Heritage Foundation Review of the State of the Union 2015

What Obama Got Right and Wrong in the State of the Union

Heritage Foundation experts weighed in on the policies President Obama mentioned in his State of the Union Tuesday night—and how they hurt or help America. Here are all their takes on the big issues.

Economy

The Problem With Obama’s Shrinking Deficit Talking Point

President Obama touted shrinking deficits in today’s State of the Union address. This is about the only time in the foreseeable future the president will get to say that. The average annual deficit over the next decade is projected at $950 billion, just shy of a trillion. Starting this year and looking out as far as projections go, the deficit–absent further policy changes–is only heading in one direction: Up. Why address chronic and rising deficits confronting the nation, when you can enjoy a talking point while it lasts?

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— Romina Boccia

The Real Story on Obama’s Sensible Regulations

President Obama claims credit for crafting “sensible regulations” that will prevent another financial crisis as well as a new government “watchdog” to protect consumers. But the massive Dodd-Frank regulation statute actually entrenches the concept of “too-big-to-fail,” the very concept upon which bailouts are based. And the new “watchdog,” the Consumer Financial Protection Bureau, has exploited its unconstrained regulatory powers over virtually every aspect of consumer finances, including banking services, mortgages and credit cards—none of which had any connection to the financial crisis. The result has been higher costs for financial services and fewer options, which actually has inhibited the economic recovery and consumer welfare. — Diane Katz

President Obama Disappoints on Business Tax Reform

President Obama and his staff rolled out his plan to raise taxes on the rich and give targeted tax cuts to some middle class families this weekend. Surprisingly, he made little specific mention of this plan in tonight’s speech.

He mentioned a significant increase of the child care credit, which only benefits families that choose to pay for care outside the home.

Then he made vague reference to closing loopholes in the tax code, but gave little indication of which he’d like to see closed. He did make clear, of course, that he wants these undefined loopholes closed to raise taxes to pay for infrastructure spending. If loopholes are to be closed, tax rates should be lowered so as not to cause a tax hike.

He did mention that he wants to see loopholes closed that allow businesses to keep foreign income offshore. This could mean many things, but is most likely ending deferral, which allows businesses to avoid paying the highest-in-the-world corporate tax rate until they bring their foreign income back to the U.S. We need to reform how we treat businesses’ foreign income, but Obama’s plan goes in the wrong direction. We need to move to a territorial system that does not tax foreign income, just like almost all other developed nations use.

Lastly, he talked about raising taxes on wealthy heirs, which really means he wants to raise capital gains taxes on the rich. Far from soaking just the rich, higher capital gains taxes will hurt middle class and low-income families because it will slow economic growth.

The big disappointment tonight is that  Obama did not commit to lead on business tax reform. This vital policy improvement is necessary to spur economic growth, but it will only happen if the president leads the charge. His failure to take the reins likely means business tax reform will have to wait yet another year. — Curtis Dubay

Obama’s Export Subsidies Favor Only the Few

The president notes the economic benefits of exports, and recognizes that “today, our businesses export more than ever.” Why, then, is he pressing for a long-term reauthorization of the Export-Import Bank, which puts American businesses at a disadvantage by subsidizing their foreign competitors? Ex-Im’s taxpayer-backed financing largely benefits some of America’s biggest, most successful multinational corporations. With privately financed exports reaching record levels, there is no justification for continuing this cronyism. —Diane Katz

Obama Is Wrong on Internet Regulation

In his address tonight, President Obama called for a “free and open Internet.”  That is a worthy goal, but the policies he has called for would actually make the Internet less free and less open.   He has called for regulators at the Federal Communications Commission to impose heavy new regulations on the Internet providers.  These regulations would treat the companies that provide Internet access as public utilities, under rules written telephone companies over a hundred years ago.   Applying such 19th century restrictions to the Internet of the 21st century makes no sense. The predictable consequences of such regulation would leave competition reduced, Internet users worse off and the Internet less free. The FCC and Congress should reject this dangerous regulatory scheme on consumers. Instead, the Internet marketplace should be allowed to function unimpeded, policed by competition and the same competition laws that apply to other industries.(For more information, see: http://www.heritage.org/research/reports/2014/11/beyond-hypothetical-how-fcc-internet-regulation-would-hurt-consumers) — James Gattuso

Once Again with the War on Women

Well, well. It seems like President Obama needs one lesson in history and one in statistics. According to the president “this Congress still needs to pass a law that makes sure a woman is paid the same as a man for doing the same work. Really. It’s 2015. It’s time.” Actually, Congress did pass such a law in 1963 and President John F. Kennedy signed it. It is called the Equal Pay Act and the country is 52 years into it. Now on to statistics. Based on previous remarks by the president, the gender wage gap is the basis for the president’s claim that women do not receive the same pay for the same work as men. Yet even that claim has little basis in reality. The president’s very own Labor Department concluded that “the raw wage gap should not be used as the basis to justify corrective action. Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.” No thank you, Obama, we’re doing more than fine making our own choices without your misguided labor policies—they only promise to do more harm than good. — Romina Boccia

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