President Barack Obama’s third State of the Union address was disappointing, and not even a particularly good campaign speech. While he did provide the left with a nice list of small policy proposals, such as special tax rates for manufacturing, green energy and millionaires, he did not seize the moment to suggest any really big, new ideas.
One of the biggest differences between this year’s SOTU speech and last year’s was the rise in inequality as a major problem in this country. Sure, the Occupy Wall Street movement made headlines and provided great visuals, but more important, those protesters also gave oxygen to the idea that extreme inequalities of wealth are actually a problem for our democracy and for social mobility generally (a.k.a. the American Dream).
While Obama seemed as though he was going to use the speech to address inequality, he was vague at best and small at worst. The only thing he said about individual tax reform was a rehash of the millionaire’s tax idea: somehow ensuring an alternative minimum tax for people that make over $1 million annually and allowing the Bush tax cuts to expire for those households that make over $250,000.
While this basic idea is a good one, he could have proposed a more specific list of deductions and credits he would eliminate, as well as making the overall tax code more simple. He did not even specify whether he meant that capital gains would be taxed as ordinary income for the $1 million plus crowd.
In any case, he has been advocating these ideas for a while now, and they have gone absolutely nowhere with Congress. Election-year politics will only solidify the opposition.
On the corporate tax side, Obama channeled Rick Santorum’s message of giving preference to manufacturing companies. While he didn’t go so far as to eliminate taxes for them, he did say they should “get a bigger tax cut.” He then went on to propose a handful of other deductions and credits for companies that keep jobs in America and open factories in hard-hit towns.
Although I concede that it’s almost impossible to simplify the tax code, because every deduction and credit has a constituency and a lobbyist fighting for it, Obama missed a chance to offer more comprehensive corporate tax reform. Rather, he chose just a few select industries.
Not All Bad
Overall, while I thought the speech was suboptimal, let me highlight some of its better ideas.
The two biggest headwinds in our economic recovery are unemployment and housing. Obama made the case that Washington can do for other industries what it did for Detroit: save the industry and the jobs. Although the GOP will hold up the failed Solyndra project as evidence that Obama can’t pick winners, his salvage of the auto industry is an excellent defense.
Obama also highlighted partnerships between community colleges and companies as a way of retraining the unemployed. This idea should get some bipartisan support because the GOP desperately wants to tie unemployment benefits to job training. However, if the federal government is going to foster this type of cooperation, it will require legislation and cost money. Convincing the do-nothing Congress to pass any legislation with a price tag will also trigger the “how do we pay for it?” hysteria that immediately ends any further discussion. Nice idea, but probably not going to happen.
Finally, on housing, Obama claims he’s “sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates.” He will pay for this by a “small fee” on the largest financial institutions, which we can be sure will lobby hard against this proposal.
Although this isn’t a bad idea — it would put money in the pockets of consumers and perhaps prevent some foreclosures — it would not address the overall problem of declining home values. Even if an underwater homeowner is able to refinance, that doesn’t change the fact that they can’t sell their house for what they paid for it. No government program will restore lost home equity or down payments. That’s the simple and unfortunate truth.
Overall, the speech was not one of Obama’s best. He tried to emphasize fairness and equality of opportunity, but those ideas are so big that they need big policies to give them any real weight. What he proposed was small and inadequate for the problems we face.
Perhaps he simply wanted to walk the tightrope of election-year politics by placating his base and not presenting himself as too radical for independents to rally around one more time.
He assured us that we would not turn back the clock four years. “I will oppose any effort to return to the very same policies that brought on this economic crisis in the first place.” Compare this to Newt Gingrich, who said earlier Tuesday that on his first day in office, he would issue executive orders that would eliminate 40% of the Obama administration’s accomplishments.
I hope that’s Obama’s plan and it works. Perhaps in a second term, unshackled by the prospect of reelection, Obama can finally be the big ideas, big reformer he was elected to be in 2008.
The opinions contained in this column are solely those of the writer.
Want to share your own views on money, politics and the 2012 elections? Drop us a line at firstname.lastname@example.org and we might reprint your views in our InvestorPolitics blog! Please include your name, city and state of residence. All letters submitted to this address will be considered for publication.