Obama State of the Union 2013 Address: Summary and Economic Impact

The SOTU continues Obama's economic policies since becoming President. It also gave specific action steps to implement the goals outlined in Obama's Inaugural Address, given January 21, 2013. Here's a summary of the SOTU's eight major areas.

He promised to cut the same amount from Medicare as recommended in the Simpson-Bowles Report. Part of the savings already comes from lower health care costs, thanks to Obamacare. The rest will come from reducing taxpayer subsidies to prescription drug companies and "asking more from the wealthiest seniors." The third cost savings will come from basing Medicare payments on quality of care, not quantity of tests.

• Create 15 new public-private partnerships for manufacturing innovation and technology.
• Raise level of R&D to that seen during the space race.
• Fixit First program - put people to work to repair bridges and improve other infrastructure.
• Partnership to Rebuild America to attract private investment.
• Pass the rest of the American Jobs Act.
• Raise the Federal minimum wage to $9 an hour, and allow it to increase with the cost of living.
• Pass women's Paycheck Fairness Act.
• Offer incentives to companies to hire the long-term unemployed and people looking for their first job.
• Target 20 low income pockets.

Attack Climate Change:

• Speed up new oil and gas permits.
• Support R&D to help energy burn cleaner.
• Use Federal energy tax revenues to fund an Energy Security Trust to drive new R&D needed to shift cars and trucks off oil for good.
• Cut in half energy wasted in U.S. by providing Federal funds to states that increase energy efficiency.

This bill will probably pass, since the 2012 Presidential Election showed Republicans the growing power of Hispanic voters. The opposition does not want to reward illegal immigrants with amnesty. For more, see The Comprehensive Immigration Reform Bill.

Defense and Foreign Trade:

Through the SOTU, Obama is trying to steer the national debate away from austerity measures, which will restrict economic growth. The recession in Europe is one example of what happens with extended budget cutting. Here in the U.S., the economy contracted in the fourth quarter 2012 thanks to cuts in defense spending. That's because government spending is a component of GDP. Cut spending, and you cut growth.

If implemented, most of Obama's measures would stimulate growth and job creation. However, they also need to be balanced with future budget cutting and deficit reduction. Obama could follow the example of the Federal Reserve's QE4 program, and set a growth and unemployment. He could quantify budget cuts that will take place once GDP hits 4% and unemployment drops to 6%. This would curb economic expansion at the right place in the business cycle, and prevent an asset bubble. It would also coordinate fiscal policy with monetary policy, making both that much more powerful in preventing both inflation and recession.

Of course, Obama's main priority in 2012, although not stated in the SOTU, was to get reelected. Although it was a close race, his larger-than-expected majority means he will have a little bit of political capital to push for his 2013 priorities. Article updated February 13, 2013

• 2012 SOTU
• 2011 SOTU
• 2010 SOTU
• George W. Bush's Final SOTU
• Bill Clinton's Final SOTU
• George Washington's First SOTU
• Other Important SOTU