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Parsing the Inaugural Speech
The policy themes emanating from President Barack Obama’s inaugural speech on January 21 gave scant encouragement to those of us who believe a faster pace of economic growth is the key to creating jobs and righting the nation’s fiscal imbalances. Rather than highlighting growth, the speech stressed the importance of preserving and expanding the social welfare safety net and the need to take strong actions to stop climate change. In short, the administration’s vision for its second term is one that embraces more “collective action,” which is to say a more “proactive government.” Specifically, the speech promised to address “poverty and injustice at home” and to bolster “Medicare, Medicaid and Social Security,” since these are programs the administration believes “do not sap our initiative but strengthen us.” The vow to make climate change policy a second-term hallmark may have a significant impact on America’s short-term growth prospects. Since any effort to push climate change legislation through Congress would meet stiff resistance from most Republicans, and even some Democrats, the administration will instead rely on executive orders and regulatory rulemaking to pursue its agenda. Indeed, this has already begun. For example, the Environmental Protection Agency (EPA) recently issued greenhouse gas (GHG) regulations for cars and has proposed a rule that would limit carbon emissions from new power plants. Later this year, under the Clean Air Act, the EPA will start regulating GHGs from existing power plants and industrial boilers. These GHG regulations will impose additional burdens on America’s utilities, automobile manufacturers, and heavy industries that are already saddled with a myriad of expensive environmental compliance costs. In 2009, the White House referred to oil and gas as “yesterday’s energy” and touted renewables as the energy of “tomorrow.” In this week’s inaugural speech, the commitment to “sustainable energy sources” as the best way to fight climate change was reinforced. But the inconvenient truth is that total GHG emissions in 2012 were lower than 20 years ago, even with an economy that is one-third larger, and natural gas, not “green energy,” is responsible for the decline. Furthermore, even though the U.S. didn’t sign the Kyoto Protocol, we have exceeded the GHG reductions mandated by that agreement In its push to expand the welfare state, while imposing needless new regulations on industry, the administration is betting that most Americans prefer redistributive policies to those that can expand the economic pie. Perhaps they’re right. But the result will be sub-par economic growth and job creation, as well as trillion dollar annual deficits, for at least the next four years.