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2011 Obama State of the Union Address

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2011 Obama State of the Union Address U.S. President Barack Obama (Photo:Michal Czerwonka/Getty Images)

2011 Obama State of the Union Address:

Each year, the President sets his intention for the coming year with the State of the Union Address. (Read A Summary of Obama's 2012 State of the Union here.) The focus for President Obama's 2011 SOTU speech was job creation. However, most analysts agreed the speech focused on long-term solutions, such as education. An aggressive, immediate job creation stimulus program was missing. Instead, newly-elected Republican majority in the House, which was focused on reducing government spending.

Background: Economic Climate Was Still Not Strong:

Obama gave his speech during a time when the economy was slowly recovering from the financial crisis. He tried to boost consumer confidence, which was still below the critical 100 level. Confidence was low thanks to a 9.5% unemployment rate, a sluggish housing market and a $14 trillion federal debt.

Summary of the Major Points:

Obama's 2011 State of the Union address was a good indicator of the priorities in the FY 2012 Federal budget, which was released in early February. Obama's speech was supposedly to create jobs, but the actual specifics were weak. Obama said he would add 100,000 math and science teachers within 10 years and make the tuition tax credit permanent. In continuation with the ARRA stimulus program, he vowed to expand public works projects.

Obama also agreed to reduce the corporate tax rate, but suggested closing loopholes so the net effect on the budget would be zero. He also proposed freezing the discretionary spending budget at current levels, which he said "would reduce the deficit by more than $400 billion over the next decade." He also called for the expiration of the Bush tax cuts for income over $250,000. Contrary to his campaign pledges, which were anti-free trade, he agreed to approve a free-trade agreement (FTA) with South Korea.

Obama Continued His Green Focus:

Obama's goals was to cut oil consumption by 785 million barrels by 2030. As he mentioned in earlier speeches, Obama promised to boost renewable-energy investment by more than 85%. He would partly fund this by ending the $4 billion-a-year in tax subsidies to oil and gas producers. He also continued his promise to add 1 million alternative energy vehicles by 2015.

Economic Impact:

The immediate impact of Obama's business-friendly speech was the Dow went above 12,000 for the first time since 2008. Other impacts won't be so clear. Although the speech was supposed to be focused on jobs creation, it was primarily long-term. Improving education will make America more competitive, reducing the need to outsource jobs. Only half of our students are science-proficient. However, it doesn't immediately help today's unemployed. Public works projects will provide a boost to construction worker, but research shows this isn't the most cost-effective way to create jobs.

Obama's deficit reduction plans won't put a real dent in the $14 trillion debt. His proposal to reduce tax loopholes in the corporate tax rates isn't specific enough to know how it will really affect the budget. The best news was his reversal on free-trade agreements. Studies have shown that FTAs, like NAFTA, drive economic growth.

What Obama Left Out of His Speech:

Instead of Obama's plan to keep spending at 2012 levels, House Republicans proposed slashing spending to 2008 levels. This would reduce the deficit by even less than Obama’s plan, according to Stan Collender, a former congressional budget analyst. Obama also did not really protect Social Security benefits, which the Republicans had targeted as a way to reduce the deficit. Obama did not specify how much of the defense budget he would trim above the 2% cut already being proposed. FTAs with Colombia and Panama were also left out.

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