State of the Union - and the World

Written By Brian Hicks

Posted January 23, 2007

Once a year, the President officially connects the branches of government through his words. In his 2007 State of the Union address, George W. Bush must convey a revamped vision of the world to a reshaped Congress.

Many of his plans have gone awry. Social security reform died on the vine because Americans and their representatives on Capitol Hill did not want to threaten the integrity of the safety net that FDR created after the Great Depression.

The War on Terror, at first made out to be a runaway success, is an uphill climb. The November election was a referendum on Bush’s Sisyphean quest in Iraq. Now his new troop surge approach is widely seen as nothing but a new way to push the same stubborn boulder to a similarly flattening result.

Of course, the malformation of noble schemes necessitates their reform, not their abandonment. In his democratic congressional counterparts, Bush must now see his only shot at a positive legacy.

As difficult as it may seem in such an apparently adversarial environment, both the President and the Congress must think in terms of the other’s best interests. For it is only within that framework that the picture each is trying to paint will appeal to the other.

If Bush lets a new, more left-leaning House and Senate show that they are more mature and better problem-solvers than the GOP monopoly was for six years, he may well provide his opponents with prime fodder for their 2008 run on the White House .

So be it. Political petulance must now take a back seat to pragmatics.

But our rancher cowboy Bush is the one with the lasso, and so he must rope and corral Congress while making clear the benefit of solving the country’s problems together, not with locked horns.

Bernanke’s Bells

On Friday, January 19, Ben S. Bernanke, chairman of the Federal Reserve, announced that a fiscal crisis broods on the horizon in the United States where tax receipts will be far outpaced by the distribution of entitlement benefits to Bush’s own generation of post-WWII baby boomers.

The best time to deal with this ominous funding gap was "ten years ago," Mr. Bernanke chided the Senate budget committee, making clear that this is not the President’s charge alone. Both houses of Congress must buck up and partner up with Bush in order to create a workable restructuring of the country’s senior safety net, Social Security and Medicare.

Anyone who has spent more than a minute working on Capitol Hill will tell you that this necessary tinkering is as politically sensitive as dismantling a bomb. Bush has already cut the wrong wire once, and it will be difficult for him to convince especially the fidgety House of Representatives to stand still long enough to work out a compromise that won’t cause an uproar in home districts.

The entitlement program makeover will also require a framework, this time for the public to reshape their notion of the role that government plays in one’s later years. There will be benefit cuts as well as tax hikes, neither of which paint a pretty picture. In the House Bush will find his best allies in the sensible fiscal policymakers of the center, namely the Blue Dog Democrats and Tuesday Group Republicans. The Senate is, by and large, a more pensive chamber, so it may be best to establish a balanced approach there and then let conference committee work create a House bill that would be sure to pass.

The Other War

While lawmakers struggle to align outgoing and incoming expenses in Washington, the battle to balance the global budget is underway as well. This has mostly to do with trade, and when the recent World Trade Organization talks ran aground last year, it was on the rocks of US-European Union agricultural negotiations.

The EU wants lower US farm subsidies and the US wants more access to overseas markets. Agricultural concessions are another hot potato no one wants to touch, especially the representatives from predominantly rural states like mine, Kansas. But Adam Smith’s invisible hand and the sword of Damocles may now be conspiring to cut through the barbed wire.

The rising cost of oil and the embroiling of US troops in volatile yet oil-rich regions have pushed more and more Americans to question the wisdom of dependence on fossil fuel imports. Though the President announced in last year’s State of the Union that the country is addicted to oil, consumers are the real junkies and the ones in need of an intervention.

With the confluence of world events and domestic fuel supply now clear, the new Congress has rescinded tax breaks for oil firms and will put the money into a new $14 billion alternative energy fund. Much of the new technology will be based in homegrown crops, which could help t wean farmers off subsidies by creating a new, ag-based energy economy.

Bush and Congress must work swiftly in tandem to create a positive reflection of this internal reckoning for the benefit of the world trade body.

Make America Attractive Again

New York City Mayor Michael Bloomberg announced Monday that a special government-commissioned report had found a menacing trend for his city’s future: Its standing as financial capital of the world is in grave danger.

At the end of 2005, the financial services job sector in London had almost matched the Big Apple and Wall Street. The "regulatory balance" created by Sarbanes-Oxley, the current corporate burden for issuing stock on US exchanges, is not a balance at all, according to many who choose to move their shares elsewhere in the end.

The net loss of jobs could add up to around 60,000 within the next five years. This would be a severe blow to the city’s standing as the world’s money mover, one that even the attack on the World Trade Center was not able to achieve. Here, as in so many other cases, America has the potential to be its own best friend or its own worst enemy.



Sam Hopkins

For the latest international news and how to profit from geopolitics and economics, click here and sign up for your FREE Orbus Intel e-letter.

Angel Publishing Investor Club Discord - Chat Now

Brian Hicks Premium