United States President Barack Obama is about to deliver his last State of The Union Address before elections. The message is crucial for his reelection aspirations, and will be scrutinized by all. Republican rivals will try to use Obama’s statements as political ammunition against him.
In the midst of a severe and unsolved economic crisis, Federal Budget is facing also an unprecedented fiscal deficit, which is not sustainable in the long term. Fiscal discipline is in this current political and economic situation a highly divisive issue. Dealing with deficits in the United States is a clear political dilemma, specially in an electoral year. For the first time in modern history, the United States lost the triple-A rating status from rating agency Standard & Poor’s. This decrease in US debt trust pushes for a decided deficit reduction plan. But cuting federal expenditures or increasing new taxes in present economic context will raise public opinion opposition.
Political position concerning fiscal discipline will become a key component of the speech, as in old days. Chosing the right wording and the persuasive arguments to protect the decision taken will be a matter of master political communication crisis.
So, as many non US citizens, we look forward the content and the discourse strategy chosen by President Barack Obama on debt, deficits and fiscal discipline.
In the meanwhile, we present in this post a research about the content analysis of the US Presidential speeches in the modern fiscal history, concerning US President degree of political commitment towards fiscal discipline.
This analysis corresponds to a research carried out in year 2009. The results of this project were published as a chapter of book in Imbeau, Louis (ed), Do They Walk Like They Talk? Speech and Action in Policy Processes, Studies in Public Choice, Springer. You can also check a preliminary version as working paper.
The time period covered in the figures presented in this post is from 1920 (Harding Presidency) to 2008, the last year of George W. Bush second term presidency.
The nature of the blog does not allow us to explain the methodology followed to gather our results. We can just mention that the main structure of the design is to proceed to a hand made lecture and analysis of all Presidential speeches (State of The Union Address, Presidential Inaugural Address, and the Budget Message of the President). When the President mades a reference to debt, deficits or fiscal discipline, the statement is analyzed and classified as favorable or opposed to fiscal discipline principles. This classification is made by confronting the argument presented by the President against the collection of arguments for and against fiscal discipline developped by economists and public choice scientist.
In the following figures we present the core results of the content analysis concerning US Presidents political position towards fiscal discipline.
We present in the linked paper all the theoretial arguments for and against fiscal discipline, and explain how we use them fro classifying each single presidential statement. Some authors may consider that we do not capture all the arguments or they identify other source of doubts and concerns about our approach chosen. Whatever the actual limitations and caveats of our methodology, we apply our criteria consistently througout all the time considered under analysis. This means that at least comaprative analysis concerning different US Presidents may still hold and provide useful information and knowledge for contemporary economic and political history.
First figure present the intensity of the use of statements about debt and deficits by terms. This first result refers to quantity, and not about the profile of the statements for or against fiscal discipline.
We count with pre Great Depression data. Number of statements on deficits increase with Hoover term, they surprisingly decrease during first term by F. D. Roosevelt. They increase substantially when he proposes the New Deal. Place given to debt and deficits decrease durng II World War, even if deficits explode (Roosevelt III and IV).
The role of fiscal discipline and deficits was moderate during the 50s, 60s and 70s. It was a relevant pilitical topic mainly during Eisenhower presidency. We observe a sharp increase of interest about the role of deficits and fiscal deficits with the arrival of Ronald Reagan, who broke records in terms of mentions to this issue in top presidential speeches. High relevance was given to fiscal discipline debate also during Bill Clinton’s presidency. This trend was abrupty reversed under George W. Bush presidency.
First analysis concerned the presence of the political debate about deficits and fiscal discipline in US Presidential top speeches. In the next figure we provide our results about the position taken by each President concerning fiscal discipline. A statement defending the virtues of fiscal discipline and deficit elimination gives a positive point. In the opposite case, when a President justifies or prone the acceptance of deficits, we give a negative point to this statement. total sum provide the commitment of each President towards fiscal discipline.
In the first figure we present total value of the Index of Fiscal Discipline by terms. It is the result of the difference between positive and negative points. In the last figure we show a bounded index, ranging from -10 (all Presidential statements advocate for accepting deficits) to +10 (all statements prone fiscal discipline measures). A value 0 means a 50/50 weight of statements for and against fiscal discipline.
We comment the results that we obtain referring to the last figure, with the bounded index, that presents more clearly the political will of each President concerning deficits.
In line with what we expected from economic theory history, we find a strong attachment to fiscal discipline principles in US Presidents before the Great Depression (Harding and Coolidge). We can also confirm that fiscal policy measures proposed by Hoover during the first stage of the Great Depression were still grounded on fiscal discipline principles. The approach changed dramatically under F. D. presidency, as it entered clearly in political views opposed to fiscal discipline, as means to fight against economic crisis.
Once the economy recovered, and within the framework of War effort, presidents came back to fiscal discipline proposals. Kennedy was the first president to adopt Keynesian principles as tool to boost the economy, as our negative value of the index shows. The 1973 oil crisis and its aftermath of stagflation during the 70s was a period fro a renewal of political positions opposed to fiscal discipline.
Ronald Reagan presidency turned back to pro fiscal discipline positions. The index did not take maximum levels, because ‘Reaganomics’ proposals where not always in line with a clear opposition to deficits.
Bill Clinton, even if from the Democrat party, presented a decided and sustained political policy attached to fiscal discipline principles in all major speeches during his two terms of presidency. His discourse was in line with the sustained reduction of federal deficits.
Finally, George W. Bush presidency has been charaterised by a nonchalance concerning deficits. He accepted deficits as a way to overcome the economic shock provoked by September 11 2001 attack, and by the burst of internet bubble.
Our aim is to present as soon as possible our analysis of the position taken by Barack Obama in his January 24 2012 State of The Union Address concerning deficits and fiscal discipline.