The Most Important Part Was Off-Book

So I decided to take in the President's economic speech this morning. Ultimately, speeches mean far less than actions, and right now the actions still reflect a mixed picture. But a speech can move the public, can get them comfortable with the big picture of the President's program aside from the day-to-day ups and downs, and on that front I think Obama did a solid job. He stressed the five pillars for economic recovery - investments in clean energy, education and health care, new financial regulations, and long-term deficit reduction, all of which is fine. These were the key set of paragraphs:

It is simply not sustainable to have a 21st century financial system that is governed by 20th century rules and regulations that allowed the recklessness of a few to threaten the entire economy. It is not sustainable to have an economy where in one year, 40% of our corporate profits came from a financial sector that was based too much on inflated home prices, maxed out credit cards, overleveraged banks and overvalued assets; or an economy where the incomes of the top 1% have skyrocketed while the typical working household has seen their income decline by nearly $2,000.

For even as too many were chasing ever-bigger bonuses and short-term profits over the last decade, we continued to neglect the long-term threats to our prosperity: the crushing burden that the rising cost of health care is placing on families and businesses; the failure of our education system to prepare our workers for a new age; the progress that other nations are making on clean energy industries and technologies while we remain addicted to foreign oil; the growing debt that we’re passing on to our children. And even after we emerge from the current recession, these challenges will still represent major obstacles that stand in the way of our success in the 21st century.

There is a parable at the end of the Sermon on the Mount that tells the story of two men. The first built his house on a pile of sand, and it was destroyed as soon as the storm hit. But the second is known as the wise man, for when “…the rain descended, and the floods came, and the winds blew, and beat upon that house…it fell not: for it was founded upon a rock.”

We cannot rebuild this economy on the same pile of sand. We must build our house upon a rock. We must lay a new foundation for growth and prosperity – a foundation that will move us from an era of borrow and spend to one where we save and invest; where we consume less at home and send more exports abroad.

That's a very strong perspective, particularly the highlighted portion, addressing inequality and the out-of-balance economy. But the very best part of the speech didn't appear in the prepared remarks. Talking about education, he paused to say that we need American students to make things again. Here's a rough transcript:

And by the way, one of the changes that I'd like to see, and I'm going to be talking about this in the weeks to come. It's once again seeing our best and our brightest commit themselves to making things. Engineers, scientists, innovators. For so long, we have placed at the top of our pinnacle folks who can manipulate numbers. And engage in complex financial calculations. And that's good, we need some of that. But you know, what we could use are some more scientists and engineers who are building and making things that we can export to other countries.

This is the rot at the heart of the American economy right now, a sinking feeling that we are no longer creative, that we no longer have the same spirit in the 21st century that we assumed to hold in the 19th and 20th, the feeling of sloth, the idea that the world is passing us by, the unease as we try to sustain ourselves through selling each other lead-filled Chinese toys and pushing numbers around on a page. This is exactly the risk at the center of an unbalanced economy, much like an unbalanced stock portfolio. Having given away innovation, having given away industry, we turned Wall Street into the manufacturing capital of the nation, much to our peril. The jobs of the future cannot remain in the same fields as the jobs of the past. We need a continued focus on green jobs, not just at the level of engineering and innovation and technology, but at the lower levels of building and creating from raw materials the new energy devices and smart grids and high speed rail cars.

And we can only do this by shrinking the size of the financial sector relative to the overall economy, and diversifying our economic picture so we are not at the mercy of the banksters. For the first time, I get the sense that the President recognizes this imbalance and is committed to reversing course. I don't completely agree with his methods - he dismissed nationalization of the insolvent banks by saying that it would prove too costly, which is a debate we need to have, but which neglects the cost of throwing money into a black hole aimed at recapitalization, only to have to go back and nationalize eventually - but I can now fairly judge his desired end state. And I like what I see.