Nat O'Connor: I'm sure I'm not the only one who watched President Obama's State of the Union address to Congress. (Various versions of it are on YouTube, including here). I'd be interested to hear any comments you have on it.
It provided an interesting summary of the major steps that were taken in the USA to combat recession. And one can compare with what was done here. It's also interesting to see Obama's proposals for continued major reforms despite the recession.
President Obama said that he "hated" the bank bailout, but thought it was necessary. He noted that the US had recovered most of the money spent on recovering the banks, and his proposed levy on major institutions was designed to recoup the rest, so that taxpayers do not lose out. Is there much chance of taxpayers being 100 per cent paid back for the bank bailout here? Would Irish banks (once bailed out) have the capacity to pay a significant levy to bridge the gap?
He spoke about making 25 tax cuts, benefitting 95 per cent of working families. He also noted that income tax wasn't raised for anyone. Meanwhile, we had the income levy that affected everyone, and the pension levy on public servants. Our tax base simply collapsed without any cuts.
Obama's primary focus in 2010 is to be jobs, he said, and outlined some details of a Jobs Bill to be put before Congress. For example, his solution to the problem of credit flow was to take $30 billion of the levy from Wall Street banks and give it to community banks to lend to small businesses. Again, could our banks provide enough funds through a levy in order to fund such a scheme?
While admitting the $1 trillion added to the US national debt, Obama emphasised the role of the Recovery Act in developing infrastructure, such as high speed rail and clean energy facilities, to make up for the US lagging behind other countries. You might call this a classic case of counter-cyclical investment by the state in useful infrastructure that will help generate economic growth in the future. (At the same time, Obama is not a pure Keynesian. Many of his proposals are tax cuts or tax breaks).
However, despite the estimated 2 million jobs created by the stimulus package, this is overshadowed by the 7 million jobs lost in the recession. Hence, Obama spoke of the need for a long-term plan for economic growth; including "real reform" of the banking/financial system, major investment in basic research and various proposals about energy (including new generation nuclear power plants, offshore oil and gas development, biofuels and clean coal technologies). He spoke of making clean energy profitable (presumably by carbon tax or green subsidy) and the need to develop the US as a leading clean energy economy. He set an ambitious target to double exports in five years and compete for new markets, with some reform of export controls to help this. There seems to be a real risk that our "national plan" is to wait for the worst to be over and then get back to business as usual, with little real reform of finance/banking and no real strategy to diversify the economy.
In terms of skills and education, Obama proposed the end of the tax subsidy to banks for providing student loans and the conversion of that expenditure into $10 thousand tax breaks for families paying for college. He also took on the question of student debt, setting a maximum of 10 per cent of wages to be paid towards student loans per year, and for outstanding debt to be forgiven after 20 years (or 10 years if they enter public service). Personal debt is going to be a burden in Ireland for years to come. Could debt forgiveness become easier here than outright bankruptcy?
Obama also spoke about propping up house prices and helping people move to more affordable mortgages. Mortgages are going to become a major burden on many families as ECB interest rates rise (as they will). Major reform of the mortgage market may be required here to allow people to move to keep costs affordable. Also, our house prices were way above the equivalent US values (in terms of relating prices to likely rental income). So, we need to let the price of housing fall and stay lower, despite the obvious damage that has done to families' major asset and investments like property-based pension schemes.
In his speech, Obama also re-stated his case for health insurance reform, as well as speaking about the wars in Iraq and Afghanistan. He said he will use an executive order to progress a commission to look at ways of dealing with the US's enormous debt. He also spoke against the election spending ruling by the Supreme Court and spoke of lobbying reform. He spoke of civil rights, including taking steps to ensure equal pay for equal work for women.
At one point, Obama challenged the elected members of Congress to stop thinking solely about the next election, and to think about the needs of the next generation.