For President Obama’s fourth State of the Union address—and the first one of his second term—he laid out a long list of promises, requests and proposals to bolster the middle class.
He was under particular pressure to address the economy due to the latest jobs report, which showed that the unemployment rate had bumped up to 7.9%.
Despite this, his winning a second term was seen as a validation of his economic policy. So the president started the address by listing the economic achievements of his first term, including a healing housing market, a rebounding stock market, stronger protections for consumers (most likely referencing the busy-at-work Consumer Financial Protection Bureau), six million added jobs and a recovered auto industry.
But the president admitted that there was still much more work to do—a familiar refrain from his re-election campaign. ”It is our unfinished task to restore the basic bargain that built this country. The idea that, if you work hard and meet your responsibilities, you can get ahead, no matter where you come from, what you look like or who you love.”
President Obama’s hour-long speech contained many bullet points—more than we can mention here. We’ve pulled out the portions that could affect your finances and the economy in the next four years and beyond.
The Sequester Is a “Really Bad Idea”
The president turned first to the impending sequester: Some $85 billion in automatic spending cuts are scheduled to take effect March 1st. They’re meant to incentivize lawmakers to come up with a deficit reduction plan, but he called them “arbitrary” and “harsh,” noting that they “would certainly slow our recovery.” A notable sound bite that political pundits remarked upon after the speech: “We can’t just cut our way to prosperity.”
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His proposal: Focus on reducing government spending on Medicare through “modest reforms,” and slow healthcare cost growth—the biggest challenge to reducing the deficit—by paying for the quality of medical care instead of the amount.
“Now Is the Time for Comprehensive Tax Reform”
One thing that Democrats and Republicans can agree on is the costly complexity of our tax code—Americans clock about 6 billions hours each year tackling their taxes.
President Obama gave a nod to this, saying, “The American people deserve a tax code that helps small businesses spend less time filling out complicated forms, and more time expanding and hiring—a tax code that ensures billionaires with high-powered accountants can’t pay a lower rate than their hard-working secretaries.” (A reference to Buffet’s proposed tax increase on the rich.) He did concede, however, that reforming the tax code wouldn’t be easy.
His proposal: Close tax loopholes for the wealthy and simplify the tax code.