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SOTU: Will Obama's economic proposals work?

COMMENTARY In his third State of the Union speech on Tuesday night, President Obama outlined an "economic blueprint" for the United States that emphasized the need to give all Americans a "fair shot," reiterating his longstanding message that "Americans who work hard and play by the rules every day deserve a government and a financial system that does the same."

Prior to the president's address, I said he should do two things:defend the administration's economic policies to date, and talk about what will be done from this point forward to solve the nation's economic problems.

However, except for the bailout of the auto industry and a brief mention of a few other successful initiatives such as financial reform, the president didn't say much about his administration's past economic policies. In retrospect, that was probably wise. Trying to convince people that the stimulus and bailout policies were more effective than they realize simply brings these issues into the limelight. The policies were very unpopular, and arguing with the public about their success is a losing proposition. It's better to look ahead. As Obama said in the speech:

I want to speak about how we move forward, and lay out a blueprint for an economy that's built to last -- an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values.

The president began the discussion of his economic initiatives by outlining a proposal to revive manufacturing in the U.S. The plan is to use tax breaks to encourage companies to locate in the U.S., to keep jobs at home by eliminating tax advantages for companies that move offshore, to lower corporate taxes in the U.S., and to appeal to the goodwill of U.S. companies (who should do what they can do to bring jobs back to this country).

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Obama also wants to boost exports. To this end, the president proposed more trade agreements (and lauded those the administration has already put into place), and he highlighted the creation of a "Trade Enforcement Unit that will be charged with investigating unfair trade practices in countries like China."

Finally, the plan to revive economic growth and employment also involved more support of small businesses. For example, tax cuts and a reduced regulatory burden, support for research and development (particularly in energy related areas), mortgage refinancing for "responsible" homeowners, an extension of the payroll tax cut, and a plan to repair crumbling infrastructure.

The plan the president outlined is fine as far as it goes, but I wanted a jobs plan that was big and bold. I wanted a plan that puts immediate job creation at the forefront. However, the Obama plan largely consists of tax cuts, it's piecemeal, and it's mostly directed at our long-term problems. Bringing businesses home doesn't happen overnight. R&D takes time, and so does infrastructure investment.

Millions of people need jobs now, not later. They don't have time to wait, for example, for manufacturing to move from China back to the U.S., and there's no certainty that will happen in any case. What was missing from the speech was a strong, coherent plan to create jobs immediately. Don't get me wrong -- we need to address our long-run problems. But we also need to get people back to work as soon as possible.

Obama's education initiatives also deal with long-term rather than short-term issues. His call to improve education at all levels, and to make sure higher education is available to everyone, is certainly welcome, and it would help us in the long-run, but it won't create many jobs over the next few months. He called for improved job retraining programs and "a national commitment to train 2 million Americans with skills that will lead directly to a job," but even those programs will take time to put into place.

Obama also mentioned other issues in the speech, such as the budget deficit and the need to regulate financial markets. The most notable proposals are his plan to impose a minimum 30 percent tax rate for incomes over a million dollars per year, and the surprisingly strong commitment to pursue financial fraud. The administration will create "a Financial Crimes Unit of highly trained investigators to crack down on large-scale fraud and protect people's investments." Obama will also ask the attorney general "to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis." This is very much needed, and should have been done long ago.

Finally, in my list of recommendations, I also mentioned the need to hammer Republicans over obstructionism, and on this topic the president said, "I intend to fight obstruction with action." I'm not exactly sure how that works, but at least he mentioned the issue.

Right now, there are millions of people unemployed. The state of the union is in poor shape. We have an employment crisis, and putting people back to work ought to be treated as a national emergency. Although I am less enthusiastic than the administration about an export led strategy for economic growth, the speech hit many of the right notes where our structural problems are concerned. And there were certainly nods toward our short-run problems as well.

But a strong sense of urgency about our immediate employment problem was missing from the speech. It's probably wise politically not to promise to create jobs between now and November. That could backfire if unemployment falls sluggishly or not at all (and if unemployment falls at a relatively fast pace, the administration can still claim credit). Nevertheless, I would have preferred a more concerted and detailed effort to deal with our immediate employment problems.

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