State of the Union hints at Obama’s lame duck term
There has been a growing trend in the State of the Union address the President gives each year. He stands before Congress and begins to alternate between populist appeals, personalised stories, and non-starter policy proposals.
This year was no different, although there is a possibility that a couple minor changes may be made.
Little of the actual public policy substance mentioned in President Obama’s speech last night has any hope of passing two hostile houses of Congress in any form that he may want. The President’s premier proposal, an increase in the capital gains tax, is chief among these political non-starters.
Not only is the proposed tax increase horrible tax policy, the likelihood of it going anywhere is all of nil. Instead, the President should have proposed some form of corporate tax cut, which could achieve similar revenue goals while having bipartisan support in Congress.
His proposed idea of free community college is equally misguided. The proposal removes tax advantages on college savings plans (known as 529 plans) in order to lower the costs of community college. This amounts to a direct transfer from those saving for a traditional college education to those who instead choose a community college.
There is plenty of reason to believe that this would do little for the aggregate cost of education to society and could even encourage community college costs to rise, given the influx of “free money” that did not exist before. Yet all of this is a rather moot point, as the likelihood of such an expansion passing is minimal.
The President once again talked about infrastructure. He asked Congress to pass a new infrastructure bill, increasing spending on things like ports, bridges, internet, and rail lines. This says nothing about whether the aggregate lack of public spending in infrastructure is a problem.
The nation boasts a robust portfolio of infrastructure, ranging from world-class ports in places like New Orleans, Seattle, and New York to a robust highway system. There is little reason to think that more public works will solve any national problems, let alone be long-term sources of jobs.
Finally, the speech cannot be addressed without talking about international affairs. Much of the speech talked about the various conflicts the nation is or was involved in recently, from Iraq and Afghanistan, to the lingering Cuba embargo. While all of these were real issues, experience has shown that international affairs in the speech amount to mostly bluster.
The President asked for Congress to pass “a resolution to authorise the use of force against ISIL”, a group with which we are already engaged in some capacity. There was also tough talk aimed at Russia and Iran. Finally, he asked Congress to “begin the work of ending the embargo” of Cuba, which, while unlikely to pass, would be a positive development.
So what might actually pass? The expansion of the child tax credit is one notable thing, and of the proposals, this may be the least damaging. While it does expand what amounts to a popular tax loophole, the credit benefits a wide swath of the population and, as such, could garner momentum even in a hostile Congress.
Some spending must be cut to offset the cost of the tax cut, which could leave the door open to terminating some damaging federal program. Beyond that, executive action could be used to further loosen the embargo on Cuba or to reform criminal sentencing.
Today, the US faces pressing issues from the national debt to highway finance to disability insurance. Americans face a stark fiscal reality, which will require hard decisions that make the lives of many people harder. Yet it is unlikely that either the administration or Congress will be willing to take up any of these difficult issues. Fortunately, 2016 isn’t that far away. Hopefully, next election, things will be different.