State of the Union: Plenty of plans, not much economic promise
FORTUNE — How serious is this president about promoting economic growth? Growing the U.S. economy wasn’t an agenda item in President Obama’s second inaugural address, a play to his liberal supporters that instead dwelled on inequality, climate change, feminism, gay rights, and long voter lines.
But jobs and the economy were front and center in last night’s State of the Union address, Obama’s first since becoming the only Democratic president since FDR to twice win a majority of voters. Here’s the catch: This president wants Washington-managed growth, designed to “reignite the true engine of America’s economic growth — a rising, thriving middle class.”
In the White House’s view, big business, which employs about 50 million Americans –nearly half the American workforce — is mostly a problem, not a partner, in this enterprise. Business leaders stand accused of unfairness — whether it’s related to paying workers or paying taxes.
In his first term, the Obama Administration’s message toward business leaders was, at best, schizophrenic — making a showy production of putting business leaders on his advisory jobs council, then hauling Wall Street CEOs to the White House to be lectured on the dangers of greed. Two weeks ago, President Obama let his jobs council expire, even though unemployment barely dropped during the short and meek life of this Potemkin village — from 8.3% to 7.9%. Now both gloves are off.
“Corporate profits have rocketed to all-time highs — but for more than a decade, wages and incomes have barely budged,” President Obama declared minutes into last night’s address. In a White House that is bereft of business leaders, this is a matter of “fairness,” so the solution is to raise the minimum wage from $7.25 to $9 a hour — a rate that’s higher than any state’s minimum other than Washington — even though that’s likely to cost jobs in an economy that contracted last quarter.
“Working folks shouldn’t have to wait year after year for the minimum wage to go up while CEO pay has never been higher,” the president declared, even though chief executive pay actually peaked in 2000 and has since fallen, according to research by the University of Chicago’s Steven Neil Kaplan.
Then there is the issue of taxes. The populist-minded president has always condemned “tax breaks for Big Oil” and tax policies that enable companies to “ship jobs overseas.”
But in 2011, asserting that “we have to make America the best place on Earth to do business,” he called for tax reform to lower the corporate rate — “one of the highest in the world” — and close loopholes to pay for it. That’s a policy Republicans can agree with, and one that business leaders say would help bring some of that $2 trillion sitting overseas home to invest in jobs, and that economists say would boost GDP.
Last year, though, the White House replaced that idea with a plan to punish multinationals with a minimum tax for doing business overseas and tax incentives to reward manufacturers who stay here. A similar, though more vague, plan was featured in last night’s speech.
There were plenty of recycled and semi-recycled ideas (there always are in State of the Union messages, regardless of who’s president) to boost the economy: Oil and gas taxes to fund green projects, a “fix-it-first” plan to rebuild infrastructure, a mortgage refinance plan.
Deep in the mind-numbing litany of government-guided programs that President Obama laid out last night were two that could actually help our jobs problem and should involve business leaders as partners. One was a plan to create 15 hubs to train workers for high-skilled manufacturing jobs. Tens of thousands of good jobs are coming on line in industries such as aerospace and utilities as the baby boomers retire, yet American workers lack the training to fill them. The plan calls for a partnership with the Defense and Energy departments. But it shouldn’t involve more government spending. As the General Accounting Office has noted, we already waste $18 billion on ineffective job training programs.
The second initiative, promoted by high-tech companies like Microsoft (MSFT), is to create incentives for K-12 schools to produce students with math, science, and engineering skills. As I wrote last week, only a fraction of our 42,000 high schools have advanced placement computer science programs, which gives high-tech companies an excuse to look overseas for talent.
But these are plans for tomorrow’s workers, not today’s unemployed. The president didn’t offer much comfort to the manager and owners of American businesses who complain that high tax rates, strangling regulation, and the emergence of Obamacare are thwarting any plans to invest in American jobs.
In the short term, we’re mired in a new normal of high unemployment, nervous business leaders, and a continued, unsettling, war in Washington over the nation’s mounting debt.