The Inaugural

There was little that I found surprising in President Obama’s second inaugural address (if you didn’t watch it or have a chance to read it, you can find it here). He clearly articulated—however vaguely—a center left agenda, much as one might have predicted.  Unless the Democrats capture the House in the 2014 midterms, I don’t see a set of circumstances that would result in major progress on any of the big-ticket items.

My biggest concerns came in the President’s discussion of entitlements.  The relevant passages:

We, the people, still believe that every citizen deserves a basic measure of security and dignity.  We must make the hard choices to reduce the cost of health care and the size of our deficit.  But 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.  (Applause.)  For we remember the lessons of our past, when twilight years were spent in poverty and parents of a child with a disability had nowhere to turn.

We do not believe that in this country freedom is reserved for the lucky, or happiness for the few.  We recognize that no matter how responsibly we live our lives, any one of us at any time may face a job loss, or a sudden illness, or a home swept away in a terrible storm.  The commitments we make to each other through Medicare and Medicaid and Social Security, these things do not sap our initiative, they strengthen us.  (Applause.)  They do not make us a nation of takers; they free us to take the risks that make this country great.  (Applause.)

As I have noted in many past postings, the challenges posed by our entitlements is nothing short of daunting. The dates for the insolvency of the various trust funds have been moved up in recent years (with the disability trust fund slated for insolvency by 2016, the last year of President Obama’s second term). The passages above reinforce my existing concerns that there will be little if any progress on entitlement reform in the next few years. The President’s rejection of a tradeoff between “caring for the generation that built this country and investing in the generation that will build its future” ignores an important fact. The status quo guarantees that the “generation that will build the future” will also have to bear an enormous tax burden to cover the costs of the baby boomers’ pensions and health care. These costs and the costs of servicing the debt will squeeze out much of the discretionary spending for the very programs that the President finds so attractive.

Of course, the President may believe that the trust funds could be made solvent if only the rich paid their fair share. If this is the case, the President’s claim that we need to “revamp our tax code” may be shorthand for significant increases in marginal rates.

More likely, the President believes (like his predecessor) that entitlement reform is best left to a future administration that will have no choice but to face the tradeoffs that he rejected in his inaugural address.