The president gave a strong State of the Union speech last night, laying out what he called "a blueprint for an economy that’s built to last."
I’ll go through some details in a minute, but first, consider that many pundits stress – and I think they’re probably right – that big speeches like this don’t usually amount to much. What does anyone have to show from last year’s SOTU?
But if you’re playing the long game here – and given partisan dysfunction, that’s the only game in town – the speech was another brick in the foundation the president began to build in Osawatomie, Kansas a few weeks ago, one I’ve followed up on in numerous posts on my blog.
We can and should argue about the details – your blueprint might be very different than the president’s (mine is outlined in the previous link). But you’re either on the bus or you’re off the bus on this stuff. That is, you either recognize the need for such an economic blueprint or you don’t. The president does; his opponents do not. That, in a nutshell, was the contrast in tonight’s speech, and it’s what the campaign will ultimately come down to as well.
The overall message of the economics in the speech – and it was largely an economics speech – was that there’s a lot we need to get done if we’re going to get this economy working for working people. More so than in any of his past SOTUs, he laid out a large number of quite specific policy initiatives. This wasn’t "win the future" with a long-term investment agenda. It was "build on the momentum we’ve got right now" by creating incentives for manufacturers, skills for workers, financial regulation, jobs in fossil fuel extraction and clean energy innovation, all financed by a fairer tax code.
A few specifics that caught my ear:
Manufacturing: Mostly favorable tax treatment for domestic production and disincentives for outsourcing. There’s already a good bit of this in the tax code – about $40 billion this year alone in accelerated depreciation for equipment purchases and the production tax credit, but last night the president went further. He also introduced a minimum tax on overseas profits and jobs. We’ll have to see the details, but for years the president has tried to close overseas tax loopholes and hasn’t gotten very far. Perhaps this is a milder alternative – a minimum tax designed to prevent firms from just going to the lowest tax havens – that congress could get behind. Not likely in this congress, but stay tuned.
His trade enforcement ideas – specifically creating a new group that would use investigators and other federal resources to combat unfair trade practices by other countries – are clearly targeted at China for their currency management, but there are lots of other non-tariff barriers that such a unit could usefully go after.
Use War Savings for Infrastructure: Some will call this a budget gimmick, and they’ll have a point in that this is money we’ve plugged into future budgets that we now know we’re not going to use for the wars (about $440 billion in savings over ten years, half of which the president claimed for "rebuilding America"). But these bucks do count as "scorable savings" and, especially given the current cost of borrowing and our infrastructure and job needs, I’m all for it.
Note that the president also announced here that he would sign an Executive Order "clearing the red tape that can slow down new infrastructure projects." That could refer to scaling back environmental impact studies, but it could also refer to getting rid of rules that set a floor under wages on federal construction projects – that would be a big setback for construction workers.
Sectoral Job Training: I’m an advocate of this – it may be the only kind of job training that reliably works right now. It’s basically partnerships between businesses and educators – usually community colleges – designed to identify specific pockets of future labor demand and train accordingly, as opposed to blanket training that’s not connected to actual job creation.
Of course, the key words there are "job creation." We can’t fix what ails us on the supply side alone.
In this regard, and as expected, the president said:
Right now, our most immediate priority is stopping a tax hike on 160 million working Americans while the recovery is still fragile. People cannot afford losing $40 out of each paycheck this year. There are plenty of ways to get this done. So let’s agree right here, right now: No side issues. No drama. Pass the payroll tax cut without delay.
Energy: As noted above, there was a lot in the speech on both fossil fuel extraction and clean energy. On the latter, congressional opposition to positioning America as a clean-energy producer is terribly shortsighted, but bowing to that reality, the president announced “the largest renewable energy purchase in history" – one gigawatt to be purchased by the Department of Defense, which is, in fact, a huge energy consumer. This is clever, but it’s not transformative. For that, we need new legislators.
Taxes: Not much new here, though I think this is the first time the White House has attached a number – 30 percent – to the Buffet rule (this would be the minimum effective rate for millionaires – from what I saw earlier today, Newt would be in compliance; Mitt, however, at 15 percent, would be way out of line).
Re: the predictable class-warfare retort to this part, I thought this was a well-framed point about the tradeoffs in play here:
We don’t begrudge financial success in this country. We admire it. When Americans talk about folks like me paying my fair share of taxes, it’s not because they envy the rich. It’s because they understand that when I get tax breaks I don’t need and the country can’t afford, it either adds to the deficit, or somebody else has to make up the difference – like a senior on a fixed income; or a student trying to get through school; or a family trying to make ends meet. That’s not right. Americans know it’s not right. They know that this generation’s success is only possible because past generations felt a responsibility to each other, and to their country’s future, and they know our way of life will only endure if we feel that same sense of shared responsibility.
I thought President Obama was on the bus tonight. Now let’s see how many people want to go along for the ride.
You can email me at firstname.lastname@example.org. I look forward to your feedback.
Cross posted at jaredbernsteinblog.com.
Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities. From 2009 to 2011, he was the Chief Economist and Economic Adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team.