During the State of the Union, the President wanted to demonstrate to the American people that he understands how frustrated they are with the continued economic problems, and even with the way that Washington has been conducting itself.  The President promised to try to “create the conditions necessary for businesses to expand and hire more workers,” and outlined many plans and new initiatives.  Yet many questions remain unanswered, and there was often a disconnect between his rhetoric and his actual proposals and recent actions.

For example, during his speech, the President boasted about having cut taxes and suggested a desire to reduce government’s burden on small businesses.  But at the same time, he committed to raising taxes on investment income and on top earners, many of which are actually small businesses. 

The President mentioned plans for targeted tax cuts to stimulate job creation.  While the details will be important, some of these ideas sounded positive, such as eliminating capital gains taxes on small business investment and tax incentives for hiring and investment.  The President should also consider if there are better ways-particularly long-term, more broad-based changes to the tax code-to encourage economic growth.  Too often, temporary, highly targeted tax incentives encourage businesses to contort their behavior in order to take advantage of tax law, and end up making decision that don’t make the most sense for their companies’ future. 

Similarly, while the President acknowledges that businesses, not the government, are the engine of job creation, he pledged to continue the misguided policy of trying to micromanage the economy to artificially create “green” jobs.  Billions of dollars of subsidies have been poured into alternative fuels, and these government subsidies distort the market, propping up products such as corn-based ethanol, which isn’t particularly energy-efficient and has a dubious impact on the environment.

The President emphasized the important role that free trade plays in the U.S. economy, and the need for the U.S. to be a leader in multilateral trade negotiations and pursue free trade agreements.  Yet the informed viewer could only wonder why, then, the Administration has failed to push for the passage of the free trade agreements that have already been negotiated and need Congressional approval.

The President saved discussing health care-the issue that was the legislative focus of much of his first year in office-until relatively late in the speech.  He emphasized that the status quo is a drag on businesses and slows economic growth, something that just about everyone agrees is true.  While the President tried to sell the current health care proposals, he implicitly acknowledged that it would be an uphill battle for that legislation to become law. 

The President claimed to be open to new ideas, stating:  “if anyone from either party has a better approach that will bring down premiums, bring down the deficit, cover the uninsured, strengthen Medicare for seniors and stop insurance company abuses, let me know.”  Is this just a rhetorical ploy?  If not, then the President should consider market-based reforms such as ending the bias in favor of employer-provided health insurance, eliminating regulations that raise the cost of insurance and price people out of the insurance market, creating refundable tax credits for the purchase of private insurance, and allowing individuals to purchase insurance from any state.

Similarly, freezing non-defense discretionary spending would be a positive step, as would scouring the budget to eliminate unnecessary, duplicative programs.  Let’s hope the President is serious about doing so. 

One of the more frustrating aspects of the President’s speech was his stated desire to “change the tone” of politics, even as he engages in aggressive partisanship and politicking himself.  It takes true audacity to call to “end the outsized influence of lobbyists” and “do our work openly” when the Administration has been partaking in closed-door negotiations about the future of our health care system, cutting billion dollar deals with unions and other interest groups, and nodding as Congressional Leaders offer sweetheart deals to specific Senators as a quid-pro-quo for a vote.  If the President really wants to change how Washington works, then he should condemn how the health care negotiations have been conducted.

The President also seems uncomfortable with debates about security policy.  He demonizes his critics as merely playing politics and belittles their arguments as “schoolyard taunts about who is tough.”  Yet there are serious differences in the approaches that the President and his critics recommend for conducting the war on terror.  We saw the consequences of these decisions in the aftermath of the Christmas Day attempted terrorist attack.  The Administration chose to treat Umar Farouk Abdulmutallab, who attempted to blow up his Detroit-bound plane, as a criminal and not a terrorist, reading him his Miranda rights.  As a result, this Al Qaeda-trained operative was never interrogated.  Any information he has about upcoming plots or techniques have been denied to our intelligence officials and to those desperately trying to “connect the dots” in order to keep Americans safe.  This isn’t a debate about the appropriateness of “enhanced” interrogation techniques, but the more fundamental question whether terrorists should be treated as common criminals with the right to remain silent.  That’s not simply a manufactured political squabble: it is question vital to our national security.

Many promises that the President made during this State of the Union-to expand free trade, reduce the tax burden on small businesses, consider new ideas for health care, control spending, eliminate wasteful programs, and reduce the influence of special interests in legislative negotiation-were positive.  Let’s hope that this was more than just rhetoric, and are really promises he intends to keep.