25 January 2012

State Of The Union Address 2012 Policy Proposals Annotated

The State of the Union address typically includes all of the major policy proposals on an administration's agenda for the year. What proposals did President Obama make this year?

I've stripped out the atmospherics and justifications for the agenda and stripped it down the policy proposals, with some commentary intertwined.

Underlying Principles

* "These achievements are a testament to the courage, selflessness and teamwork of America’s Armed Forces. . . . They’re not consumed with personal ambition. They don’t obsess over their differences. They focus on the mission at hand. They work together."

* "They understood they were part of something larger; that they were contributing to a story of success that every American had a chance to share — the basic American promise that if you worked hard, you could do well enough to raise a family, own a home, send your kids to college, and put a little away for retirement. . . . The defining issue of our time is how to keep that promise alive."

These themes are vintage Obama rhetoric that defined his 2008 Presidential campaign, which was about hope, and about the mutual responsibilities of individuals and government to each other.

* "Long before the recession, jobs and manufacturing began leaving our shores. Technology . . . made some jobs obsolete. Folks at the top saw their incomes rise like never before, but most hardworking Americans struggled with costs that were growing, paychecks that weren’t, and personal debt that kept piling up. In 2008, the house of cards collapsed. We learned that mortgages had been sold to people who couldn’t afford or understand them. Banks had made huge bets and bonuses with other people’s money. Regulators had looked the other way, or didn’t have the authority to stop the bad behavior. It was wrong. It was irresponsible. And it plunged our economy into a crisis that put millions out of work, saddled us with more debt, and left innocent, hardworking Americans holding the bag."

President Obama has adopted, in a more sophisticated form, the basic narrative that those on the left from the Occupy movement, to the bright minds in the punditocracy, to explain why the financial crisis happened. This narrative puts offshored jobs, selfish plutocrats, and an underregulated financial industry front and center as the causes of our economic woes, and implies solutions that address those issues.

Tax Incentives

Tax Progressivity

* "If you make more than $1 million a year, you should not pay less than 30 percent in taxes. . . . In fact, if you’re earning a million dollars a year, you shouldn’t get special tax subsidies or deductions. On the other hand, if you make under $250,000 a year, like 98 percent of American families, your taxes shouldn’t go up."

* "Pass the payroll tax cut without delay."

These proposals reflect a basis observation that the rich pay too little in taxes due to tax breaks for unearned incomes, while working people are under pressure in the current weak economy and can't afford to pay more in taxes right now. These proposals also flow naturally from an observation that a failure of the one percenters to share the gains of economic growth is one of the important problems with our economy.

Tax Incentives For Job Creation

* "if you’re a business that wants to outsource jobs, you shouldn’t get a tax deduction for doing it. That money should be used to cover moving expenses for companies like Master Lock that decide to bring jobs home."

U.S. trade treaty obligations, which the U.S. has been found to have violated in the past, greatly restrict how much the tax code can discourage offshoring. This particular proposal is a trivial, mostly symbolic message that may still violate those treaty obligations but is worth proposing to send a message to big business.

* "every multinational company should have to pay a basic minimum tax. And every penny should go towards lowering taxes for companies that choose to stay here and hire here in America."

The devil is in the details in this case. What would the basic minimum tax be based upon? What tax breaks for domestic employers would be funded?

* "if you’re an American manufacturer, you should get a bigger tax cut. If you’re a high-tech manufacturer, we should double the tax deduction you get for making your products here. And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers."

This sounds like expansions of the benefits of the Section 197 domestic production deduction and enterprise zone funding, both of which are absurdly complex and not championed by many economists, but attempt to implement industrial policy goals. It also makes clear that the Obama Administration is not ideologically committed to lassiez faire, or even microeconomically neutral economic policies. The administration is not afraid to make judgments about how our economy needs to be tweaked and put forward policies to encourage the economic to transform in that direction. Given the bipartisan admiration that is emerging for China's ability to secure immense and seemingly never ending large GDP growth rates with these kinds of policies, it isn't too hard to see why a hand's off approach has lost favor in the White House.

Also, does it make any sense to provide so many tax benefits for manufacturing that conceivably even businesses that have before tax losses could have after tax gains? And, almost all of these tax goodies benefit big businesses, rather than small ones. The idea is to benefit the "real economy" relative to "phoney financial profits", but phoney real economy profits aren't necessarily sustainable either.

* "Expand tax relief to small businesses that are raising wages and creating good jobs."

* "we’re providing new tax credits to companies that hire vets."

These sounds like some expansion of complex existing tax credits for hiring new employees. I have yet to see any solid empirical evidence evaluating how much impact they have on hiring relative to their tax expenditure cost.


* "It’s time to end the taxpayer giveaways to an industry that rarely has been more profitable, and double-down on a clean energy industry that never has been more promising. Pass clean energy tax credits."

Again, this administration is not uncomfortable with using the tax code to favor one industry over another with blatant subsidies. Fossil fuel industries run the last round of energy tax breaks, decades ago, and the Obama administration wasn't to strip out its subsidies and give them to Bill Ritter's New Energy Economy instead, in the hope that these subsidies will start businesses that will eventually be self-sufficient and will help the nation meet environmental and energy independence goals in the long run. For Colorado, this may be a wash, we have both a significant fossil fuel economy and a significant clean energy economy, so Colorado will have both winners and losers.

International Trade

* "It’s not right when another country lets our movies, music, and software be pirated. . . . There will be more inspections to prevent counterfeit or unsafe goods from crossing our borders."

The Obama adminstration remains committed to the questionable policy of taking a hard line on the enforcement of intellectual property rights abroad, even though this often plays into the hands of repressive regimes, and may be unstoppable as a practical matter with current technology and current copyright owner business models. Anyway, economically, most of the losses copyright owners claim to suffer from foreign copyright violations come from foreign use of unlicensed publication of their works, not from imports of counterfeits to the U.S.

* "It’s not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidized. . . . I’m announcing the creation of a Trade Enforcement Unit that will be charged with investigating unfair trading practices in countries like China. . . . And this Congress should make sure that no foreign company has an advantage over American manufacturing when it comes to accessing financing or new markets like Russia."

This seems somewhat hypocritical coming from someone who has just gone on at length about how he intends to subsidize American manufacturers. And, it relies on the somewhat questionable assumption that foreign governments are patient and strategically minded enough to use their tax money to make goods cheaper for Americans to buy in order to steal global manufacturing market share from the American economy. I don't doubt that there are subsidies, or that American manufacturers have lost global manufacturing market share. But, I am deeply skeptical that foreign taxpayer subsidies are a particularly important source of our loss of global manufacturing market share. Economic fundamentals like low wages, a workforce that has a surplus of newly minted skilled workers without domestic ventures who have jobs for them, declining costs of delivering goods to U.S. markets, reduced tariffs, cheap technological advancement that is possible by simply by copying innovations made in more developed nations, and increasing returns to scale and from interchange of knowledge in economic hot spots as urban manufacturing centers emerge are probably all more important and unlike taxpayer funded subsidies, are sustainable in the long run.

Unions and economically squeezed U.S. manufacturers may appreciate this quasi-protectionist approach, and Democratic party policy has always talked about "fair trade" rather than "free trade." But, I have real doubts about how much can be accomplished practically to benefit the U.S. economy with international trade diplomacy.

Education, Training and Basic Research

* "a national commitment to train 2 million Americans with skills that will lead directly to a job. . . . give more community colleges the resources they need to become community career centers. . . . cut through the maze of confusing training programs, so that from now on, people like Jackie have one program, one website, and one place to go for all the information and help that they need. It is time to turn our unemployment system into a reemployment system that puts people to work."

This has been tried many times before, and was the signature issue of Dan Quayle. It is an alluring idea, but it has repeatedly failed to make much of a difference. The case that unemployment has as an important source a disconnect between the available skills of unemployed workers and available jobs isn't very solid. This clearly isn't the case with cyclical unemployment, and there are pretty good indications that a lack of general intellectual and social competencies are more important than a lack of specific job related skills for individuals who have persistant difficulty finding employment even during economic booms (i.e. the non-cyclical component of unemployment above the rate of unemployment that economists conceptually call "full employment" because there are always some people who are briefly in transition from one job to their next job for non-economic reasons or because they are re-entering the work force and can't be hired absolutely instantly). The United States has one of the highest high school graduation rates in the world and one of the highest college graduation rates in the world. One of the reasons that we haven't seen much effort to successfully institutionalize training programs for non-college jobs is because existing backlogs of people with the right skills in these stagnant job categories and on the job training for people with the right general intellectual and social skills have been sufficient to meet the economy's needs. In developing countries there are lots of undereducated and undertrained bright, socially functional people. In the U.S., in contrast, we have lots of overeducated or overtrained people who aren't terribly bright or have problems playing well with others.

* "Give them the resources to keep good teachers on the job, and reward the best ones. And in return, grant schools flexibility: to teach with creativity and passion; to stop teaching to the test; and to replace teachers who just aren’t helping kids learn."

The Obama administration has given up on the standards based, testing oriented, "best practices" driven education policy of the "No Child Left Behind Act" in favor of support for local control and processes that operate at the level of teachers rather than curriculums. The old approach didn't work. It isn't clear that the federal government can offer guidance to the states on what will work, even as modestly as it does in this new approach, with much authoritative credibility. At best, programs like these simply encourage innovators at the state and local level and give them a symbolic credibility boost that the grants that they have won or could win carry, that stir up local decision makers to be open to changing practices that are only the status quo now by virtue of interia.

* "I am proposing that every state — every state — requires that all students stay in high school until they graduate or turn 18."

The evidence in Colorado and quite a few other states, contrary to a social scientist's intuition, is that increasing the mandatory school attendance age improves the educational and juvenile justice outcomes for kids not permitted to drop out by them, without causing the problems associated with having academically low achieving kids who are often disciplinary problems in school against their will that you would expect. So empirically, this seems to be a good policy with large returns that reduces crime and improves long term socio-economic outcomes that it is a no brainer to strongly encourage all states to implement, even though there are lots of plausible reasons why it should work as well as it actually does.

* "Extend the tuition tax credit . . . doubling the number of work-study jobs in the next five years."

This is good as far as it goes, but doesn't seriously address the dire status quo problem that well off people have much more access to higher education than less well off people with more academic ability, and it doesn't target the funds very finely. A dramatic increase in funding for scholarships based on both academic ability and financial need would be money better spent. Also, more work study jobs mean most students who have to balance both a job and being a student at the same time, while reducing the number of good jobs available to people who aren't in school in college towns.

* "If you can’t stop tuition from going up, the funding you get from taxpayers will go down."

I'll believe it when it happens. In Colorado, tuition increases are being driven by state level revenue shortfalls, and no amount of federal policy incentives are going to materially influence that decision making process. Also, college students so often come from affluent families, that it may be more efficient and fair to increase tuition and to use the increased revenue to provide targetted financial aid to only those students who can't afford the higher tuition.

* "Innovation also demands basic research. . . . Don’t gut these investments in our budget."

The returns on basic research are routinely underestimated so this is a good investment, and if we are going to try to stimulate the economy by pumping more money into it, we may as well direct that spending towards ends that are good long term investments in addition to being sources of short term stimulus. The payoffs may be decades off, but those payoffs won't ever materialize if we don't invest in basic research now, so we need to keep investing to stave off long term economic stagnation as much as we possibly can. This also isn't a particularly big line item in the federal budget, so it is a priority we can indulge without doing undue harm to the size of the federal deficit.


* "We should be working on comprehensive immigration reform right now. . . . stop expelling responsible young people who want to staff our labs, start new businesses, defend this country. Send me a law that gives them the chance to earn their citizenship."

Absence a shift in control in Congress, comprehensive immigration reform is DOA politically, regardless of its substantive merits. The DREAM Act which the President describes as a stopgap rule, is extremely good policy from the perspectives of both justice and fairness and from an economic perspective. It doesn't hurt to push hard for this bill and stiff Republican opposition to it looks mean spirited and heartless.


* "I’m prepared to make more reforms that rein in the long-term costs of Medicare and Medicaid, and strengthen Social Security, so long as those programs remain a guarantee of security for seniors."

Medicare and Medicaid cost control are central components of the health care reform act and more cost controls cement and expand that achievement (and there is little room to dispute that the long-term costs of these programs really do drive the deficit). Social Security isn't materially broken, so offering to strengthen it doesn't cost much.

* "we’ve increased annual VA spending every year I’ve been President."

A decade of overdeploying ground troops creates a community of veterans who need more VA spending simply to receive the same level of VA support that their predecessors did on a need adjusted basis.

Stimulus Spending

* "Help manufacturers eliminate energy waste in their factories and give businesses incentives to upgrade their buildings."

Reducing energy waste is good, but it is a bit hard to figure out why businesses need government incentives to take steps that reduce their expenses and make them more profitable. One hopes that the government isn't spending too much on this program. Still, to the extent that you want to throw money at the economy to provide short term economic stimulus, you may as well spend it on purposes to provide some sort of long term economic benefit which short sighted firm managers might be undervaluing with unreasonably great discount rates for evaluating the benefit conferred by future profits.

* "We’ve got crumbling roads and bridges; a power grid that wastes too much energy; an incomplete high-speed broadband network that prevents a small business owner in rural America from selling her products all over the world. . . . you need to fund these projects. Take the money we’re no longer spending at war, use half of it to pay down our debt, and use the rest to do some nation-building right here at home."

* "I’m proposing a Veterans Jobs Corps that will help our communities hire veterans as cops and firefighters."

Both of these proposals are classic Keynesian/New Deal economic policies. Empirical evidence shows that they work in the short term. And, we are a nation with a deferred infrastructure maintance problem, which is best to address when the economy is slow and government demand isn't getting in the way of highly profitable private sector demand that firms are struggling to satisfy. It is a sensible way to use idle economic capacity for something worthwhile.

Regulatory Proposals

General Regulation

* "No bailouts, no handouts, and no copouts. An America built to last insists on responsibility from everybody."

* "I will not go back to the days when health insurance companies had unchecked power to cancel your policy, deny your coverage, or charge women differently than men."

President Obama opened his State of the Union Address with the argument that the housing bubble and the financial crisis and Great Recession that followed were a product of underregulation, rather than overregulation, and his analysis of the causes of this crisis are credible as a matter of substance. So, his refusal to cave to knee jerk Republican calls for deregulation across the board as a solution to every problem is a good tactical move that is politically defensible once one starts talking about particular regulations rather than "regulations" as an abstract aggregate concept.

* "[W]omen should earn equal pay for equal work."

This could either be a throw away line, designed to accentuate the gender gap in the 2012 election without changing policy in any way, or it could be the sleeper policy initiative of this administration. The administration has broad authority to enforce sex discrimination laws as it sees fit without new Congressional authorization and doesn't need much funding to do that. But, there is considerable room to interpret sex discrimination laws in a way that gives more content and bite to the comparable pay for comparable work concept. More aggressive interpretations of and enforcement of comparable pay laws could greatly change the culture and functioning of the American economy, and administrative action could have a meaningful impact on how employers act, even if more expansive interpretations of existing laws are ultimately shot down by the still quite conservative federal courts. The statement in this speech is too brief to discern whether this represents a real change in policy, or merely a commitment to a narrow conception of this principle that is already widely accepted in the American workplace even without regulatory enforcement.

* "I’ve ordered every federal agency to eliminate rules that don’t make sense. We’ve already announced over 500 reforms[.]"

* "I’ve asked this Congress to grant me the authority to consolidate the federal bureaucracy."

* "I will sign an executive order clearing away the red tape that slows down too many [infrastructure] construction projects."

* "Tear down regulations that prevent aspiring entrepreneurs from getting the financing to grow."

The task of updating regulations and organizing the federal bureacracy in the most streamlined and sensible manner is like weeding a garden, it never ends and takes constant vigilance. There are always regulations that were poorly written in the first place or have ceased to be useful in the modern regulatory climate that need to be repealed, rewritten or revised, and federal bureacratic subdivisions have a remarkable propensity to survive even when other parts of the bureacracy have been created or evolved into agencies that have overlapping or contrary responsibilities. The Obama administration believes in good government and the ideas behind the federal regulatory and administrative state enough to be trusted to carry out these tasks in good faith in a way that isn't simply calculated to undermine the underlying policies that the agencies and rules were invented to carry out. And, tidying up these matters does improve the business climate as well, while better protecting the interests that federal law set out to protect when these agencies were created and these regulations were adopted.

Energy and Environmental Regulation

* "I’m directing my administration to open more than 75 percent of our potential offshore oil and gas resources. . . I will not back down from making sure an oil company can contain the kind of oil spill we saw in the Gulf two years ago."

Where? Have the concerns from offshore oil drilling raised by the last major spill been adequately addressed? What are we doing now that we weren't doing then?

* "I’m requiring all companies that drill for gas on public lands to disclose the chemicals they use."

This is nice, but disclosure is only a first step that doesn't substantive prevent environmentally harmful activity from being conducted.

* "I will not back down from protecting our kids from mercury poisoning, or making sure that our food is safe and our water is clean."

Good. I wonder what achieving this goal means from a practical perspective.

* "set a clean energy standard that creates a market for innovation."

Good. I wonder what mechanism (e.g. markets in rights to pollute, carbon taxes, emissions standards made without reference to the technologies use to achieve them, will be used to accomplish this end.

* "the Department of Defense, working with us, the world’s largest consumer of energy, will make one of the largest commitments to clean energy in history."

This can't hurt, and there is no better way to learn what clean energy steps are or are not practicable to impose on industry than to try to implement them yourself in a situation where there are also important non-environmental priorities to be considered.

Financial Regulation

* "I’m 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 rates. No more red tape. No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won’t add to the deficit[.]"

Hurray for everybody who has a mortgage and hasn't refinanced lately. Also, framing this as a sort of reparations or restorative justice measure that is being imposes on banks because it is something that they are capable of doing that compensates the general public for the harm that the mortgage lending industry did to the U.S. economy helps ground a pretty intrusive and economically costly imposition of the profitability of this business sector while not offering anything to people that banks weren't offering most people who were willing to put together the paperwork anyway.

* "I’m asking my Attorney General to create a special unit of federal prosecutors and leading state attorney general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis."

Long overdue.

* "if you are a big bank or financial institution, you’re no longer allowed to make risky bets with your customers’ deposits. You’re required to write out a “living will” that details exactly how you’ll pay the bills if you fail –- because the rest of us are not bailing you out ever again. And if you’re a mortgage lender or a payday lender or a credit card company, the days of signing people up for products they can’t afford with confusing forms and deceptive practices — those days are over."

We've imposed lots of new regulations on banks and some of them are probably improvements, but it is hard to know what really matters, and what was overkill or was counterproductive when the entirely collection of new regulations are taken as a whole. Regulations don't have to be a complex as these regulations were to be effective.

* "We’ll also establish a Financial Crimes Unit[.]"

You honestly mean that we didn't have several of these already? No wonder banks were ignoring regulations.

* "Some financial firms violate major anti-fraud laws because there’s no real penalty for being a repeat offender. . . . pass legislation that makes the penalties for fraud count."

From a practical perspective the federal government has more than enough power already to put any company that doesn't play ball out of business in a flash. See, e.g., Arthur Anderson and Lehman Brothers. The gap that this proposal is filling, that the speech doesn't really make clear, is the capacity of the federal government to impose sanctions that fill middle ground between slaps on the wrist and putting someone entirely out of business.

Political Process Reform

* "Send me a bill that bans insider trading by members of Congress; I will sign it tomorrow. Let’s limit any elected official from owning stocks in industries they impact."

The idea is a good one, but the usual enforcement mechanism of the Congressional ethics committees, which the U.S. Constitution doesn't leave a lot of alternatives to, has some built in instiutional limitations, so I'm not hopeful that this will make a huge difference.

* "Let’s make sure people who bundle campaign contributions for Congress can’t lobby Congress, and vice versa[.]"

This is basically a bad idea, whose only redeeming feature is that it isn't terribly likely to be passed into law or to survive judicial scrutiny. What is so bad about giving influence to people who have a proven capacity to encourage large numbers of modest sized individual donors to contribute funds to political campaigns? The right to petition Congress, which is what you are doing when you lobby Congress, is constitutionally protected. And, why do we need to prevent Congress from lobbying people who bundle campaign contributions?

* "I ask the Senate to pass a simple rule that all judicial and public service nominations receive a simple up or down vote within 90 days."

This would be a great reform to adopt from a public policy and political theory perspective. But, the Senate isn't going to do it simply because the President asks them to change the balance in power between the President and the U.S. Senate because he asks them to, and similar reform efforts have failed in the past. What can President Obama offer the Senate that will convince two-thirds of sitting Senators to adopt this rule that weakens their individual power and the power of their political party when they are out of office, particularly in the case of lifetime appointments to the federal courts?

Military and Foreign Affairs

* "[W]e’ve begun to wind down the war in Afghanistan. Ten thousand of our troops have come home. Twenty-three thousand more will leave by the end of this summer. This transition to Afghan lead will continue[.]"

Finally, President Obama has started to acknowledge that the time has come to start disengaging from our last currently active foreign war, the longest in all of U.S. history which was begun by George W. Bush immediately following 9-11 but was only ramped up to a larger scale, not necessary with much improved results, recently. It is somewhat troubling that President Obama did not mention that current nominal 2014 deadline for withdrawing from Afghanistan.

* "[W]e will advocate for those values that have served our own country so well. We will stand against violence and intimidation. We will stand for the rights and dignity of all human beings –- men and women; Christians, Muslims and Jews. We will support policies that lead to strong and stable democracies and open markets, because tyranny is no match for liberty."

* "From the coalitions we’ve built to secure nuclear materials, to the missions we’ve led against hunger and disease; from the blows we’ve dealt to our enemies, to the enduring power of our moral example, America is back."

It is nice to see President Obama back away from a purely real politic narrow self-interest approach to foreign policy in favor of a more principled and soft power driven approach. Hillary Clinton's push to get us involved in Libya proved the desirability of this approach and has brought President Obama around to this view quite nicely.

* "America is determined to prevent Iran from getting a nuclear weapon, and I will take no options off the table to achieve that goal. But a peaceful resolution of this issue is still possible, and far better, and if Iran changes course and meets its obligations, it can rejoin the community of nations."

This is a decent, middle ground position on the issue.

* "I’ve proposed a new defense strategy that ensures we maintain the finest military in the world, while saving nearly half a trillion dollars in our budget."

Cutting the Defense budget is long overdue. I'm not convinced that President Obama is making those cuts in the right places, but some big cuts in the Defense budget are absolutely necessary if we are to make progress in reducing the deficit before interest rates rise again and make that deficit far more expensive.

* "I’ve already sent this Congress legislation that will secure our country from the growing dangers of cyber-threats."

Too much paranoia about cyber-threats can do a great deal of harm to the functioning of the Internet if done poorly, although there is a genuine need to address these threats. I'm concerned that this will not be handled well, given the missteps that the administration has made so far with SOPA and PIPA. And, the descriptions of the problems that I've seen from advocates of greater cyber security have all been too vague to convince me that the advocates really understand which threats really matter as opposed to just jumping on a trendy band wagon of proposals that they don't really understand. Most members of Congress are old enough to have used slide rules and manual typewriters as young men and women.

* "When you put on that uniform, it doesn’t matter if you’re black or white; Asian, Latino, Native American; conservative, liberal; rich, poor; gay, straight."

It is nice to see a public statement showing commitment to the recently secured repeal of "Don't Ask, Don't Tell," although an absence of any affirmative new gay rights advancing policies, and in particular a glaring silence on the issue of DOMA isn't terribly reassuring.

What's Missing?

As important as what a President says in a State of the Union address is what he omits. Silence in the State of the Union address on an issue means that an issue has failed to make it to the top of the administration's policy agenda and that major administration sponsored legislation in that area is unlikely to be introduced.

President Obama has made a decision to stay far away from the culture wars. Don't ask, don't tell repeal is a done deal and doesn't call for new policy initiatives in and of itself, dispte the very hair splitting position he his adminstration has taken on DOMA. He said nothing about the administrations conflicted stance on medical marijuana. He make an effort to launch a pre-emptive counterstrike to GOP Presidential candidate Santorum's opposition to birth control with some initative or statement. His support for the DREAM Act is about as tepid and narrow a position as one can take while still calling for some liberalization of immigration laws now. He said nothing whatsoever about federal criminal justice policies apart from a commitment to going after a very narrow set of perpetrators of financial crimes who still haven't been caught almost four years after the financial crisis revealed their wrongdoing.

He has not asked for a mandate to pursue any major new initiatives in foreign affairs or to initiate any new military initatives more ambitious than beefing up our cyber-warfare resources. There was no mention of a stance on missile defense. The cuts he proposed to make in the military budget weren't specified, denying him a clearly stated mandate in those budget wars. No specific steps to take in dealing with Syria were outlined. His move to send special forces to help local military forces deal with the Lord's Resistance Army in Uganda, or his steps to confront Somolian pirates, wasn't mentioned. He mentioned that we talked to the government of Burma, but not any measure that he plans to take in dealing with them. He made no mention of the ongoing near crisis situation in the Eurozone economies or of what strategy he plans to take to prevent that crisis from dampening our own economy. He limited his statements about China to trade disputes (and even then, did not mention the trade disputes, such as China's exchange rate policies, that are really the most contentious), not addressing its increased investment in major military resources or its human rights and democracy record beyond an overall commitment to those vague ideals in our overall foreign policy agenda.

Not mentioning major foreign policy or military initiatives may weaken his mandate in Congress over the next year by less tightly pushing Democrats to rally around the top items on his agenda. It may also be a political misstep, going into the 2012 election, because foreign policy is an area where the President has immense unilateral power, the Democratic party controlled Senate is more relevant than the Republican controlled House, and none of his political opponents is in a position to challenge him. Mitt Romney has never gotten closer to military and foreign affairs in his political life than directing the natural disaster relief efforts of the National Guard and courting potential foreign investors in his state. Ron Paul's extreme isolationist position has little support in his own party, isn't a very effective counterpoint to President Obama now that he has disengaged us in Iraq and Libya and made a point of emphasizing his plan to end out involvement in Afghanistan in his most definitive foreign policy position in his entire speech. Newt Gingrich and Rick Santorum were strongly domestic policy oriented when they were in Congress and neither man has that reassuring gravitas Americans would like to see in someone who has the power to launch nuclear missiles without anyone else's say so. And, President Obama has far more personal experience being in and interacting with people in the rest of the world than any of the Republican candidates. He could really shine here with an insightful and bold initative, and instead chose to keep these issues on the back burner or held in reserve for later.

He proposed a number of wonkish and modest initatives on the domestic policy front, and these followed the Clintonian pattern of being incremental, of not adhering to some big picture theoretical vision for economic policy, and of what can be perhaps best described as a merchantalist economic agenda.

The only really bold policy stance that he took in the entire speech was his proposal to increase taxes on millionaires dramatically while holding the least affluent 98% of American taxpayers harmless, and this was perfectly timed to make the income tax returns made by Republican front runners Newt Gingrich and Mitt Romney that show both men to be millionaires living in economic worlds that average Americans have trouble even dreaming about. How many people do you know who get paid $25,000 a month to give advice to a obscure government chartered oligarchical wholesale mortgage company's lobbyist and who make millions of dollars a year trading on their past political glory? How many people do you know who make more than twenty million dollars a year without even having to show up to work at a day job and yet paid less than 15% of that amount in federal taxes? These are not the tax returns of people whom average voters can related to themselves.

President Obama earns a government salary as President, was a law professor before he was a full time politician, and earns royalties from a couple of books he wrote that have sold well. He got there from a starting point of a black boy being raised by a single mother. His wife was a senior hospital administrator. He and his wife may have made more money than the average American do (we would worry about the accumen of a President for whom that wasn't true), but they have made that money in a way that is far close to the range of experience of the average voter, have never been members of the ranks of the superwealthy in the way that Romney has as a private equity fund manager, and have not secured their wealth by selling their political influence to special interests. As a result, President can be far more credible when he claims to speak for the average American on what is fair when it comes to taxes than his likely Republican opposition.

This is class warfare that he can win, since the vast majority of Americans are on his side of the debate when it comes to their personal self-interest and their intuitive sense of right and wrong. It is one thing to say that you want to soak the rich, and another to say that you expect millionaires to pay somewhat higher tax rates than their secretaries.

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