Reflections on the 2010 State of Union
ACR recaps highlights from the President’s State of the Union Address
Below is a broad summary of the proposals offered by the President. Following the political upset in Massachusetts two weeks ago, The New York Times reports the President tried to “restore public confidence in his administration and to convince the American people that he is intensely focused on the issues that concern them most: jobs and the economy.” A recent poll suggests he succeeded, with CBS News reporting that “83% of speech watchers approve of the proposals the president made in his speech.”
Additionally, next week the President will release his FY 2011 Budget. As you may recall, the hallmark of the President’s budget last year was healthcare reform and he proposed placing a cap on the itemized deduction, including the charitable deduction, to help pay for healthcare reform. While the President’s FY 2011 Budget will likely not focus on healthcare, there is a strong likelihood that many of the revenue raisers proposed last year, such as the itemized deduction provision, will be included in the budget again as a potential “deficit reduction” measure (expected to be a major focus of the President’s agenda) or as a pay-for for other public policy priorities.
Summary of Proposals
Jobs Bill Forthcoming
The President called on the Senate to pass the House’s December-passed jobs bill, telling the chamber “I want a jobs bill on my desk without delay.”
- It is unlikely the Senate will pass the House jobs bill unamended, but we do expect the Senate to follow through with their own jobs bill very soon.
- There is strong political momentum in both parties to pass job-creating legislation.
New Bank Fee and Regulations
The President repeated his call for greater regulation of the financial system and for curbs on allowing banks to grow “too big to fail”.
- He asked for legislation creating “real reform”, and threatened to veto anything less.
He also reiterated his plan to impose a new bank tax (the Financial Crisis Responsibility Fee (FCRF)) on major financial institutions as a way to recoup money spent through TARP.
- The bank tax proposal was met with a standing ovation from both Republicans and Democrats, an indication of its political popularity.
- We will have more information about the proposed FCRF after the release of the President’s budget next Monday.
- The House Ways & Means Committee is already drafting legislation, and we expect hearings on the fee to be announced soon.
Tax and Lending Proposals
Obama proposed taking $30 billion of TARP money to help community banks lend to small businesses.
He also proposed an extension of 50% bonus depreciation for businesses, cutting capital gains taxes on investments in small business, and a new tax credit for hiring additional workers or raising wages.
A product of the President’s Economic Recovery Advisory Board (PERAB), Obama called on Congress to provide “Cash for Caulkers”, tax incentives to use more energy-efficient products and weatherize homes and offices.
The President repeated his call to crack down on tax breaks for companies that shift work offshore.
Middle Class Task Force Initiatives
This week, Vice President Biden’s Task Force on the Middle Class issued a five-point plan of ‘investments for middle class families’. The President repeated some of these recommendations last night, including:
- Doubling the Child and Dependent Care Tax Credit for middle class families making under $85,000.
+ This is accomplished by increasing their tax credit rate from 20% to 35% for qualifying expenses.
- Limiting a student’s federal loan payments to 10 percent of his/her income above a basic living allowance.
+ The president also proposed ending “unwarranted taxpayer-subsidies” for banks issuing student loans, instead giving families a $10,000 tax credit for four years of college.
- Creating a system of automatic workplace IRAs, requiring all employers to give the option for employees to enroll in a direct-deposit IRA.
Deficit Reduction
The President proposed a three-year freeze on discretionary spending starting in 2011 (exempting national security, Medicare, Medicaid and Social Security spending).
- He threatened to veto legislation spending beyond this freeze.
The President said he would issue an executive order to create a commission focused on reducing the deficit, after the Senate voted yesterday against legislation that would have done the same.
He shared his long-expected plan to let tax cuts on individuals making over $250,000 expire, as well as the tax incentives for oil companies and investment fund managers.
Energy
Notably, the President specifically called for construction of new nuclear power facilities, exploration into new offshore oil drilling, coupled with passage of climate change legislation.
- Notable, he did not say that climate change legislation had to include a cap-and-trade market for emissions.
Trade
Also a product of the PERAB’s recommendations, he proposed launching a National Export Initiative to help farmers and small businesses increase their exports, with the goal of doubling all exports in five years.
The President also supported continuing trade negotiations and “strengthening ties” with partners like South Korea, Colombia, and Panama.
- Although far from a call for Congress to pass the pending free trade agreements, when you combine this with the lack of any mention of key pro-union initiatives like The Employee Free Choice Act / Card Check, many pro-trade groups see a glimpse of hope for these deals.
Health Care
The President acknowledged the present political unpopularity of health care reform, but maintained it is crucial that Congress finish work on a reform package.
- Speaker Pelosi has floated the idea of a two-track plan for health care reform, with Congress pursuing easier-to-pass incremental changes now and comprehensive reform later.
- It remains unclear exactly how Congress will proceed with completing Health Care Reform, but the intention to pass legislation remains strong.
The President acknowledged the First Lady’s new initiative to tackle the epidemic of childhood obesity and making our kids healthier.
Campaign Finance Reform
In a rare moment, the President expressed disapproval of the recent Supreme Court ruling on corporate and union campaign spending. The President said the ruling “reversed a century of law,” which could “open the floodgates for special interests—including foreign companies—to spend without limit in our elections.”
The President called on Congress to pass legislation effectively reversing the Court’s decision, which was met with applause from both sides of the Chamber.
