Five bites from the Obama State of the Union Speech

by YankeeJim | January 25, 2012 at 04:12 am

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Five bites from the Obama SoU speech

People can absorb six and appreciate at least three bites of something. (That is a business rule that we use in modeling.)

Ezra Klein served up five bites from his take on Obama policy from last evening’s State of the Union (SoU) speech. He and others say Clinton speeches still win the SoU contest, but Morning Joe and MSNBC brought out Bob Woodward and Tom Brokaw to assess the speech, so it must have been important.

I have already gushed over it because I am a Middle Class voter who wanted some optimism. Optimism for me comes from a President who hasn’t given up the fight and who will not succumb to Republican declinists.

Klein missed one of the most important priorities, renewing manufacturing America, and that means jobs.

Here is one weak point -- paying for infrastructure by using the war savings, shifting war expense to infrastructure. If the war expense was driving high cost and debt, there are no war savings.

“In terms of policy, Obama offered at least five significant proposals. First, the Buffet tax, which was a vague gesture towards a policy in Obama's September jobs speech, got fleshed out. It would act as a sort of alternative minimum tax for the very wealthy, raising the effective rate of taxpayers making more than a million dollars to at least 30 percent. It would be achieved, in part, by wiping out non-charitable tax breaks and deductions for high-earners. Notably, Mitch Daniels appeared to embrace a version of this idea in the Republican response, when he said the government should "stop sending the wealthy benefits they do not need, and stop providing them so many tax preferences that distort our economy."

Second, Obama's corporate tax reforms included a proposal for a global minimum tax. The details on this remain vague, but the basic idea is to dissuade multinationals from sheltering their income in low-tax jurisdictions -- think Ireland, or the Cayman Islands -- by making them pay a minimum tax on overseas income no matter where that income is held. As an example, let's say the minimum tax rate was 10 percent. If GE is selling goods in Germany, and getting taxed at more than 10 percent, they would be free and clear. But if they were moving money to Ireland to try and pay a six percent tax rate, they would have to pay the difference between Ireland's rate and the minimum rate -- four percent, in this case -- to the US Treasury.

Third, Obama proposed a new pay-for to try and persuade Congress to pass his infrastructure bill. In this case, he asked that half the savings from ending the wars in Iraq and Afghanistan are reinvested in US infrastructure.

Fourth, he asked Congress to pass a mass refinancing plan to help more homeowners take advantage of today's record-low interest rates. Note that this is, in limited form, something Obama could do on his own through Fannie Mae and Freddie Mac. But Fannie and Freddie only guarantee a bit more than half of the homeowners who could benefit from a policy like this one. Congressional legislation could widen the potential universe of beneficiaries. The question is, if Congress doesn't act, will Obama maximize what he can do on his own?

Finally, Obama took direct aim at the filibuster: He asked for both nominees to get an up-or-down vote within 90 days, and for Senate filibusters to require that legislators actually hold the floor and talk continuously, Jimmy Stewart-style.”