Every time the President of the United States makes a speech, the market- both Forex and Equity- reacts. While last Wednesday’s State of the Union Address may have had a temporary positive effect for the USD, the American public suffered from mixed reactions.
Is it over yet? That was the question President Obama addressed in his State of Union Speech. The president, typically an eloquent and charismatic orator seemed to be lecturing the American public, rather than trying to persuade them. Although towards the end of his 70 minute address, he finally fell back into the “YES WE CAN” mood of his campaign, and with every round of applause he smiled as if to say - see they still love me.
Unfortunately for the president the mood of the US has shifted over the course of the past year. Gone with the wind are the days of complete trust in whatever the president says. Now Americans are skeptical and wary more and more of big government’s role in their lives, and with unemployment reaching 10%, the public still believes that this recession is far from over.
The rapid decline of approval in the Democratic actions, or lack thereof, can be clearly seen by the completely unexpected win of the Republican Senator in the very liberal state of Massachusetts. This seat - which was previously held by the late senator Ted Kennedy, is considered to be one the safest seats to win for the democrat party- was won by a Republican who spoke about reducing the deficit, stopping the democrats health care reform and lowering taxes. The fact that Massachusetts has not voted for a republican senator since the late 1960’ should be a wakeup call for Obama. The country wants him to move to the center and to govern form the center as he promised in his campaign.
However, as Mr. Obama’s went on into the night, it became apparent that he has not woken up. While the speech contained some valid points- such as the Deficit freeze and capital gains cuts for small business- as he continued to speak, it became more and more clear that his address was full of contradictions and empty promises.
The speech started with some good points mainly the Budget Freeze. However, Mr. Obama followed this by stating that there would be no budget freeze until 2011- and that the saving he anticipated from this budget freeze would only reduce the deficit by 3% (about $15 billion in total- hardly enough to put even the slightest dent in America’s $1.35 trillion deficit).
While his proposal to cut the capital gains tax for small business investment is a step in the right direction- the planned propositions falls short of what is needed to generate jobs and economic growth. Moreover, this statement seemed even more confusing and conflicting, as he stuck to cap-and-trade legislation, which will in affect increase taxes on business and will kill jobs.
Next he moved on to job creation- another very positive point. While on the surface it sounds very nice that he wishes to create new jobs, you have to ask yourself, how does he plan to create these jobs? And what types of jobs does he even plan to create?
Moreover, when the Bush administration tax cuts expire next year the taxes of the people who own businesses that provide jobs will increase. If a business pays more in taxes it tends to hire fewer workers.
This speech clearly exemplifies that Obama still retains his core belief that big government and government control is the answer to all problems- the opposite of Bill Clinton who in 1994 said in his state of the union that “the era of big government is over” which began a cycle of growth and prosperity. Obama , unlike Clinton is refusing to move to the center. It’s nice that students will be able to get loans that they won’t have to repay so they can go to college. But where are the jobs when they graduate? Obama’s answer is to spend, spend, spend. This is not the change that most Americans believe in.
