Commentary

State of the Union Address — 1999

By Patrick Korten
January 21, 1999

Following are brief observations from Cato Institute scholars on many of the major points made by Mr. Clinton in his State of the Union speech.

Hooked on Government Money

“In his address, President Clinton once again tried to divert the nation’s attention from his scandal-ridden administration with a laundry list of programs and handouts — one for every voter, and two for key swing groups. Taxpayers should hope that Congress will once again ignore most of his expensive and counterproductive proposals.

“Somewhere near the middle of his 80-minute speech, the president told China that stability ‘can no longer be bought at the expense of liberty’ — even as he spent the rest of his speech promising to get us all further hooked on government money and government programs, at only the cost of our freedom.”

- David Boaz, executive vice president

The Era of Big Government

“That giant sucking sound America heard was their federal tax dollars flowing out of Washington. President Clinton’s exhausting list of new government spending programs could end up costing taxpayers $150 billion over the next five years, according to my preliminary estimates. The costs include $25 billion for expanding Medicare to non-seniors; $8 billion for expanding Medicare coverage of drug benefits; $8 billion for higher veterans’ benefits; $10 billion for higher military pay; $5.5 billion for federal land purchases; $1.5 billion for new carpool lanes, bike paths and transit spending; $3.5 billion for parks; at least $5 billion for new farm programs; $3 billion for homelessness assistance, $20 billion for new school construction and other education programs and $1.5 billion for drug testing. So much for saving Social Security first. No, the era of big government is not over in Washington.”

- Stephen Moore, director of fiscal policy studies

Constitutional Authority

“I’m distressed by the absence in the president’s message of any concern about the pressing need for help from our government with pet care. I longed to hear him say:

‘My fellow Americans, for too long in this nation we have ignored the medical needs of those family members who cannot speak for themselves, who do not even have the vote — our pets. Have you taken your pet to the vet lately? The cost of pet care has skyrocketed in recent years, yet we have done nothing as a people to help the millions of Americans who have to face the cruel choice between food for their children and vets for their pets. I know personally how important the family pet can be. Our own Socks and Buddy, never judgmental, have helped to bring Hillary and me closer together in troubled times, yet they too get into scrapes from time to time, which means expensive trips to the vet. If we are serious in this nation about helping struggling families, we can hardly ignore these cherished family members. Tonight, therefore, I am proposing a bill that will ensure that every American — black, white or furry — has adequate medical care. As we move into the 21st century, let us end this discrimination and dedicate ourselves to the humanitarian goals enshrined in my Vets for Pets Act.’

“The serious point is this: 98 percent of what the president proposed is not authorized by the Constitution and thus is unconstitutional. His is a vision of government as Santa Claus. The beauty of Santa Claus is that he looks only to ends, never to means. Clinton too talks only about benefits, never about costs. Children love him.”

- Roger Pilon, director, Center for Constitutional Studies

Social Security

“The president has conceded that investment in private capital markets is the key to any reform plan but sets out a stark contrast: government investment vs. individual investment. The president wants the federal government to directly invest the Social Security trust fund in the stock market. This would make the federal government a major shareholder — a major owner — of nearly every major American company. For good reason, Alan Greenspan has warned that this proposal ‘has very far-reaching potential dangers for a free American economy and a free American society.’

“Moreover, the president’s proposal would not even solve Social Security’s problems. Even under the optimistic assumptions put forward by the administration, Social Security would not be ‘saved’ — merely kept barely alive for a few more years. Bankruptcy would be postponed, not averted. The system would still provide young workers with a negative rate of return, meaning that young workers would pay more in taxes than they collect in benefits. And workers would still have no legal right to their Social Security benefits. They would still be dependent on the whims of politicians for their retirement security.”

- Michael Tanner, director, Project on Social Security Privatization

Medicare

“President Clinton’s proposal to use 16 percent of the federal budget surplus to shore up the Medicare program, while avoiding any structural changes, is simply pouring good money after bad. Medicare costs have been skyrocketing, threatening the program with insolvency by 2008. Instead of acting to restrain costs, the president has called for expanding the program and adding costly new benefits, all at the expense of American taxpayers.

“In doing so, the president not only undercuts his own Medicare Commission, expected to issue its report this spring, but misses an opportunity to restructure the program to expand consumer choice while controlling costs.

“In the short term, Medicare should be converted into a defined contribution program. The elderly would be given the option of taking a fixed amount of Medicare money, similar to a voucher, and purchasing private health insurance. This would give them a full range of options, including traditional fee-for-service plans, managed care plans and medical savings accounts. In the long run, Congress should investigate proposals that would allow individuals to privately save and invest their Medicare payroll taxes, allowing them to accumulate funds with which to purchase private insurance at retirement.”

- Michael Tanner, director of health and welfare studies

Education

“On education, the president seems to have forgotten that he is no longer governor, and that our federal system prescribes different roles for state and federal governments. As an official government document once said, the Constitution says nothing about education because ‘education is a matter reserved for the states.’ It should be up to families and state and local governments, not the federal government, to decide whether to strengthen teacher performance tests, get tough on student discipline, and so on. The federal Education Department has spent hundreds of billions of dollars over 20 years with absolutely no positive effect on our nation’s schools. The president’s proposals would take us further down a failed path.”

- David Boaz, executive vice president

Minimum Wage

“Clinton proposed a one dollar increase in the minimum wage, a measure that would reduce the employment of the least skilled young people and reduce the training and benefits of those who keep their jobs. Moreover, most of those who benefit from an increase in the minimum wage are secondary workers in nonpoor families. In his 1992 campaign, Clinton recognized that the earned income tax credit (EITC) was a much more effective measure to increase the earnings of the least skilled workers and to assist the welfare-to-work transition. That is still the case. Clinton should declare his independence of the failed policies of the old left.”

- William Niskanen, chairman

Foreign Policy

“President Clinton reiterated what he said last year to the leaders and people of China: ‘Stability can no longer be bought at the expense of liberty.’ Perhaps the president should follow his own advice. His address indicated that his major foreign policy goal is to ‘shape’ the world. But America could pay a heavy price to promote the ephemeral goal of ‘stability’ in the world. An interventionist foreign policy can lead to exactly the retaliatory acts of catastrophic terrorism (nuclear, chemical, biological and cyber attacks) against which the president claimed to be taking effective measures. Attempting to prevent or defend against those attacks — or the public demand for such measures in the aftermath of such catastrophes — might ultimately lead to an erosion of civil liberties in the United States. Instead of attempting to buy world stability at the expense of liberty at home, the president should intervene overseas in the business of other nations only when America’s truly vital interests are at stake.”

- Ivan Eland, director of defense policy studies

Defense

“The president plans to increase defense spending for the first time since the end of the Cold War. Yet the United States is still spending as much on defense as it did during some years of the more threatening Cold War era. U.S. expenditures on national defense equal those of the next 10 highest spending nations combined. The United States has at least reasonably good relations with all of those nations. Any additional money needed to shore up the readiness of U.S. forces (that is, recruitment and retention of personnel, purchase of spare parts, etc.) can be obtained by closing redundant military bases, terminating weapons purchases that are unneeded or left over from the Cold War, cutting defense pork and reducing U.S. commitments overseas. A defense budget that is already excessive for the more benign threat environment of a post-Cold War world should not be increased.”

- Ivan Eland, director of defense policy studies

“Clinton proposed an increase in the defense budget to meet the selective problems of pay and readiness. In contrast with his education proposal, however, he did not propose a reallocation of the current defense budget to meet these new concerns. The current defense budget still includes tens of billions of dollars for Cold War weapons systems and for an inflated base structure. The selective problems of pay and readiness should be met by reallocating funds from the budget for procurement and installations, not by increasing the total defense budget.”

- William Niskanen, chairman

Financial Turmoil Overseas

“President Clinton yet again called for ‘building a global financial system for the 21st century,’ but after five U.S.-supported bailout plans have failed, that grand concept is beginning to sound old. Its central pillars — more money for the International Monetary Fund and massive aid to countries before crises occur — look especially anachronistic with the collapse of Brazilian currency. If Clinton wished to put an end to the crisis-generating system his administration has so far supported in the international economy, he would call for governments around the world to end interventions that have created perverse incentives for investors and politicians alike. That also means finally getting the IMF out of the way of the market.”

- Ian Vásquez, director, Project on Global Economic Liberty

Free Trade

“President Clinton’s trade initiatives are a mixed bag. On the one hand, he calls for market opening through new global trade talks, but at the same time he urges increased government intervention in the international economy — with expanded export subsidies, threats against Japanese steel imports and a ‘global financial system’ that relies on IMF bailouts. While new trade negotiations are welcome, the accompanying mercantilist baggage should be rejected. The proposed corporate welfare measures would cause market distortions and instability; combining them and trade liberalization in a package deal serves only to undermine the case for true free trade.”

- Brink Lindsey, director, Center on Trade Policy Studies

Child Care

“President Clinton’s child care plan is virtually identical to the $22 billion package he introduced last year. It was rejected then, and it should be rejected again this year for the same reason: there is no child care crisis. Parents attest that high-quality child care is both available and affordable. According to the most reliable study of its kind, sponsored by HHS and the National Association for the Education of Young Children, 96 percent of parents say they are satisfied or highly satisfied with their current arrangements. Most families could certainly appreciate more money — there is no question that raising a family is expensive. But the best way to give parents more money is to let them keep more of what they earn in the first place. A far better solution than Clinton’s plan — full of sops to businesses and the daycare lobby — would be an across-the-board tax cut for all workers.”

- Darcy Olsen, entitlements policy analyst

Tobacco

“First a cigarette tax hike of 55¢ per pack, then federal litigation to recoup health costs from the tobacco companies. Never mind black markets, regressive taxes, personal responsibility or individual liberty. Whenever Clinton needs money, he calls for Philip Morris. And if the Republicans in Congress resist his pleas for yet higher taxes on smokers, no problem. Clinton simply by-passes the legislative process — not to mention the Constitution — and asks the federal courts to create new law. Anything to replenish depleted Medicare coffers. That’s what happens when we socialize health care.”

- Bob Levy, senior fellow in constitutional studies

Patrick Korten is vice president for communications at the Cato Institute.