ALEC State of the Union Response
Communications and Technology
President Obama recognized in his State of the Union address that markets are working to provide quality broadband to consumers, check bad actors, and create new businesses and millions of new jobs.
The president didn’t call for massive new government bureaucracy or new heavy-handed privacy laws or actions; in fact, he only called on Congress to adopt a bipartisan bill to curb patent trolls and litigation against innovation. This means that there is no need for new heavy-handed government efforts to overbuild broadband and no need to create new, burdensome and unworkable privacy regimes to go after perceived harms or design market outcomes.
In an all too familiar theme, President Obama continues to vacillate when it comes to explaining his energy and environmental philosophy. On the one hand, the President spoke about his idea of an “all-of-the-above” energy strategy, one that he hopes will someday lead to energy independence. On the other, he spoke about the importance of addressing climate change by reducing greenhouse gas emissions.
It will be interesting to see how he attempts to reconcile these two statements in the last three years of his presidency.
He spoke positively about the ongoing oil and natural gas boom from which many states are currently benefiting. What he did not say was that this boom has largely been brought on by technological advancements associated with hydraulic fracturing and horizontal drilling.
The president seems take credit for the fact that the United States today produces more oil than it imports, yet there was no mention of continuing this trend by opening up federally controlled land for energy exploration and development. Noticeably absent from the State of the Union was any utterance of “coal” or “Keystone XL pipeline,” two key components of an “all-of-the-above” approach.
Lastly, the President spoke about the importance of reducing greenhouse gas emissions by saying that he has “directed [his] administration to work with states, utilities, and others to set new standards on the amount of carbon pollution … power plants are allowed to dump into the air.”
The problem with this, however, is that the Environmental Protection Agency (EPA) under the Obama Administration has arguably overstepped its legal authority under the Clean Air Act by proposing and implementing regulations without significant input from states and other key stakeholders. In response to this growing concern, ALEC recently adopted the model Resolution Concerning EPA Proposed Greenhouse Gas Emission Standards for new and Existing Fossil-Fueled Power Plants designed to help states ensure that they have a seat at the table when these regulations are developed.
Tax and Fiscal Policy
President Obama’s State of the Union address contained a few positives but also many areas of concerns from a tax and fiscal policy perspective. For one, the President touted a falling national unemployment number without noting that the results across the states are decidedly mixed. In actuality, much of the story of the economic recovery from the Great Recession is a mixed story about state success and state failure driven by state policy, and not monolithic federal policy leading to a smooth and even national recovery.
The President’s rhetoric on income inequality, an issue he has called “the defining of our generation,” was largely misplaced. The President emphasized redistribution of the economic pie and ignored the real challenges to mobility posed by bad public policy, much of which he supports. We blogged on income inequality and mobility in advance of his State of the Union address, and our conclusions stand: the President focuses too much on inequality, not enough on mobility; too much on income redistribution, not enough on fundamental economic policy reform.
President Obama is quite right to focus on tax reform in his State of the Union address, particularly given that the United States has the highest corporate tax rate in the world. The states are indeed calling for corporate tax reform and 18 states have lead in lowering rates and reforming their tax code in 2013.
Most notably absent from the President’s speech was any support for solving social problems through state government, not one-size-fits-all federal policy. This is unfortunate given the benefits of federalism (see here and here) and the state’s call for less dependence on federal funds.
Once again, President Obama used his State of the Union Address to underscore a commitment to creating American jobs by increasing American exports! He cited ongoing negotiations on significant trade partnerships with Pacific Rim nations and Europe, and he highlighted an obvious way to enhance America’s trade prospects – securing Trade Promotion Authority (TPA).
TPA, also known as “Fast Track Authority” is the legislative power granted by Congress to the President to negotiate reciprocal trade agreements with legislated limitations the President must follow. In exchange for TPA, Congress agrees to implement negotiated agreements without amendments giving our President credibility during negotiations with prospective trading partners.
The US economy benefits from international trade – both imports and exports. Trade supports 38 million American jobs and one-third of all US manufacturing jobs. Crops planted on one-third of each American acre are intended for export. Trade opportunities expand when free trade agreement (FTA) partners increase. FTA partners represent only 10 percent of world GDP but are responsible for almost half of US exports. US exports to new FTA partners grow on average four times as rapidly in the period following an agreement as US exports globally.
ALEC adopted TPA model policy Resolution on Trade Promotion Authority in the 1990s. While enhancing trade during the strong economic expansion of the 1990s was good, doing so during today’s jobless economic recovery is vital.
Commerce, Insurance, and Economic Development
In a State of the Union address strongly focused on economic inequality, President Obama emphasized the importance of opportunity and noted, “The best measure of opportunity is access to a good job.” Yet, his proposal to increase the minimum wage will likely decrease access to employment prospects, especially for young and inexperienced workers.
Despite being a politically attractive option, a majority of academic studies find that increasing the minimum wage has negative effects on employment levels. While some workers receive a marginal addition to their wages, others—usually less educated or experienced—will have wages of $0 per hour because they are unable to find a job. As the unemployment rate hovers at around 7 percent, policymakers should consider policies that increase economic freedoms, such as lowering barriers to entry put in place by burdensome licensing requirements, rather than policies that would limit employment opportunities.
Continuing with the theme of increasing employment opportunities, the president underscored the ability of a “first class infrastructure” to attract “first class jobs.” Operational ports, bridges and highways are vital to a prosperous economy but the President’s plan to pay for infrastructure projects with savings from corporate tax reform will fail to provide a sustainable financing solution. Options that leverage private investment dollars, such as public-private partnerships, should be the primary consideration as policymakers examine how to pay for our nation’s infrastructure.
Justice Performance Project
Despite calling on Democrats and Republicans to work together on a variety of issues, President Obama missed a major opportunity to highlight truly bipartisan reform happening in both Congress and the states. Across the ideological spectrum, policymakers have discovered that, despite a tremendous investment, our criminal justice system is not delivering a commensurate return on public safety. With the safety of our communities and families at stake, policymakers must demand a higher level of accountability from our criminal justice spending.
Policy leaders in the states have realized that they cannot simply throw more dollars at corrections budgets to increase prison capacity. Instead, our system requires programs that are proven to reduce the likelihood that an offender will reoffend. By focusing prison space on the most serious offenders while holding nonviolent offenders accountable in ways that emphasize personal responsibility, rehabilitation, and restitution to victims, we can decrease the likelihood that an offender will return to prison.
Congress is now following the states’ lead and examining how to achieve the most public safety per taxpayer dollar. Led by a bipartisan coalition including Senators Richard Durbin, Rand Paul, Mike Lee and Patrick Leahy, the result has been a number of policy solutions including The Justice Safety Valve Act, The Smarter Sentencing Act and The Recidivism Reduction and Public Safety Act of 2013, all the subject of a Senate Judiciary Committee hearing this week.
Health and Human Services
The president spent just five minutes of the 65-minute speech discussing what many have called his signature legislative achievement, the Affordable Care Act (ACA). Eschewing issues like navigator fraud, policy cancellations, premium increases, and healthcare.gov, the president instead focused on pre-existing conditions while imploring more Americans to sign up.
Expanding access to coverage, including access for those with pre-existing conditions, is a goal shared by a majority of Americans. Fortunately, there have been alternative proposals to solving the pre-existing conditions issue for some time, all of which do not require a $1.7 trillion law.
The president also stated that 9 million Americans have signed up for private health insurance or Medicaid coverage because of ACA. While this claim has been challenged itself, conspicuously absent from the speech was the number of Americans who have now gotten health insurance who did not have it prior to the law’s passage.
Perhaps the president is still waiting to receive those numbers, or perhaps he’s waiting until open enrollment ends on March 31st to release them. Either way, it appears we’ll all have to wait a bit longer before the president speaks on the state of health care in America.
The President also failed to mention one of the key cost-savers for rising health care costs: lawsuit reform that keeps medical malpractice insurance rates in check and discourages the order of unnecessary tests and procedures. Fortunately, this is an issue that, under many circumstances, falls under the purview of state legislatures across the country, and we continue to see the states working hard to reform unfairness in civil litigation.
President Obama did, however, bring brief attention to unruly patent litigation and the need for bipartisan agreement on constructive, fair lawsuit reform in this arena. A proposal currently sits in the US Senate Judiciary Committee.
Last week was School Choice Week, which means various organizations, schools, individuals, and elected officials from all around the country showed their support for policies that expand student access to high-quality educational options. In his State of the Union address, President Obama echoed a goal similar to that of school choice advocates: “guaranteeing every child access to a world-class education.”
The similarities end there, however, with the President making no mention of school choice policies or parental empowerment. Instead, the President focused on making “high-quality pre-K available to every 4-year old,” a policy with questionable benefits to student learning and development.
Congress has already attempted to implement the president’s vision, introducing the Strong Start for America’s Children Act last November, which expands access to pre-K for 4-year olds and will cost $26.8 billion over 5 years. According to the bill, research demonstrates that high-quality pre-K programs prepare “children for success in elementary, secondary, and postsecondary education as well as helping children develop the critical physical, emotional, social, and cognitive skills that they will need for the rest of their lives.”
Despite these claims of early-education’s benefits, in a 2012 Department of Health and Human Services (HHS) evaluation of Head Start, it was revealed that the Federal pre-K program “had little to no impact on cognitive, social-emotional, health, or parenting practices of participants,” reports the Heritage Foundation.
If President Obama hopes to guarantee “every child access to a world-class education,” he should ditch expensive pre-K policies with ostensible benefits to children’s education and development. School choice is a preferable alternative, which empowers parents, drives student learning, and promotes access to effective education options for every child.