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'Granular not Grandiose': Obama's SOTU Economic Wish List

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Amidst a sea of applause, President Barack Obama took the podium last evening to deliver his fifth State of the Union address. As the first SOTU address in his "legacy" term, this speech comes on the heels of the most severe government shutdown in the nation's history and an arguably anemic roll-out of his new government health care system. This discomfort showed through in the president's bearing, causing the occasional verbal slip and pacing issues. Although he was clearly uneasy, the president crafted an aspirational plea to both sides of the aisle to cease ideological fighting and unify to push for American primacy. 

Obama's approach is divided. While elucidating a number of proposals and calling for their passage through Congress, he also commented on aggressively used executive order powers to achieve smaller goals that could be his lasting impression. These goals are far from the sweeping plans envisaged in the opening of his presidency. To wit, CBS analysts quipped the plans are "granular, not grandiose." Yet he has little choice in the impression he leaves behind; the political deadlock seems unlikely to adequately resolve itself enough for a sweeping policy move.

The president's wish list...

The crux of the following proposals move toward the strengthening of the middle class and building "new ladders of opportunity" into it. That being said, Obama's executive order powers seems somewhat limited in their intended scope. As mentioned above, current circumstances prevent huge changes, but efficient use of powers could set the stage for future political moves. Though this list is far from exhaustive, these four proposals are clearly the most applicable toward his commitment to reenergizing the middle class.

A minimum wage of $10.10

Obama announced yesterday that he would unilaterally raise all federally contracted wages to a minimum of $10.10. This move was perhaps the most obvious, especially when considering the tenor of his rhetoric last evening. Using five states that have already raised minimum wages as an example, Obama looks to springboard this government policy to include an elevated nationwide minimum wage. 

New retirement investment options

Intending to create a new bond-based retirement fund known as "MyRA," the president looks to include a new non-traditional avenue for retirement investment. This policy choice favors those who currently work under hourly wage more than the established middle class, but creating a new retirement option may bring in some small revenue streams back into the government. If all goes according to plan, this is the first goal to be achieved with the president's intended memorandum signing on Jan. 29.

Unemployment restructuring

One of the major applause lines in this year's address was a call for Congress to reinstate previously cancelled unemployment insurance legislation. Although he gave little concrete direction as to how to accomplish this, the president called for unemployment polices to be overhauled to more effectively return the currently unemployed to work. 

Tax reform and credits

Obama cited members of both sides of the aisle in claiming a flawed tax system full of holes that allow for the flight of American investment and jobs. Under new legislation, this system would receive another overhaul. While the end result of the overhaul will be markedly different considering the party priorities, the availability of common desire for change leaves this as a possible achievement moving forward. Interestingly, he called for the addition of earned income tax credits for single Americans with no dependents so as to encourage upward mobility. Likely a very popular motion among struggling college graduates, this may backfire down the line in revenue lost.

Obama and Iran

While a minor point in the speech and a slight departure from the economic thrust, Obama commented on the diplomatic situation with Iran, claiming that he would actively veto any new sanctions passed by Congress. This latest commitment comes on the heels of his administration looking to halt any capital flows to Iran. Recent misapprehensions about the current U.S.-Iran relationship (namely, that the relationship is still sorely lacking in cordiality with sanctions in place) have left a business community confused as to its stance toward Iran. That being said, Obama called for diplomacy to be given another chance to improve the relationship between the two countries. 

Taking away from the speech

The rhetoric used last night was not the strong message that earlier Obama addresses have utilized. Instead it was the language used by a president who seems resigned to small achievements in place of the grand dreams initially promised.

Given the stated goal of reinforcing the American middle class, Obama may enjoy some small positive bumps to his ailing ratings. And while he has a fair amount of political capital yet to be used domestically, the American president has offered nothing radically new in last evening's State of the Union address. He has one goal right now, and with the achievement of even one of the above, he has a chance to redefine modern American economics.

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Kurt Avard

A January 2014 addition to the Motley Fool team, Kurt Avard prefers to focus on the "dark" side of business and how it interacts with politics. Rarely writing on the same thing twice, he feels that, if he manages to convince you that the two are inexorably linked, he has adequately done his job. Follow him on Twitter @kurtsavard

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