Wednesday, January 21, 2015

Obama's State of the Union address

Watching President Obama's State of the Union address last night, the first impression was that from a public speaking point of view this harkened back to his 2008 and 2009 speeches.  He was relaxed, confident, and articulate in the way that he delivered his mostly scripted words.  Not be be irreverent but is seemed as if he was "free at last".  Free from his own party's thin skinned politicos who hemmed him in with their concerns about how his words would affect them and free, in his mind, from the need to cede ground to the Republicans and thus tactically keep them corralled as the "no" party.

Whether highlights or lowlights, key takeaways that come to mind here this morning are as follows.

---The expected references to taxes on the wealthy and more taxes on the banks were not specific but clearly indicative of proposals for more tax.  There seemed to be no distinction between taxes on wealth and taxes on productive investment.  He specifically used the phrase "pay taxes on accumulated wealth" which here seemed to be a new and a somewhat radical statement since he didn't reference estate taxes or reported earnings in tandem with that.  An increase in capital gains taxes that he proposes would not be popular to some but 28% is not unlike the Reagan and Clinton years so it could be digested over time.  As for the tax on large banks with assets above certain levels, one could ask why only banks if he is going to make such a proposal.  Are banks inherently more evil that other large global corporations or are they just easier to pick on?  Of course the Republican Congress will approve little of this and even that would be possible only if a major revision of the tax code could be negotiated, something both parties always say they favor but never happens.  I wonder why. Actually I don't.

---The President made an oblique reference to increasing home ownership without referencing the Democratic initiative that is being implemented by his administration, one that is also favored by some Republicans, to allow certain mortgage loans with just a 3% down payment.  After what we have just been through that idea seems to be borderline insane.

---As for foreign policy the President's emphasis on combining strong diplomacy with a potential for force was listened to a little wistfully here even if those were surely the right words to say.  There are so many difficult situations in the world today and Syria, for one, is no shining example of the effectiveness of that approach as executed by Obama.  He mentioned his support of a moderate opposition force in Syria, but that was mentioned four months ago as something that was being orchestrated on Saudi Arabian soil and nothing has come of it yet.  Now that is forgotten it seems and there is some kind of new initiative that will take many months to reach any critical mass.  It is not clear that any President could have handled this difficult situation well, as it is sort of a lose lose mess of options, but Obama's words of hope were not too hopeful here.

His comments on Afghanistan and the "successful" completion of the U.S. mission there beyond ten thousand remaining advisory troops was nice to say considering all of the sacrifice of our soldiers, but everyone with a pulse knows that Afghanistan is far from a done deal.  Will we still regularly send planeloads of cash as we had been doing with Karzai, literally, to the new government to payoff everyone in this corrupt group of elitists, tribal leaders, and terrorists to get them to cooperate in some way?  One other open issue is the terrorist threat globally. His reassuring words felt good and he's right that much has been done to combat it.  The truth though seems to be that the terrorist threat is spawning into something more insidious that makes it also "far from a done deal", very far.  Any President and any Congress has much more vigilance required ahead.  

---The focus on the middle class was foreshadowed by administration officials and expected, and that focus is needed.  To suggest that it is so simple as to be solved by more tax breaks is simply naive and Obama is smart enough to know that.  Yes, it is terrific that unemployment is down significantly over the last few years but as everyone knows wages have been stagnant.  That may be beginning to change and would be a positive for our economy if that hoped for thrust is not derailed by disinflation. The real problem, however, is structural.  The number of "real" middle class jobs that this economy produces are simply not what they were in the 1950's through the 1980's.  Technology and globalization have changed the equation.  Raising the minimum wage to even $12 an hour, the highest level that could be remotely politically possible, leads to a salary of $25,000.  That's not completely poor but it is could not be considered at even the bottom rung of middle class except in the poorest areas of the country.

---The President's refrain that we, or he as says "I", far too much, have "laid a new foundation" is a little premature.  That's not to discount what the Federal Reserve and the Obama administration have accomplished by staying the course on initiatives to improve the economy.  There's more to be done, but Obama is right to suggest that we have come a long way economically since 2008, and it is a big deal, a really big deal given all of the constant naysayers in Congress and in parts of the media.  What is overlooked here by many is that this progress was initially the result of the of the greatest bipartisan effort of this still new century.  That was the hand off from the Bush to the Obama administration of the policy thrusts to deal with the terrible recessionary crisis at that time.  Bush made some hard choices and Obama continued to make more, choices that were absolutely necessary in hindsight.  Who could imagine what this country would be like if Bush and Obama had let the auto industry collapse.  Who can imagine what would have happened if both administrations had not injected huge amounts of liquidity into the system at that time.

Maybe bipartisanship only happens under extreme duress, but why wait for that eventuality.

---There was much more that could be commented on.  That the Republicans could not manage even a smattering of applause on any mention of the challenge of climate change and environmental issues was discouraging.  It's an issue.  My younger daughter spent the first half of 2014 in China and her photos of and experience of the pollution there at times are mind boggling.  How can this issue simply be ignored by the leaders that now control Congress.  It won't go away if they simply look away, but almost everyone knows this but them.  This should not be a political issue.  The same can be said for infrastructure spending in the U.S.  This is an issue that is essential to address for long term economic growth, not to mention just plain old safety, and this is so obvious that it too should not be a political issue.

One can only hope that in these next two years some progress can be made on the above issues and many others.  Immigration comes to mind as extremely urgent as well, but now I must have lunch and know that readers, if they have made it this far, are flagging as well.



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