Wharton's Eric Orts and Penn's Marc Meredith discuss the State of the Union address.

In his State of the Union address on Tuesday, U.S. President Barack Obama said hardworking Americans need the policies of “middle-class economics” that provide a level field, job opportunities and tax credits to emerge stronger in an already-rebounding economy. He defined middle-class economics as “the idea that this country does best when everyone gets their fair shot, everyone does their fair share [and] everyone plays by the same set of rules.” 

Obama said he will flesh that out in the U.S. federal budget due in two weeks. If he has his way, two-year community college education — which 40% of U.S. college students choose and and costs $60 billion over 10 years — will become free. A tax cut of up to $3,000 per child annually would aim to make childcare affordable and accessible. New laws would give workers seven days of paid sick leave each year. All of that would be funded in the coming decade by $320 billion in taxes and fees from the rich and large financial institutions with risk appetites.

That’s an ambitious list — and with only two years left in office, it’s unclear what Obama and his administration can accomplish. But Wharton legal studies and business ethics professor Eric Orts says he is “optimistic” that some of these proposals could gain some traction before Obama’s final term ends. “When the smoke clears … I think people will start to look to see if there are one or two things that can be done,” he said during an interview on the Knowledge at Wharton show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.) According to Orts, Obama “is taking the long view, checking off boxes on a lot of things” before he leaves office — and thereby setting the stage for the next administration. 

Orts was joined by University of Pennsylvania political science professor Marc Meredith, who noted that the speech felt like “a pep rally for the first 10 minutes.” Although Obama’s speech was “not a game changer” and included several proposals “that may or may not become law,” Meredith said that the President spoke more in terms of values than concrete plans and showed that he is still “a worthy adversary for Republicans.” 

“When the smoke clears … I think people will start to look to see if there are one or two things that can be done.”–Eric W. Orts

The Job Hunt

Employers were high on the President’s list. Obama noted that he wants to stop rewarding American companies that keep profits abroad, and reward those that invest at home and bring back jobs that went overseas. He also promised simpler tax systems for small business owners.

Obama urged employers to “see beyond next quarter’s earnings” and invest in their workforce. “We still need laws that strengthen rather than weaken unions, and give American workers a voice,” he said. He added that legislation is needed to ensure that women and men are paid equally. He also sought authority from Congress to protect U.S. jobs in trade deals with foreign countries and to give incentives to U.S. companies that “bring jobs back from China.” 

Across Party Lines

Obama also called for a bipartisan infrastructure plan to modernize ports, repair bridges and bring faster trains. That included a plan for “the fastest Internet” that is also “free and open.” He also sought congressional support to stop cyberattacks: “No foreign nation, no hacker, should be able to shut down our networks, steal our trade secrets or invade the privacy of American families.”

Obama began his speech by congratulating his administration for keeping the unemployment rate lower than it was before the 2008 financial crisis; for record levels of insurance coverage and high school graduation; for a “growing economy, shrinking deficits, bustling industry, booming energy production”, and for bringing back American troops from Iraq and Afghanistan. With lower oil prices — and reduced U.S. dependence on oil imports — the typical family will save $750 this year at the pump, he said.

Meredith noted during his interview with Knowledge at Wharton that Obama needed to clarify what his administration had accomplished so far — or “come 2016, Republicans will try to say [these things happened] because there was a Republican Congress.”

“The President is trying to make a case to move beyond the cynicism and make a genuine appeal.”–Eric W. Orts

Tough Negotiations

Obama took a tough stance on several issues, warning he would use his presidential veto on attempts to deny families health insurance benefits, unravel new Wall Street regulation or derail immigration reform. 

Sen. Joni Ernst of Iowa, who delivered the Republican response to Obama’s speech, stated, “Americans have been hurting, but when we demanded solutions, too often Washington responded with the same stale mindset that led to failed policies like Obamacare.” She said her party will bring ideas “that aim to cut wasteful spending and balance the budget — with meaningful reforms, not higher taxes like the President has proposed.” 

Orts and Meredith agreed that there isn’t likely going to be much movement during the next two years when it comes to key issues like income tax reform or minimum wages. However, both felt that Obama’s proposal to make community college free for students in good standing could gain some traction, provided the President finds a Republican champion to help him gain bipartisan support. “It’s an appealing idea” to many, Orts noted. “It has become a standard that you need college to enter the workforce.”

At its most basic level, the President’s address represented “a negotiation [with Republicans],” Orts said — one which leaves the Republicans with two options. The first is tomake some deals” that will reap some benefits for the Republican party. The other is to remain “the party of no,” which may spell trouble for Republicans in the next election. 

“The president is trying to make a case to move beyond the cynicism and make a genuine appeal,” Orts noted. “I’m still optimistic that there will be some meeting in the middle.”