President Obama's victory in the 2012 election left Republicans in control of the House of Representatives. That left the administration with a fundamental strategic choice: to reach out to the opposition, or to use the lever of public opinion to move House Republicans in their direction. The negotiations over the fiscal cliff suggested that the White House had chosen the latter course. The president's 2013 State of the Union address -- his single best opportunity to set the agenda for his second term - offers further evidence of that choice, on which he is betting the future of his presidency.
In a wide-ranging speech focused on strengthening the middle class, Obama gave little ground to his adversaries. While he did not back away from the social policy initiatives -- on immigration, gun safety, and climate change -- that took center-stage in his second inaugural address, he clearly shifted his emphasis to the economy and jobs, which recent surveys have placed at the top of the public's concerns. He advanced a vision of an activist government that would raise wages and incomes, boost education and skills, and improve the climate for job creation. While insisting that, "Nothing I'm proposing tonight should increase the deficit by a single dime," he did not spell out how much these initiatives would add to federal spending or how their cost would be offset. He proposed no significant cuts in existing programs. And he ducked the structural problems that dominate the long-term fiscal horizon.
Speaking in advance of the speech, White House press secretary Jay Carney characterized the president's second inaugural address and the 2013 State of the Union as "two acts in the same play." Clearly, the FY2014 budget proposal will be the third act that clarifies the meaning of the second. And then comes the denouement - the partisan conflict that will determine the outcome of what the president has set in motion.
In social policy, Obama renewed his call for comprehensive immigration reform, including an earned path to citizenship for immigrants now residing in the United States illegally, and for gun legislation that bans assault weapons and high-capacity magazines as well as closing loopholes in background checks. Rather than proposing new legislation to slow climate change, he focused on executive actions his administration would take in the event of congressional inaction on a "market-based solution," and he restated his commitment to natural gas, renewable energy sources, and increased efficiency.
Concerning the economy, Obama's emphasis on restoring manufacturing jobs was notable. Among other initiatives, he proposed reforms that would lower the corporate tax rate and make the research and development tax credit permanent while providing preferential treatment for manufacturers and others who invest in the U.S. economy. Rejecting calls to institute a "territorial" tax system, which he fears would set off a race to the bottom in corporate tax rates, he called instead for a new minimum tax on offshore earnings.
Obama proposed to attack the problem of low wages and stagnant household earnings on two fronts. In education and training, he emphasized (as he has before) the crucial role of community colleges in providing marketable skills. And he endorsed a new partnership between the federal government and the states to provide access to high-quality preschool for every child, a goal that many education experts endorse. But the president was not content to rely on these long-term strategies for boosting wages. Not only did he renew his call for a "Paycheck Fairness Act" to close the gap between men and women, he also proposed an increase in the minimum wage from $7.25 to $9.00 per hour, indexed for inflation.
On the public's other major priority -- reducing the federal budget deficit -- Obama broke little new ground. In the face of looming legislative deadlines--the sequester at the end of February, the expiration of the continuing resolution at the end of March, and another encounter with the debt ceiling in late spring, the president urged agreements that would avert these events but offered nothing beyond what he had already put on the table.
While the president did offer an outline of a long-term approach, it is unlikely to satisfy the many Americans who regard the budget deficit as a grave threat to the country's future. Rather than proposing a "grand bargain," as many budget experts and bipartisan commissions have urged, he reiterated his target of $1.5 trillion in additional deficit reduction over the next decade. While this would be just enough to stabilize the ratio of debt to the Gross Domestic Product during that period, it would do little to address the long-term imbalance between the commitments we have made to programs such as Medicare, Medicaid, and Social Security and the revenues now available to fund them. Well before the end of the decade, his approach would allow the deficit to begin rising again, with no end in sight. Obama appears to have decided that there is no possibility of resolving the larger fiscal issues on terms that he and his party would find acceptable. So he will hand these issues off to the next president, who will no longer enjoy the luxury of delay.
Although the State of the Union was less about progressive principles than was the second inaugural, its tone and substance extended few olive branches to the Republicans. For a while, anyway, Obama is committed to an outside-in strategy: he will take his case to the country to build support for his program and ratchet up pressure on the opposition party to go along.
This represents a high-stakes gamble. If the strategy succeeds, the president will end up with an impressive roster of legislative accomplishments. But if it leaves Republicans unmoved, he will face an unpleasant choice between negotiating with a weakened hand and accepting gridlock.
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