In delivering his second State of the Union address, President Barack Obama struck a friendly tone when speaking about US business and manufacturing’s roles in the global economy by pushing trade agreements, proposing lower corporate tax rates without adding to the deficit, and hinted toward fair trade initiatives on the US’ part. As Democrats and Republicans sat side by side for the first time, Obama also gave a conciliatory shout out to House Speaker John Boehner as “someone who began by sweeping the floors of his father’s Cincinnati bar, an attempt to bring everyone in the chamber closer together.
But, when all is said and done especially in the wake of Rep. Paul Ryan’s and Rep. Michelle Bachmann’s rebuttals the nation’s (and the people’s) debt is still higher than ever, and is projected to increase exponentially if spending is not cut.
Source: Congressional Budget Office
In his State of the Union speech, somewhere between the two highly rhetorical (and, admittedly, quite affecting) bookmarks at the open and closing, Obama managed to touch on some economic points of interest. “This is our generation’s Sputnik moment, Obama said, before proceeding heavily into how we need to out-work and out-innovate the rest of the world, primarily through investing in green tech, high-speed rail and high-speed Internet capability, to cover 98 percent of Americans.
As far as manufacturing and trade is concerned in the short and medium-term, Obama wants to “knock down barriers for companies’ success.” We can “lower corporate tax rate without adding to the deficit,” he said. “It can be done.” He wants to double exports by 2014, and hearkened back to the agreements with India and China that “support 250,000 jobs in US, and those with South Korea that support 70,000 jobs.” (He mentioned South Korea’s technological leg-up on the US at least twice, which proves the KORUS agreement to be crucial in the months to come.) Obama’s also pursuing agreements with Panama and Colombia, and continuing Asia-Pacific trade talks. In perhaps the most overt allusion to more protectionist practices, he said, “I will not hesitate to create and enforce common sense safeguards to protect American people.
Most notably, Obama mentioned that government overspending is not sustainable and that efficient government would be his focus, calling for a five-year spending freeze, which, he said, would reduce the deficit by $400 billion over 10 years, including upwards of $70 billion to be cut over five years from the defense budget. The Wall Street Journal reported this morning, “Such spending is a relatively small portion of total outlays, accounting for roughly 15% of the $3.5 trillion spent by the federal government last year. After all these statements and figures, the Washington Post‘s Michael Gerson (speaking on PBS, where I chose to watch the speech) pointed out that there was really no “policy breakthrough, and he wished Obama had spoken more about the deficit.
Let’s get one thing straight: a spending freeze is not the same, and won’t have the same effects, as simply making necessary spending cuts.
Rep. Paul Ryan made this crystal clear in his rebuttal. As the chairman of the House Budget Committee, Ryan drove his recurring theme of “limited government” home. He mentioned that the “crushing debt will soon eclipse the size of the entire economy,” and pushed for action before it’s too late. Obama’s stimulus, he said, while being sold to the people as investment, actually upped government agencies’ budgets by 84 percent.
“Washington should not be in the business of winners and losers,” he said. When a government takes on too many tasks, he argued, then it can’t do any of them very well. (Just as in Obama’s speech, Ryan failed to really outline what the Republican budgetary agenda would look like that will likely come after the president releases his budget in February.) Endless borrowing is not a strategy, Ryan ultimately concluded; spending cuts have to come first.
We’d have to agree. Before any new jobs can be created, spending must drastically decrease not just be frozen and corporate taxes should be reduced to allow businesses the latitude to invest in workers instead of being forced into compliance payouts. Although Obama made some broad gestures, all of his overtures regarding new innovation could be interpreted as a plea to the private sector to lead the way. Obama likely knows that’s where true innovation begins and ends now it’s time for his administration to enable that to happen.
MetalMiner and its sister site, Spend Matters, along with Nucor, will host a live simulcast, International Trade Breaking Point on March 1, 2011. If your company sources products from overseas, you will not want to miss this half-day event: