I was going to raise capital gains taxes, yes, which is why I started calling my  middle class tax cut a "net" tax cut, I admit, I tried to whip a fast ball by you, I'm sorry. I was wrong.

Please forgive me.

I was also wrong and misleading when I said that small business owners will not be affected by my tax hikes on the upper brackets, when I said most small businesses would fall under the income threshold I wanted to raise taxes on.

Yes, some 85% of small business owners are taxed at the personal income tax rate. It's true that most of the 35 million small businesses in America have a net income of less than $250,000, hire only a few workers, and stay in business for less than four years.

But a moderately successful business with an income above as little as $165,000 a year could face a higher tax liability under my plan. That's because I wanted to raise the 33% income tax bracket to 36%.

And the Senate Finance Committee found that of the filers in the highest two tax brackets, three out of four are small business owners.

Of those, 50% of businesses have employees with 20 to 249 workers who would pay the higher taxes under my initial tax plan. These are the businesses that are the engines of job growth in this country.

So my initial plan was not right--I really do want to help small businesses create jobs. So I will not raise their taxes.

A wise person once said that humans are guided by more than the laws of their country, by more than their fickle emotions, by more than their powers of reason.

We are a people guided by what is right and good and real and true for each other, we are in the service of justice, the service of each other.

And that is what I am about.

I thank you for giving me the honor of serving you.

God Bless you, and God Bless our great country, America.