State of the Union Address Policy Initiatives

State of the Union Address Policy Initiatives

January 31, 2008 0 Comments

(January 31, 2008) – You can find a summary of the policy initiatives proposed in the State of the Union message at the following White House summary page. The most interesting proposal to me was the veto threats President Bush made to trim spending earmarks, although drawing the line at half of last year’s earmarks seems like a real wimp-out. Earmarks are spending measures that members of Congress sneak into bills and committee orders that are never voted on in the light of day. There should be none of them at all–zero.

The other interesting topic was tax rates. President Bush correctly pointed out that Congress is steaming towards a huge increase in tax rates when today’s income tax, capital gains tax and dividend tax rates expire in 2 years. That tax increase would have a huge impact on growth and the value of the stock market–as much as 3000 Dow points by my estimates. (I do not believe this is yet factored into stock prices.) Unfortunately, the tax topic has been highjacked by the election process. And traditional tax cut supporters threw the tax cuts out the window when they all climbed on the stimulus package train. There will be no tax cut extension this year.

I will participate in a White House policy conference call tomorrow morning and get back to you on anything I learn there.


John Rutledge


  1. Peter

    February 5, 2008

    Dr. Rutledge, earmarks don't add a dime of spending to the federal budget - they only allocate some of it according to Congress's wishes. If Congress doesn't submit an earmark, the spending will be allocated by bureaucrats and political appointees in the Executive. It's the level of spending that needs to come down; the earmark argument is a red herring.

    You make 2 good points, that earmarks don't increase the total and that total spending is the biggest problem. I agree with both. Total spending is what drains resources away from other activities and slows growth. that's why I proposed years ago (with no chance of success) that all government programs be reduced in proportion to fit inside tax revenues every year.
    I don't agree, however, that earmarks are benign. They do not reflect the wishes of Congress, which would require a vote of all members. They reflect the wishes of one Congressman on behalf of a single interest. I believe the collective impact of widespread earmarks contributes to making the overall budget bigger, which we would both agree is not good for the country.
    Thanks for your comment.

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