Wonkbook: Five policies to watch from Obama's State of the Union
Last night's State of the Union will not take a place alongside Barack Obama's 2008 speech on race. It won't be mentioned in the same breath as his 2004 speech in Boston. It didn't even have the intellectual scope and narrative sweep of his 2011 speech in Osawatomie, Kansas. Rather, it was a laundry list of policies, along the lines of the State of the Unions Bill Clinton delivered late in his presidency. Which makes perfect sense. Obama is staffed by much of the same team that wrote those State of the Unions. And that formula worked. According to Gallup, the public preferred Clinton's State of the Union speeches to those of any recent president.
In terms of policy, Obama offered at least five significant proposals. First, the Buffet tax, which was a vague gesture towards a policy in Obama's September jobs speech, got fleshed out. It would act as a sort of alternative minimum tax for the very wealthy, raising the effective rate of taxpayers making more than a million dollars to at least 30 percent. It would be achieved, in part, by wiping out non-charitable tax breaks and deductions for high-earners. Notably, Mitch Daniels appeared to embrace a version of this idea in the Republican response, when he said the government should "stop sending the wealthy benefits they do not need, and stop providing them so many tax preferences that distort our economy."
Second, Obama's corporate tax reforms included a proposal for a global minimum tax. The details on this remain vague, but the basic idea is to dissuade multinationals from sheltering their income in low-tax jurisdictions -- think Ireland, or the Cayman Islands -- by making them pay a minimum tax on overseas income no matter where that income is held. As an example, let's say the minimum tax rate was 10 percent. If GE is selling goods in Germany, and getting taxed at more than 10 percent, they would be free and clear. But if they were moving money to Ireland to try and pay a six percent tax rate, they would have to pay the difference between Ireland's rate and the minimum rate -- four percent, in this case -- to the US Treasury.
Third, Obama proposed a new pay-for to try and persuade Congress to pass his infrastructure bill. In this case, he asked that half the savings from ending the wars in Iraq and Afghanistan are reinvested in US infrastructure.
Fourth, he asked Congress to pass a mass refinancing plan to help more homeowners take advantage of today's record-low interest rates. Note that this is, in limited form, something Obama could do on his own through Fannie Mae and Freddie Mac. But Fannie and Freddie only guarantee a bit more than half of the homeowners who could benefit from a policy like this one. Congressional legislation could widen the potential universe of beneficiaries. The question is, if Congress doesn't act, will Obama maximize what he can do on his own?
Finally, Obama took direct aim at the filibuster: He asked for both nominees to get an up-or-down vote within 90 days, and for Senate filibusters to require that legislators actually hold the floor and talk continuously, Jimmy Stewart-style.
Obama proposed much more policy, of course. You can see it all in Wonkblog's policy-only edit of the speech. But the caveat to almost every idea he offered is the same: Most all of them require congressional cooperation. Cooperation the Obama administration is not likely to get. All tax bills, for instance, must originate in the House, and Speaker John Boehner is not known for his interest in raising taxes on the rich.
But what viewers of the State of the Union learned was that Obama has an agenda. An ambitious one, even. Whether they approve of it, and whether they approve of congressional Republican obstructing it, remains to be seen.
In terms of 2012 politics, the speech -- and Mitt Romney's tax returns -- set up a contrast that will be made more explicit as the campaign wears on. When Obama was a candidate, he paid an almost 30 percent tax rate, and he believes folks as wealthy as him should pay even more. Romney, by contrast, is paying about half that rate, and he believes folks in his income bracket should pay even less. Quite a bit of the election, on the Democratic side at least, will be about making this contrast.
1) Read President Obama's State of the Union speech : "In the last 22 months, businesses have created more than 3 million jobs. Last year, they created the most jobs since 2005. American manufacturers are hiring again, creating jobs for the first time since the late 1990s. Together, we’ve agreed to cut the deficit by more than $2 trillion. And we’ve put in place new rules to hold Wall Street accountable, so a crisis like this never happens again. The state of our Union is getting stronger. And we’ve come too far to turn back now. As long as I’m President, I will work with anyone in this chamber to build on this momentum. But I intend to fight obstruction with action, and I will oppose any effort to return to the very same policies that brought on this economic crisis in the first place.
@AnnieLowrey: Obama calls for a "Buffett Rule": a requirement that millionaires pay at least 30% of their income in taxes. First time he's named a number.
@NorahODonnell: Obama Buffett rule would essentially double Mitt Romney's taxes
2) Read Gov. Mitch Daniels' Republican response : "On these evenings, Presidents naturally seek to find the sunny side of our national condition. But when President Obama claims that the state of our union is anything but grave, he must know in his heart that this is not true. The President did not cause the economic and fiscal crises that continue in America tonight. But he was elected on a promise to fix them, and he cannot claim that the last three years have made things anything but worse: the percentage of Americans with a job is at the lowest in decades. One in five men of prime working age, and nearly half of all persons under 30, did not go to work today.
3) The policies in the speech will do little to boost the economy in time to help Obama's re-election, reports Steven Mufson: "For election-watchers who think presidential races are always about 'the economy, stupid,' it didn’t matter much what President Obama said in his State of the Union address Tuesday night. One way or another, the tepid state of the economy is going to make the presidential election a nail-biter. If the economic recovery continued to putter along at its current rate, Obama probably would win 50.17 percent of the vote in November, according to a statistical model by Yale University economics professor Ray C. Fair, who has been studying the relationship between presidential elections and the economy for three decades...Obama doesn’t have many levers to pull. Few of the proposals he laid out Tuesday night -- tax reform, expanded job training, infrastructure investments, energy-saving incentives for manufacturers, a home-refinancing plan -- would jolt the economy before November."
4) Romney's tax returns have put him at the center of the national debate over tax policy, report Lori Montgomery and Jia Lynn Yang: "With the release of his tax returns Tuesday, Mitt Romney has emerged as Exhibit A in a political battle likely to define the 2012 election: how to tax the rich. To Democrats, Romney is benefiting from an unfair tax code that permits a man who made nearly $21 million last year to pay just 15 percent in federal taxes. In his State of the Union address Tuesday, President Obama said those earning more than $1 million a year can afford to pay more and should send at least 30 percent of their income to Washington...To Republicans, Romney is an exemplar of the capitalist system, a wealthy man who propels the economy through successful investments. Many of them think he should pay even less to the federal government. Indeed, Newt Gingrich, Romney’s chief rival for the GOP presidential nomination, has proposed eliminating taxes on investment income altogether -- a move that would push Romney’s tax rate near zero."
CHART INTERLUDE: The tax rates of presidential candidates, in one graph.
5) The IMF cut its estimates for global growth, reports Annie Lowrey: "The International Monetary Fund warned on Tuesday that global growth prospects had dimmed as the sovereign debt crisis in the euro zone entered a 'perilous new phase.' Releasing quarterly updates of three reports on the outlooks for the economy, debt and global financial stability, the fund cut its estimates of global growth this year to 3.25 percent, from the 4 percent it forecast in September, on 'sharply escalated' risks emanating from Europe...The fund cut its growth forecasts for every region in the world, as well as for trade and commodity prices. The fund now estimates that Europe will experience a mild 0.1 percent contraction -- down from a September forecast of 1.4 percent growth -- with a sharper contraction of 0.5 percent among the 17 countries that use the euro currency and deeper recessions in Italy and Spain. It also cut its estimate of global trade volumes."
@BCAppelbaum: IMF and World Bank are shrieking and banging pots about Europe in the way everyone always says they wished someone had done before a crisis.
1) The State of the Union marked Obama's turn towards populism, writes Ross Douthat: "After flirting with the role of the reasonable centrist after his party’s defeat in 2010, President Obama has decided to run for re-election as a full-throated liberal populist. There were rhetorical nods to deficit reduction, sensible regulatory reform and the Lincolnian idea that 'government should do for people only what they cannot do better by themselves, and no more.' But the substance of the speech could be summed up in one word: More. More spending on education. More spending on infrastructure. More money for green energy projects. More assistance for homeowners who are underwater on their mortgages. More tax breaks for manufacturers - for high-tech manufacturers, for manufacturers who relocate to poor areas, for manufacturers who retrain workers, for manufacturers who don’t outsource jobs, for manufacturers who upgrade their buildings ... O.K., I lost count. And all of it to be paid for, inevitably, by more taxes on the wealthy."
@NickBaumann: Obama: "You can call it class warfare all you want." GOP: Challenge accepted.
2) Obama's speech was more of the same -- and that's good, writes Jonathan Cohn: "This time, Obama offered a few new policy ideas - among them, a proposal to get more taxes from companies with operations overseas and an initiative to develop partnerships between community colleges and local businesses. He also called for some political reforms, most important among them an end to filibusters of judicial appointees. Mostly, though, he stuck to the proposals and themes he’s put out in the last six months, most memorably in his September address on jobs and his December speech on fairness. But those happened to be very good speeches - not only because their tough rhetoric but also because of their substance. Together, they sketched out an ambitious vision of government, as an engine of economic growth and protector of opportunity for the lower- and middle-classes. Tonight, Obama was doubling down on those arguments - in no small part because, as policy and politics, they seem to be paying off. "
3) But his call for protectionism is wrongheaded, writes Matthew Yglesias: "The bold, transformative Barack Obama, painter of grand vistas, is gone, replaced in his State of the Union address by a Clinton-esque figure, reciting laundry lists of small-bore proposals. There were some very good ideas for attacking the crisis of mass unemployment. Extending the payroll tax cuts without another round of policy riders and protracted negotiations should be a no-brainer. Legislation to make it easier for millions of Americans to refinance their mortgages at today’s low interest rates is a great idea that should bolster consumer demand and make it easier for the entrepreneurially inclined to start businesses. His call to avert a massive spike in student loan debt interest payments is sound, and the promise to create a federal task force on foreclosure fraud seems very smart. But framing the entire economic message of the speech was a strikingly retrograde, self-contradictory, and confused agenda of reviving American prosperity through mercantilism."
4) Romney's tax returns show the flaws of the tax code, writes Derek Thompson: "It's not that Romney tax return proves he's done something wrong. It's that his tax returns prove that the tax code is wrong. Households worth $200 million earning $20 million in investment income a year shouldn't be paying a lower tax rate than some middle class families, especially at a time when we're thinking about cutting spending that disproportionately benefits the lower and lower-middle class...Consider last night's TV debate, when Mitt Romney told Newt Gingrich that the former speaker's tax plan goes too far, since it would lower Romney's own tax rate to zero...In an election that will be about inequality and taxes, Mitt Romney tax returns are a glowing artifact of inequality in the tax code. And by proposing to make capital gains entirely tax-free, Gingrich has proposed a tax plan that would make our law even more unequal. That's why, even without the polls, you can fairly say that Mitt Romney's tax returns matter."
5) Fannie and Freddie don't deserve the blame for the housing bubble, writes Mark Zandi: "There is plenty of blame to go around for the U.S. housing bubble, but not much of it belongs to Fannie Mae and Freddie Mac. The two giant housing-finance institutions made many mistakes over the decades, some of them real whoppers, but causing house prices to soar and then crater during the past decade weren’t among them. The biggest culprits in the housing fiasco came from the private sector, and more specifically from a mortgage industry that was out of control. These included lenders who originated home loans, investment bankers who packaged them into securities, rating agencies that misjudged these securities, and global investors who bought them without much, if any, study. In other words, America’s mortgage securitization machine was fundamentally broken."
Chicago rock interlude: Wilco plays "Whole Love" live on Conan.
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Still to come: Obama pushes for a crackdown on fraud; the ranks of the uninsured rise; self-deportation has conservative roots; a new push for a clean energy standard; and a dog shows off its acting skills.
Obama is pushing for tougher laws on financial fraud, reports Edward Wyatt: "President Obama called on Congress Tuesday to toughen laws against securities fraud and to strengthen the ability of the Securities and Exchange Commission to punish Wall Street firms that repeatedly violate antifraud statutes. In his State of the Union address, Mr. Obama also said he would ask the attorney general to establish a special financial crimes unit to prosecute cases of large-scale financial fraud...The two initiatives represent an attempt to give financial regulators a greater ability to police the financial markets. In addition, the proposals seek to acknowledge the continuing frustration among many Americans -- exemplified by the Occupy Wall Street movement -- that few financial executives have been prosecuted for their actions leading up to the crisis."
Obama revived his push for corporate tax reform, reports Jonathan Weisman: "President Obama, stymied for three years on his promise to end tax incentives that move jobs overseas, went back to the well on Tuesday night with tax proposals that he said would promote domestic corporate growth. Ever since his 2008 presidential campaign, Mr. Obama has vowed to change tax measures that he says lure American companies to invest and expand overseas. It was a huge applause line on the campaign trail, but for three years the proposals have gone nowhere in the face of stiff, often angry opposition from corporations -- especially high-tech firms -- that say the proposals would kill their economic competitiveness. The proposals tied to his State of the Union address on Tuesday night would simplify those earlier measures while adding carrots to the sticks of higher taxes on overseas profits."
The Pentagon's 2013 budget will include reduced defense spending, report Julian Barnes and Adam Entous: "The Pentagon on Thursday will announce a proposal to spend $525 billion in fiscal 2013, the second year of reductions as the administration moves to roll back the military budget, U.S. officials said...The proposed 2013 spending is $51 billion lower than an earlier administration spending plan of $576 billion. The White House and Congress agreed last summer on $487 billion in cuts to defense spending over the next 10 years--forcing a reduction in the spending proposal for fiscal 2013, which begins on Oct. 1 of this year. The Pentagon is under a threat of even deeper cuts as a result of last summer's deficit-reduction deal. If Congress doesn't come up with a new plan for spending cuts or additional taxes, the Pentagon budget will be slashed by a total of roughly $1 trillion over a decade beginning in January 2013."
Consensus on a payroll tax cut extension remains elusive, reports Jonathan Weisman: "Presidential politics and a push by both sides to include pet measures could turn negotiations over the extension of President Obama’s payroll tax cut into the next partisan donnybrook on Capitol Hill, lawmakers made clear on Tuesday. Meeting for the first time, members of a new bipartisan, House-Senate committee negotiating a final version of a yearlong payroll tax cut agreed that a deal had to be struck before the end of February, when a short-term extension that passed in December will expire. Expiration of the 2011 two-percentage-point cut to the payroll tax would raise taxes on around 160 million workers, and 3 million could lose their jobless benefits if unemployment insurance is not renewed as part of the deal. Congress, already at historic lows in popularity, will take another hit if consensus cannot be reached."
Most states saw job gains in December, reports Josh Mitchell: "The jobless rate fell in 37 states and Washington, D.C., in December as the labor market strengthened, fresh government data show. The nation’s unemployment rate fell to 8.5% from November’s revised 8.7%, the Labor Department reported earlier this month. Tuesday’s report showed the gains were spread across the country. Alabama saw the biggest drop in the unemployment rate, down sixth-tenths of a percentage point to a seasonally adjusted 8.1%. Michigan -- which has benefited from a reinvigorated auto industry -- fell by half a point to 9.3%. States hit hardest by the housing crisis continue to suffer the most. Nevada again notched the highest jobless rate at 12.6%, followed by California at 11.1%. States with abundant natural resources performed the best, including North Dakota at 3.3%, Nebraska at 4.1% and South Dakota at 4.2%."
Historical correspondence interlude: Malcolm Scott Carpenter's father writes to him on the eve of Atlas 7's launch.
Healthcare was largely absent from the State of the Union, reports Sam Baker: "President Obama made only glancing references to healthcare reform during his State of the Union address Tuesday night. Although Democrats insist that Obama will be able to campaign on the healthcare law, it was almost entirely absent from a speech that helped establish the themes and frames of his reelection campaign...It's by far the smallest amount of attention healthcare has gotten in Obama's three State of the Union addresses, never mind the joint-session address he devoted entirely to trying to push healthcare across the finish line in 2009. Tuesday's speech also made no reference to medical malpractice reform, an area where Obama said last year he would be willing to work with Republicans."
The percentage of uninsured rose in 2011, reports Tim Mak: "The percentage of Americans lacking health insurance coverage rose for the fourth straight year in 2011 to 17.1 percent, a new survey showed Tuesday. The climb has been steady since Gallup began tracking whether adults have health insurance in 2008. Four years ago, only 14.8 percent of adults lacked health insurance. In December 2011, the monthly percentage of uninsured adults increased to 17.7 percent, the highest on record, reports Gallup. Since 2008, the rise in the number of adults who lack insurance is most pronounced among Asians (4.2 percent), those who makes less than $36,000 (4.1 percent), those ages 26-64 (3.8 percent) and Hispanics (3.7 percent)."
Romney's ‘self-deportation’ plan for immigration is no joke, reports Julia Preston: "When Mitt Romney said in the Republican debate on Monday night that he favored 'self-deportation' as a solution to illegal immigration, it seemed to come out of the blue, perhaps an effort, as the race moves to Florida, to soften the hard line he has staked out on immigration. In fact, that position has been advocated for years by restrictionist and conservative groups and is central to tough laws passed in Arizona, Alabama and South Carolina, among other states. Mr. Romney’s embrace of a strategy that would induce illegal immigrants to leave voluntarily places him squarely on the side of groups that want to reduce legal immigration and vigorously oppose any plan to give legal status to illegal immigrants, which they reject as amnesty. The idea arose from a recognition by those groups that no administration was going to conduct mass roundups to deport an estimated 11 million immigrants now living in the United States."
Indiana is on the verge of becoming a 'right to work' state, reports Monica Davey: "With Republican-controlled Indiana on the verge of becoming a 'right to work' state, Democrats in the State House on Tuesday took the only step they have left to prevent it, if only for a bit longer. They disappeared. Again. A final vote on the measure, which would ban union contracts from requiring nonunion members to pay fees for representation, had been expected on Tuesday in the House, which Republicans dominate 60 to 40. But with scores of union members and supporters filling the Statehouse halls in Indianapolis in protest, most Democrats refused to turn up for floor sessions -- not once but twice on Tuesday afternoon...And so, with the national spotlight soon to descend on Indianapolis for the Super Bowl and with the tense standoff only rising among lawmakers and protesters, Indiana finds itself at the center of a fight over the role of unions and their power, not unlike the issues that boiled over last year in Ohio and Wisconsin."
Adorable animals being adorable interlude: A dog shows off its acting chops.
Obama's speech is sparking a new push for a clean energy standard, reports Ben Geman: "Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) is getting close to unveiling a proposed 'clean' electric power standard - a plan President Obama admitted Tuesday night has not gained the traction that Obama had hoped. 'We are still finalizing what we are going to propose. I am planning to do that in the next few weeks,' Bingaman told E2Wire in the Capitol after Obama’s State of the Union address. The plan would require power companies to supply escalating amounts of electricity from various low-carbon (or at least lower-carbon) sources such as natural gas, wind and nuclear energy...He mentioned the standard in acknowledging that there’s not political support in Congress to pass wider climate change legislation. But Obama noted the clean energy standard hasn’t advanced either."
@fivethirtyeight: Obama 2012 energy strategy is McCain's 2008 energy strategy. That's how the window has shifted.
Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.