2012 Obama State of the Union Address:
On January 24, 2012, President Obama outlined a comprehensive list of his priorities for the coming year in his State of the Union Address (SOTU). They are a continuation of his economic policies since becoming President. As in the 2011 State of the Union address, Obama focused on jobs.
For 2012, he presented an "economic blueprint" to reduce income inequality. Obama's blueprint is the opposite of trickle-down economics, which basically says what's good for business is good for the economy.
The Economic Blueprint:
Obama directly addressed income inequality by calling for an extension of the 2010 tax cuts to everyone except those making $250,000 a year or more. The rest of the Blueprint could be categorized into the following seven areas.
To create jobs and help the unemployed, Obama reminded Congress to approve the American Jobs Act. It would extend the payroll tax cut as well as extended unemployment benefits. He also wants to eliminate tax breaks for companies that move jobs overseas, lower taxes for companies that hire Americans, and give tax breaks for companies that build in distressed areas and train workers.
The blueprint included these steps to develop energy:
- Create 60,000 jobs a year by developing natural gas.
- Reduce tax credits for oil exploration and give tax credits for alternative energy development.
- Allow the development of clean energy on enough public land to power three million homes and direct the Navy to purchase enough capacity to power a quarter of a million homes a year.
Obama gave new direction for defense spending. He mentioned early in the speech his past military accomplishments -- killing Osama bin Laden, and ending the Iraq War. He went on to propose $500 billion in cuts, while increasing the ability to defend against cyber-threats. He also said he would set up a Jobs Corps for Veterans.
In the area of free trade, Obama mentioned that he increased exports by signing free trade agreements with Colombia, South Korea and Panama in 2011. He will set up a Trade Investigation Unit to enforce trade agreements. However, this was in opposition to his 2008 trade platform, which opposed these agreements. While a candidate, he promised to renegotiate NAFTA -- but has never fulfilled that promise.
Obama detailed these steps in the areas of education, housing and regulations:
- Train two million of the structurally unemployed.
- Make college more affordable by extending the tuition tax credit and doubling the number of work/study jobs.
- Address the housing crisis by giving mortgage holders $3,000 a year with a refinancing program, funded by a small fee on the big banks.
- Retain regulations, like the Dodd-Frank Wall Street Reform Act, that legislates oversight of derivatives, preventing another financial crisis.
- Ban insider trading among Congressmen.
Obama's Blueprint Won't Move Forward Without Congress:
Obama acknowledged that the Republican-controlled House will oppose him every step of the way. Since it is an election year, the Tea Party-dominated opposition will not be in a mood to support any bills the Democrats submit that support Obama's agenda. They would prefer to see the implementation of the supply-side economic policies held by one of own leading candidates Mitt Romney, Newt Gingrich and Ron Paul. In fact, 2012 could be Obama's last State of the Union address.
Obama and Republicans disagree on several issues that must be decided this year.
- The payroll tax cut and extended unemployment benefits will expire in February.
- The American Jobs Act has languished since it was introduced in September.
- Automatic spending cuts, part of the debt ceiling crisis resolution this past July, will kick in.
- The extension of the Bush tax cuts expires at the end of 2012.
If Obama's plans are implemented, they will have a positive effect on the economy.
- The American Jobs Act will create 5 million jobs.
- The Jobs Act includes extending the payroll tax cut, which creates more than 2 million jobs alone.
- Extending unemployment benefits creates more than 1 million jobs, because the unemployed are more likely to spend every penny they get on essentials.
- Better education is needed to make Americans more competitive. This will reduce unemployment, income inequality and the need to outsource jobs.
- A program to help homeowners who are underwater on their mortgages would help reduce the foreclosure pipeline that is slowing recovery of the housing market.
- Eliminating tax cuts to the wealthy won't hurt the economy, as families in high tax brackets are more likely to save than spend. The revenue saved will reduce the budget deficit and debt.
Background: Economic Climate Is Slowly Improving:
Four years later, the economy is still only slowly recovering from the financial crisis of 2008. As a result, consumer confidence is increasing, but slowly. In December, this important economic indicator had risen to 64.5, up from November. Expectations for the future are better, at 76.5, although both are still below the important 100 level. Confidence has risen at about the same rate as unemployment has fallen. The current unemployment rate had declined to 8.5% in December 2011. Obama mentioned that 3 million jobs have been created since he took office, including manufacturing jobs.
The SOTU Previews the Federal Budget:
Obama's 2012 State of the Union address is a reflection of the ongoing priorities set in the FY 2012 Federal budget, which guides government spending from October 2011-September 2012. It also provides a preview for the FY 2013 budget that will be released in early February. (Article updated January 24, 2012)