State of the Union Recap: A Look at the President’s Plan for Jobs and the Economy
During his January 25 State of the Union address, President Obama offered a number of proposals designed to jumpstart the sluggish economy, create more U.S. jobs, and sharpen U.S. competitiveness. Below are the key proposals and the Chamber’s reaction.
Obama: “Race to the Top should be the approach we follow this year as we replace No Child Left Behind with a law that’s more flexible and focused on what’s best for our kids … Over the next 10 years, with so many baby boomers retiring from our classrooms, we want to prepare 100,000 new teachers in the fields of science and technology and engineering and math … And this year, I ask Congress to go further, and make permanent our tuition tax credit – worth $10,000 of four years of college.”
The Chamber’s position: The Chamber applauds the president for making education reform a top priority. Among developed countries, the United States ranks 21st out of 30 in science literacy and 25th out of 30 in mathematics literacy. Perhaps our greatest shortcoming is the 1.2 million students who fail to graduate from high school each year. It is time to reauthorize and update the Elementary and Secondary Education Act (formerly known as No Child Left Behind), but it must be done right. ESEA reauthorization must demand high-performing teachers, high standards for all students, reliable annual assessment data, and proficiency in math and reading.
Obama: “I’m asking Congress to eliminate the billions in taxpayers dollars we currently give to oil companies … I challenge you to join me in setting a new goal: By 2035, 80% of America’s electricity will come from clean energy sources.”
The Chamber’s position: The Chamber supports increased research and development in clean energy technologies. However, the president’s clean energy mandate is wholly unrealistic. It could require a more than 700% percent increase in non-hydro renewable generation and a more than doubling of nuclear power, while virtually eliminating the country’s most available, proven, and economic domestic energy resource—coal.
In addition, raising taxes on the oil industry—as the President proposed in his address—will harm the economy, cost jobs, and make the United States more dependent on foreign oil. The Chamber supports an “all of the above” energy strategy—the development of both renewable and conventional energy sources. Picking winners and losers, as the administration proposes, is the wrong approach.
Obama: “If you have ideas on how to improve this law by making care better or more affordable, I am eager to work with you. We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses … I’m willing to look at other ideas to bring down costs, including one that Republicans suggested last year – medical malpractice reform to rein in frivolous lawsuits.
The Chamber’s position: The Chamber vigorously opposed last year’s health care law because it imposes mandates and regulatory burdens and raises taxes. One of the most onerous burdens is the requirement that businesses file 1099 IRS forms for all non-credit card, business-to-business transactions worth $600 or more in a year. The Chamber is encouraged by the president’s pledge to correct this flaw. Similarly, the Chamber wholeheartedly supports the president’s call for meaningful medical malpractice reform. America’s broken medical liability system imposes high costs on patients, health care providers, and taxpayers. Last September, the respected medical journal Health Affairs published a study that estimated the total cost of America’s medical malpractice system at $55.6 billion a year.
Obama: “I am prepared to work with Republicans and Democrats to protect our borders, enforce our laws, and address the millions of undocumented workers who are now living in the shadows … And let’s stop expelling talented, responsible young people who could be staffing our research labs or starting a new business, who could be further enriching this nation.”
The Chamber’s position: Comprehensive immigration reform is long overdue. The nation’s dysfunctional immigration policy, which has unfortunately driven many states to pursue their own solutions, must be reformed to address both enforcement and the legitimate workforce needs of the nation’s employers.
Obama: “Over the last two years, we’ve begun rebuilding for the 21st century, a project that has meant thousands of good jobs for the hard-hit construction industry. And tonight, I’m proposing that we redouble those efforts.”
The Chamber’s position: The nation’s transportation, energy, telecommunications and water infrastructure are in dire need of investment. In its 2010-2011 Global Competitiveness Report, the World Economic Forum ranked the United States just 23rd in quality of overall infrastructure. The Chamber expects the president’s budget to contain specifics with regard to reforming federal transportation programs for transparency, accountability and focus and boosting public and private investment in highways, public transportation, air traffic control systems, and ports and inland waterways. In addition, regulatory roadblocks that are keeping $180 billion in private infrastructure investment on the sidelines must be removed, and governments must incentivize private sector investment.
Obama: “I’m asking Democrats and Republicans to simplify the [tax] system. Get rid of the loopholes. Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years—without adding to our deficit. It can be done … We simply can’t afford a permanent extension of the tax cuts for the wealthiest 2% of all Americans … the best thing we could do on taxes for all Americans is to simplify the individual tax code.”
The Chamber’s position: President Obama’s call for lowering the corporate tax rate and simplifying the tax code is a positive step forward. Tax reform should lower the corporate tax rate; eliminate double taxation on U.S. multinationals by replacing the worldwide tax system with a territorial system for the taxation of foreign source income; provide simple, predictable, and easy to understand tax rules to improve compliance; make business tax provisions permanent to reduce uncertainty; and not disproportionately burden a specific sector, industry, or income group. The Chamber opposes allowing current individual tax rates to expire for the nation’s successful small businesses.
Obama: “Last month, we finalized a trade agreement with South Korea that will support at least 70,000 jobs. This agreement has unprecedented support from business and labor, Democrats and Republicans, and I ask this Congress to pass it as soon as possible … Before I took office, I made it clear that we would enforce our trade agreements, and that I would only sign deals that keep faith with American workers and promote American jobs. That’s what we did with Korea, and that’s what I intend to do as we pursue agreements with Panama and Colombia and continue our Asia Pacific and global trade talks.”
The Chamber’s position: The Chamber declared a national goal of doubling U.S. exports in five years before the president issued the same declaration during his 2010 State of the Union speech. Enacting trade agreements with South Korea, Panama, and Colombia represent significant steps toward reaching that goal. With a South Korea-E.U. trade agreement scheduled to go into effect on July 1, 345,000 U.S. workers are at risk of losing their jobs, and American companies will see $35 billion in exports disappear if the United States doesn’t complete its own deal with the Koreans. The U.S. economy is expected to receive a $12 billion boost as a result of a U.S.-Korea FTA.
Obama: “I’ve ordered a review of government regulations. When we find rules that put an unnecessary burden on businesses, we will fix them.”
The Chamber’s position: The Chamber welcomes the president’s executive order to restore balance to government regulations. However, to date the administration has presided over a surge in regulations. HHS is expected to release 30,000 pages of new healthcare regulations, many aimed at small employers. EPA is expanding its regulatory reach on carbon dioxide emissions. And 11 different agencies are drafting 243 new rules governing the cost and access to credit for businesses.
Excessive and costly regulations are harming the economy and inhibiting job creation. Compliance costs harm small businesses the most. Businesses with fewer than 20 employees incur regulatory costs 42% higher than larger businesses of up to 500 employees. The average regulatory cost for each employee of a small business exceeds $10,000 per year.
The Chamber supports regulatory reform that repeals or replaces outdated or ineffective regulations and ensures realistic cost-benefit analyses using quality data. The Chamber also believes that Congress should reclaim some of the regulatory authority it has delegated to the agencies and also implement effective checks and balances on agency power.