Last night’s State of the Union message was, as I suspect most of us expected in an election year State of the Union message, a stump speech and, like most SOTUs, loaded with scads of proposals we’ll never hear from again. Here’s what the editors of the Washington Post heard:
A  STATE OF THE UNION address from a president seeking reelection is always an odd event. Especially in the face of a divided Congress, the president’s proclaimed program stands little chance of enactment. The ambitious agenda of years past gives way to the knowledge, born of painful experience, of how difficult that will be to achieve. Meanwhile, the president’s proposals are made in the context of the race about to be joined, stacked up against the pie-in-the-sky promises of his opponents. The subtext is, inevitably, less a blueprint of the year to come than an explanation of why the president deserves reelection and a sneak preview of a second-term agenda.
Neither I nor they found the speech particularly divisive. I found the speech notably empty of meaningful content. Here’s a quick test to help you see what I mean. Place “the reason that” as the opening of a sentence, whatever the apparent purpose of a particular policy proposal is next, and then the president’s proposal and see how it sounds. Let’s try some examples.
The reason that the high school graduation rate isn’t higher is that those who fail to graduate on time aren’t forced to stay in school until they turn 18.
The reason that income inequality has increased in the United States is that the top .1% of income earners aren’t taxed at a marginal rate of 30%.
The reason that more companies aren’t returning their manufacturing facilities to the U. S. is that the tax incentives they receive for doing so aren’t high enough.
IMO all of these assertions are risible. Here’s my point: even if every proposal in the SOTU were enacted into law I believe they would only effect minor changes in the problems that face us. 18 year old non-graduates would age out of the system rather than graduate. The highest income earners would adjust their compensation to avoid taxation (not to mention that the reason for increasing income inequality in the U. S. is that the incomes of the poorest haven’t increased fast enough not that the incomes of billionaires have increased too fast). China’s low labor costs and superior production engineering as well as the improved access to the Chinese market that local manufacturing provides would keep manufacturing there.
In a speech in which we don’t expect everything that’s proposed to be enacted into law and, arguably, nothing that’s proposed will be enacted into law why not aim for the sky? Why not dream big?
The full text of the speech is here.
Update
Let me put it another way. One way of looking at the last couple of years has been that the president has been blocked at every turn by obstructionist Republicans. I strongly suspect that will be the theme of the president’s re-election campaign. But there’s another way of looking at things as the editors of the Wall Street Journal explain in their remarks on the speech:
The New Yorker magazine this week has posted on its website a 57-page memo that economic adviser Larry Summers wrote to Mr. Obama in December 2008. It lays out nearly his entire agenda for the “stimulus,” reviving housing, the auto bailout and saving the financial industry. If anything, the memo overstates what would be needed to stabilize the financial panic, but nearly all of the stimulus spending priorities that the memo deemed “feasible” made it into law. They simply didn’t work as promised.
The Pelosi Congress also passed ObamaCare, Dodd-Frank, cash for clunkers, the housing tax credit, and much more. The only Obama priority it didn’t pass was cap-and-trade, which was killed by Senate Democrats.
Mr. Obama’s regulators also currently have some 149 major rules underway, which are those that cost more than $100 million. The 112th Congress hasn’t been able to kill a single major rule. The most it has been able to do is extend the Bush tax rates—which helped the economy by avoiding a tax shock—and slow the rate of increase in federal spending. This President has been “obstructed” less than anyone since LBJ.
When you get what you ask for blaming the results on obstruction is a pretty neat trick if you can pull it off.
Did you catch Ryan Lizza’s piece in the New Yorker, The Obama Memos: The making of a post-post-partisan Presidency?
Yes, I did and, coincidentally, I was adding to the post with the WSJ’s citing of them. I don’t know if you read them as I do, that they support my construction of events pretty well. I’m thinking particularly of the Section #2 economics portion.
“When you get what you ask for blaming the results on obstruction is a pretty neat trick if you can pull it off.”
Not so neat a trick when you get inestimable aid from the other side:
“You lie!”, “Our number on goal is to make Obama a one-term president”…
Such cynicism.
All over America this morning business leaders are asking themselves how they can bring jobs back to America.
Plus schools are thinking Yes, let’s keep the wanna-be drop-outs imprisoned here in class for an extra couple of years. We can’t see any downside to that.
Also I am now going to work together with my fellow Americans just like the military works together. But slower, and in a weary, unfocused kind of way. And with fewer guns.
“. They simply didn’t work as promised.”
They assumed the economy was contracting at a rate of 4% per year. It was actually contracting at 9% per year. The rest follows. (This really is not difficult to remember, but gets conveniently forgotten a lot.)
That aside, if the goal was to stop the slide, the best that was achievable IMHO, then it worked. I dont think anyone has a viable plan to get us back to 3%-4% GDP growth. Too many houses and too much CRE.
Steve
Or, alternatively, when is the next flight to Belize?
All over America this morning business leaders are asking themselves how they can bring jobs back to America.
Well, at least one group is. And I strongly suspect many others are as well, despite such juvenile cynicism.
My firm has decided to attempt another fund raise. Dodd-Frank not withstanding. Here’s what we do. We raise money from endowments, pension funds etc and we acquire family owned manufacturers – basically B to B+ players and make them A to A+ players. We do the cost trick, access channels, new product development and acquisition integration. We round out management; marketing, procurement and the financial function, primarily. This results in sales and earnings growth, taxable earnings growth, employment growth, and equity gains. This is a good thing, for all but the most despicable of ideologues.
Our customers? The endowments do cancer research, fund universities etc. The pensions fund, well, pensioners. And so it goes. As an aside, we happen to do exactly what Bain does and did. We could only wish 82% returns. My dick just isnt that big or good. Romney should be made a saint, but I digress.
Manufacturing is alive and well in the US. But it. In no way shape or form enhanced by the views of the left or Obama today. Obama and manufacturing are actually mortal enemies. And I’ll advocate anything I can to get this creep out of office.
Drew- Did you see this by Surowiecki?
http://www.newyorker.com/talk/financial/2012/01/30/120130ta_talk_surowiecki
OTOH, the following link, and today’s piece, from Cowen makes me (almost) think we should be nice to you.
http://www.american.com/archive/2012/january/how-to-think-about-private-equity
Steve
I wonder what happened to Harry and David.
That should have been, ‘wondered’.
@sam- Read Cowen today. He cites a study claiming that the PE guys have a lower rate of failed companies, though it seems the topic has not been studied well.
Steve
Acc to Surowiecki, Harry and David was trashed by the PE guys:
Uncle Sam stepped in to pick up the dumped pensions.
Not saying this is typical.
My interest was piqued because my wife’s ex-boss has been sending us a Harry and David basket for years (even after she quit when we moved west). Then last year, we got something else. And we stopped getting the H&D catalogs. Then I read the company had filed for bankruptcy. Like I said, I wondered what had happened.
I hate to break it to you sam, but Hostess filed bankruptcy recently too.
I’ve been start to wonder about all of the food crisis stories that breathlessly exclaim that ‘a box of rice cakes has as many calories as a Hostess Twinkie!’, if people really know what a Twinkie is any more. There just seems like there are so many slightly more appetizing, yet naughty products in the snack aisle; this line has to be quite dated.
“I hate to break it to you sam, but Hostess filed bankruptcy recently too.”
Yeah, I read that, too. Nothing is scared…
Steve
I’ve seen this piece, and multiple others. Look, I’ve taken on the “provacateur” role here for some time. It’s just shtick. You need to have some insight. Or need to accept insight.
The very term “private” equity should tell people something. It’s private. You can’t trust just about anything you read. It’s private information. Bain has done very well, and is an exemplar corporate citizen. They were the 1990’s Chicago Bulls. We are as well. are there bad guys out there Yes. They get all the press. One has to be sophisticated enough to understand that. But to paint all with the same brush is what inane people like Reynolds and the press do…….and what is going to happen in the next election. But it has no connection with reality.
@Drew- I get that. however, I think there is a world of difference between what PE guys do and what the TBTF bankers do. While there are crooks in every profession, most people in most professions have been fairly honest, decent people. The big banks just dont seem to follow this rule. I cannot figure out how anyone with a brain and a sense of ethics could have been pushing no-doc loans. While I may not always make it clear, this is where my ire is directed.
Steve
Shorter Drew: Love me for being successful! Why won’t you love me?
You know, I do various events where I’m thrown together with writers who are struggling, barely getting into print, paying for their own marketing and publicity while I get to swan around in a sports coat that cost more than their book advance, staying in my fancy suite, acting like the lord of literature. And I know goddamned well a lot of those people resent the hell out of me. I don’t ask them to like me. I don’t expect them to. If they’re jealous or resentful okay, I get that, it’s part of being closer to the top of the pyramid than the bottom. I’m luckier than they are, and they are entitled to resent that.
Steve –
I could never do what you suggest. It’s simply amoral. But it’s the Feds who set up these incentives. And when you set up incentives…..money does strange things to people.
Michael –
No, you are not luckier. You are more talented, insightful, clever and marketable. Your success in the market is absolute evidence. Don’t hide from it in false modesty. That is dishonest, and I suspect you know it.
You are what you are, Michael, very good at your chosen profession. You work at polishing the expertise. I, at least, admire it. Just as i admire others talent and success. And resentment won’t get your rivals anywhere but more bitter.
Don’t give us crap about how you are just a bumbling fool who happened on success. You made it happen, just how other successful people do. It’s the way of the world.
Drew:
I can name half a dozen writers who I know for an absolute fact are better than me and make a tenth of what I make.
Talent is luck. It’s DNA. I did nothing to earn it. And without talent I’m nobody. Of course I work hard, but I worked a hell of a lot harder when I was waiting tables and earning 60 bucks a day. Hard work is a given — everyone who succeeds works hard. But so do the people who fail. They work just as hard as we do, and they live under incredible stress, and they live with constant fear, and no matter how hard they work they have zero chance of driving a fine German luxury car.
What bugs me about you as that you insist on conflating success and virtue. It’s bullshit. It’s smug, self-inflating, self-serving bullshit. There is no relationship between success and virtue. That’s why rich guys like Gates and Buffet (and according to polls most high earners) understand that we have an obligation to help the people who are not as lucky as we are. And why the ancient notion of noblesse oblige is something you might consider in place of your Ayn Rand Galt Poor Little Rich Me nonsense.
Michael –
I just don’t buy it. My entire profession at this point is evaluating and supporting talent. That’s what we do. You make it sound as if it’s just a roulette wheel. My experience is its just the opposite. I’ll take a talented management team in a shit industry over a crap management team in a great Industry anytime. Business is hard. Shit happens. Things change. Excellent management is required to deal with the shit.
I can’t tell you how many times investors have to re-learn this fundamental lesson.
So maybe we have to simply have this point of departure. If I wanted a smart, humorous and talented writer, I’d pick you in a heartbeat. You think I can’t stand you. No way. I think the world of you and just like to spar for sport. But a business partner, or business thought partner? No way. Its not your field of expertise. You are, with all due respect, a business idiot. You have no clue or useful insights.
Similarly, if you were looking for a writing partner, I suspect you would have the same views on me. I have no illusions as to my writing ability. I would probably be correctly classified as a writing idiot
. “Know thyself” can be useful advice.
As a post script.
I’m fascinated by the invocation of guys like buffet. Because of the business im in, I have knowledge that the average joe doesn’t have about buffet. And that means you, micheal. You think you know things. You simply do not. Buffet is a self important fuck. A self promoter. A media savvy guy. WTFU, supposed smart guy. WTFU.
Talk to people in Omaha about him. Talk to people in the business world about him. Charitable? Not a chance.
A monopolist? Perfect.
And that makes his argument on taxation wrong because?
The best evidence that the Buffett rule is wrong is Warren Buffett’s behavior. If he thought that government was better fitted than he to spend his money, there’s no barrier to his giving the government the money. He’s not being forced to take his income as capital gains and be taxed at a higher level. Or preventing his wealth from being appropriated by the government on his death.
Instead he’s donating to private charity and bestowing his fortune on a private foundation. That’s a vote of lack of confidence in the federal government’s ability to spend money prudently.
There’s been a lot of IMO misguided to do about Mitt Romney’s tax return. Is the effective tax rate the right measurement? Or effective tax rate plus charitable contributions? If that’s the gauge, Romney’s already there: his effective tax rate plus charitable contributions are around 30% of income. I presume most of his charitable contributions are tithing.
I would be very much interested in seeing Warren Buffett’s effective tax rate plus charitable contributions. Or Bill Gates’s. Or Paul Krugman’s.
Here’s the president’s tax return. His adjusted gross income is $5.5 million. His charitable contributions are around $330,000. Tax plus charitable contributions areabout 39% of income. He’s modeling what he thinks other high income people should do. Very virtuous.
Drew, Wasserstein & Company apparently played by the rules and made a mint doing so. Therefore they are successful, talented and work hard. Clever and insightful too. So why are they singled out as bad guys? Why do you have such a problem with Buffet? They are merely succeeding as you define it and doing so apparently within the rules of the game.
Also, you make a point of telling Michael he doesn’t know shit about business and that you don’t know shit about writing. Therefore what makes YOU more qualified than Michael to judge the quality of other writers? You simply judge everything by the bottom line. And as Michael states you conflate that with all manner of virtues.
The hardest working person I have ever known personally has never gotten anywhere with his life. He’s even got talent. He’s got problems too, self-made and inherited in nature, and they’ve held him back. I’ve know other people with worse problems, with less talent and who worked less. They’ve made it. This isn’t a statistical aberration, as I know many such cases.
The second hardest man I knew made millions in business and retired in his 40s. He went broke a few years thereafter because this ‘brilliant’ businessman lost it all by making some fundamental investing errors that the e-Trade baby wouldn’t make. (And I mean the baby used as the actor, not the character.) Now he’s in his 60s and desperately working his way out of a hole. (I suspect he’ll work his way into the grave, however, as he’s working as hard as he did in his 20s, and 40 years takes a toll on everybody.)
What part was the aberration there, the part where he got rich, or the part where he got broke and struggled for years? Nothing much changed from the one set of circumstances to the other.
And sales mean nothing other than that people want to buy whatever it is you’ve got to sell. Britney Spears (sp?) has outsold whole genres of better singers and musicians you’ve never heard of – do you really think that makes her better, more talented, more insightful*? Or is it that she has sold a certain kind of soft-core porn that happens to hit the spot? Doesn’t mean she has more talent.
As for writing talent, why should that be any different? Making it big probably means you’ve got some talent, but it doesn’t necessarily mean you’re more talented or hard-working than others in the same field.
* Insight and Britney Spears don’t often go together. I remember an interview with her and some boy band singer she was dating at the time. The subject of The Beatles came up. She had NO IDEA who The Beatles were. “I’m very young” she said at the time. She was a legal adult, in the music industry, had spent her whole life in entertainment, and had no idea who The Beatles were. There’s your insightful success. (The interview was in EW Magazine.)
For the record, I was not referring to myself in the third person in the previous comment. Those are other people I know, and I do not refer to myself in the third person.
The opportunity doesn’t present itself very often so let me give my take on Britney Spears here. She’s part of the Disney stable. Disney produces young (mostly female) pop stars pretty much the way that Kraft produces cheese (and just about as interesting). She’s coasted pretty far on the Disney formula.
Another example of luck: No matter how talented, hard working insightful and clever Courvoisier Winetavius Richardson is, he was fucked the day his parents (probably just his mother, at a guess) gave him that name. Hell, his nickname of Crime Tyme is a distinct improvement. And short of making it is a big time rapper he never had a chance.
She didn’t get huge until the after-Disney phase, as I recall. I believe she created the formula for other post-Disney teen stars to follow to riches – make soft-core porn music videos, and add sleaze to your personal life until you achieve success. It works like a charm, because American loves it when the gir-next-door is pretty, wholesome and winsome, and then goes hard-core sleaze. (I don’t know if other countries go for that or not, so I won’t comment on that.)
The opportunity doesn’t present itself very often so let me give my take on Britney Spears here.
Yeah, that’s why you haven’t banned me for bad behavior.
As long as a commenter is contributing in a constructive manner to the discussion behavior would need to be pretty darned bad for me to ban. I’ve been personally treated pretty badly by at least one commenter but I’ve tolerated it because I valued his contributions.
“The best evidence that the Buffett rule is wrong is Warren Buffett’s behavior. ”
I’m surprised that you would say this. Why should the soundness of an argument depend on the behavior, or character, of the person making it? Assuming, arguendo, that Buffett does act in a way inconsistent with the principle he argues for, how does that render the principle illegitimate? At best, it shows him to be a hypocrite, not that the principle itself is unsound.
I’m not accusing him of hypocrisy. I’m accusing him of incoherence. Does he believe that the federal government is capable of spending his money prudently? If not, why should force be used (that’s what government is: force) to compel others to pay what he doesn’t think the federal government is capable handling?
Drew:
I’d be the first to admit I’m a business idiot. Except within my narrowly-field.
The rest is nonsense. You believe what you need to believe in order to justify yourself. Most people do. But it also means they are philosophical idiots. (And no, I don’t dislike you, either. If I were investing I’d probably ask for your number.)
If talent isn’t luck at the big DNA lotto game, where does it come from? We both know experience doesn’t equal talent. We both know hard work doesn’t equal talent. Only talent equals talent, and it is a gift of DNA. The DNA rocks one way and you’re Picasso, it rocks the other way and you’re crocheting doilies.
If talent exists in business, and I assume it does, then that talent is similarly largely a product of luck. Is every Harvard MBA with a perfect 4.0 GPA equally successful? No. They’ll all work hard, but only a few will have big-time talent. They will be the lucky ones, not the hardest-working or most virtuous ones.
Of course recognizing the effects of chance forces one to a different philosophical position than the one you adopt. But to ignore the effects of random chance, of luck, of DNA, in 2012 is willful self-deception. You aren’t looking at data and drawing a conclusion, you’re looking at desired outcomes (high ego, loyalty to your philosophy, justification for your actions) and shoehorning your view of reality to fit in defiance of facts.
I wanted to say something about writers and talent and luck.
A very famous writer was once teaching at a university, and he got a call from a woman who wanted him to read her son’s manuscript, which she claimed was great. When she first called, he deflected with the usual excuses, time, teaching pressures, etc. He was trying to be kind. But, damn, the woman was persistent. She kept on calling. So finally he decided the only way to get rid of her was to read the thing. Reading a few paragraphs would discharge his obligation and would allow him in good conscience to tell her that she was mistaken about the book. So she came to his office with the smudged typescript and gave it to him. And later he began to read it, and read it, and read it…. And the mother was right, it is a great book.
The college teacher was Walker Percy and the book was John Kennedy Toole’s A Confederacy of Dunces. The book was finally published 1980–11 years after Toole’s suicide at the age of 31. The book was awarded the Pulitzer Prize for fiction in 1981 and is considered a modern American classic.
Toole was lucky in his talent and lucky in a mother who could see his genius on those smudged typewritten pages, and she was lucky in her choice of readers. One can well imagine all that genius going for naught were it not for that luck.