January 19, 2015 at 10:39 pm ET
Looking Back at Finance in SOTU
In a departure from the traditional secrecy surrounding the State of the Union address, the White House spent the last several days outlining the important proposals that President Barack Obama will mention in his speech on Tuesday night. As a result, expect to hear about a plan to make the first two years of community college free, as well as a proposal to beef up cybersecurity collaboration between businesses and the federal government. We also know that Obama will lay out a tax reform agenda that raises rates on capital gains and for the wealthiest Americans as a way to finance lower taxes for the middle class.
While all of those will be important stories to follow, today we take a look back at what Obama had to say about financial issues during his 2014 State of the Union. We’ll explore how things have changed and whether Obama lived up to his promises, or if Congress met his challenges.
1) A Rebounding Housing Market
“Here are the results of your efforts: The lowest unemployment rate in over five years. A rebounding housing market. A manufacturing sector that’s adding jobs for the first time since the 1990s.”
Last year, President Obama highlighted “a rebounding housing market” as one of the reasons why 2013 had been a promising year for the U.S. economic recovery. In 2014, the sector continued to see an increase in home prices, but at a lower rate than the previous year. In terms of sales, purchases of new and existing homes last year through November fell to 58.72 million from the 60.73 million sold during the same period in 2013.
2) Avoiding Government Shutdown
“But when that debate prevents us from carrying out even the most basic functions of our democracy – when our differences shut down government or threaten the full faith and credit of the United States – then we are not doing right by the American people.”
President Obama used his address last year to criticize Washington for failing to fulfill “even the most basic functions of our democracy,” a reference to the 2013 debt-ceiling crisis and federal government shutdown. This past year was notably absent of such high drama, though passage of a $1.1 trillion spending bill, which funds most of the government through September, unexpectedly went down to the wire. The current debt-ceiling suspension ends in March, so expect talk this year of whether the GOP will use its newfound Senate majority to rekindle the debate.
3) Increased Hiring
“With the economy picking up speed, companies say they intend to hire more people this year. And over half of big manufacturers say they’re thinking of insourcing jobs from abroad.”
President Obama predicted a surge in hiring for 2014. He was largely correct. According to the Bureau of Labor Statistics, the national unemployment rate fell to 5.6 percent in December, its lowest level since 2008 and down from 6.7 percent a year earlier. On average, the U.S. economy added 246,000 jobs each month last year, up from 194,000 in 2013.
4) Tax Reform
“Both Democrats and Republicans have argued that our tax code is riddled with wasteful, complicated loopholes that punish businesses investing here, and reward companies that keep profits abroad. Let’s flip that equation. Let’s work together to close those loopholes, end those incentives to ship jobs overseas, and lower tax rates for businesses that create jobs here at home. Moreover, we can take the money we save with this transition to tax reform to create jobs rebuilding our roads, upgrading our ports, unclogging our commutes – because in today’s global economy, first-class jobs gravitate to first-class infrastructure.”
The closest Washington came to comprehensive tax reform last year was a proposal put forth by then-Ways and Means Committee Chairman David Camp (R-Mich.) who has since retired. Camp’s plan drew criticism from both sides of the political spectrum and the measure never came to the House floor for a vote. Regarding corporate tax inversions, the Treasury Department in September took some administrative actions to discourage future inversions, and some potential off-shore deals have been scuttled as a result. Legislative proposals put forth by lawmakers such as Sen. Chuck Schumer (D-N.Y.) would have gone further than the Treasury actions, but such measures never made their way through a divided Congress.
5) MyRA Savings Bond
“Let’s do more to help Americans save for retirement. Today, most workers don’t have a pension. A Social Security check often isn’t enough on its own. And while the stock market has doubled over the last five years, that doesn’t help folks who don’t have 401ks. That’s why, tomorrow, I will direct the Treasury to create a new way for working Americans to start their own retirement savings: MyRA. It’s a new savings bond that encourages folks to build a nest egg. MyRA guarantees a decent return with no risk of losing what you put in. And if this Congress wants to help, work with me to fix an upside-down tax code that gives big tax breaks to help the wealthy save, but does little to nothing for middle-class Americans. Offer every American access to an automatic IRA on the job, so they can save at work just like everyone in this chamber can. And since the most important investment many families make is their home, send me legislation that protects taxpayers from footing the bill for a housing crisis ever again, and keeps the dream of homeownership alive for future generations of Americans.”
One of Obama’s most ambitious proposals last year was the creation of a government-backed retirement savings account known as MyRA. The goal is to offer a reliable, low-risk investment for low- and middle-income Americans who either work part-time or for small businesses who do not provide more traditional retirement savings options. However, the rulemaking process did not conclude until late last year and the program only recently became available to the public, making it difficult to determine what level of success MyRA has achieved.