For many, the big question going into President Obama’s State of the Union address—besides what Michelle would wear (a Saphire blue number by Barbara Tfank)—was what he would say about the staggering economy and how the government can improve the country’s fortunes.
Spurred by Occupy Wall Street and a growing raft of evidence that Americans are having a harder time maintaining and improving their standards of living, Obama said that restoring faith in everyone’s ability to succeed through hard work was “the defining issue of our time.”
So what? The president has less control over the economy than you might imagine, even when institutional barriers and partisanship in Congress don’t block almost all action, as they do today—one reason he proposed a basic filibuster reform. Maybe the most important thing to be done is preventing poor decisions; the president reminded us that the unnecessary battle over the country’s debt ceiling was a major unforced error.
While the raft of policy proposals that made up the bulk of his speech aren’t likely to go anywhere before the presidential election, they do tell us something about our economic challenges and what the president proposes to do about them.
Obama does have a fairly coherent view of what the government should do, one he drew out through an extended military metaphor—it establishes a recognition of mutual responsibility to do “for people only what they cannot do better by themselves, and no more.” That means, generally, that government has role as a coordinator and networker, connecting resources with those who need them; as an investor in projects with high social impact—whether public infrastructure or clean energy—that won’t be built by the private sector; and as a player in the economy where it has to be—like Obama’s Department of Defense making major investments in clean energy to power its operations.
With unemployment still far too high, Obama had a lot to say about jobs. Most urgently, he demanded that Congress act to extend a temporary payroll tax cut that puts money in your pockets and helps spur hiring; it expires in February. Congressional negotiators are far apart on how to extend the tax cut and what else will go in the bill—which, sadly enough, could be the last major legislation that passes Congress in 2012. Expect to be exasperated by news of this debate for the next several weeks.
But where will we actually see jobs created? Manufacturing, Obama hopes, a strategy that represents a turn toward populism in an election year. But though a strong manufacturing sector is important, it’s not at the center of the United States’ economic challenges. Still, the president rightly celebrated the success of the government rescue of carmakers Chrysler and General Motors, the latter of which has re-established itself as the world’s largest auto manufacturer. While that rescue was one of the few real successes of the hated TARP program, direct government investment in businesses—ironically, a private equity deal as big as any Mitt Romney ever attempted—is not the model the president has in mind.
Instead, he focuses on our tax code, which privileges companies that manufacture products overseas. He’d like to close the tax breaks that benefit companies that operate factories abroad, while creating new ones for companies that keep jobs at home. That vision isn’t likely to survive first contact with the ornery tax wranglers on the House Ways and Means committee, and half likely shouldn’t—tax reform is better served by simplifying the code with fewer breaks overall—but an overhauled tax code would help companies grow.
The real future of jobs is in better education, not a focus one economic sector. Employers complain bitterly about the lack of skilled workers to hire, and more education is connected to a higher standard of living. The president talked about simplifying the current maze of government job-training programs and linking them to unemployment support. He also wants to connect community colleges and businesses so students can learn the skills they need to get jobs; it’s a smart use of the government’s ability to connect institutions to share data.
The president’s vision of America’s future workforce is also, smartly, an inclusive one: He would allow children who came to the United States illegally to have a path to citizenship if more comprehensive immigration reform continues to languish.
It’s safe to say that these ideas are largely positioning for a reelection campaign; generally laudable and fairly safe. Or, in the case of his gradually tougher position on the largest banks and their scandalous behavior toward mortgage borrowers, just radical enough to guarantee obstruction. They tell a story of a president who is increasingly working to create the most economically beneficial playing field for workers, entrepreneurs and companies, but not yet imagining changes in the contest’s rules—or the creation of a different game altogether.
Perhaps the most important story Obama told last night was about inequality—though, cautious politician that he is, he didn’t come right and say the word. Instead, he talked about the need for investments in basic research and the kinds of social services that support a strong middle class, and the need to fund them more fairly than we do today. He called for ensuring millionaires pay at least 30 percent of their income in taxes, citing the widely told story of billionaire investor Warren Buffet paying a lower tax rate than his secretary.
This “common sense” request, as Obama put it, underscores the strange times we live in, as the lowest tax rates in our history clash with massive deficits, extraordinary income inequality and a need for public action to create jobs.
Obama’s essential pragmatism will no doubt disappoint those who see a need for far more fundamental reform rather than the to-do list of a politician with limited tools, but the basic theme of his speech—and his record that, for all its faults, has given us a gradually improving economy—suggests he’s starting to hear those critics who demand more focus on giving everyone a fair chance to thrive.
Photo courtesy of the White House
