State of the Union: The Economy, Jobs and Politics



President Barack Obama will make the domestic economy the centerpiece of his last State of the Union address before he seeks re-election in November.

The speech is expected to call for sweeping initiatives to bolster the U.S. manufacturing sector and the labor and housing markets, and seek broad reform of the tax code.

At the same time, Obama will undoubtedly be making a case that his shepherding of the economy for the past three years warrants another four-year term.

That case was made slightly easier for the president in recent months as the unemployment rate has unexpectedly dropped to its lowest level -- 8.5% -- since early in Obama’s term.

The economy will be primary focus of the presidential campaign.  

More On This...

It’s unlikely any large initiatives will be approved by Congress in an election year, a point certainly not lost on the president. That should open the door for him to call for an array of big picture reforms without any realistic belief of their passage.

The speech will be delivered before a joint session of Congress at 9 p.m. EST. Indiana governor Mitch Daniels will give the Republican response.

Analysts believe Obama set the tone for tonight’s speech during an address in Kansas in December in which he described America being divided by economic inequalities.

Using populist themes that closely echoed the rallying cries of the Occupy Wall Street protesters, Obama has suggested the U.S. economic playing field has grown uneven. In effect that president has complained that the rich are getting richer and the poor poorer.

His Republican opponents have countered that Obama is stirring up class warfare in an effort to get re-elected.

In any case, Obama will likely call for higher taxes on the rich. His point man for that battle has been billionaire investor Warren Buffett, who has openly criticized the U.S. tax code for allowing wealthy Americans to pay their taxes at lower rates than the middle class.

Buffett’s secretary, Debbie Bosanek, whom Buffett claims pays a higher tax rate than he does, is expected to sit with First Lady Michelle Obama during the speech. Bosanek has emerged as symbol for Democrats seeking tax reforms that would raise rates on wealthy Americans.

Republicans are vehemently opposed to raising taxes on higher income Americans, arguing that these are the people who create jobs. Taxing them at a higher rate takes away their incentive to grow their businesses and create more jobs, Republicans argue.

The speech is expected to call for tax breaks for U.S. manufacturers in an effort to stem the flow of jobs oversees to countries with lower tax rates.

Obama is also expected to offer new help to struggling homeowners in the form of mortgage relief, although the effectiveness of such programs is questionable. At least two earlier programs designed to help homeowners make their monthly payments and ward off default and foreclosure have not nearly reached their goals.

And no State of the Union address would be complete without a pitch for additional domestic renewable energy sources as a way to wean the U.S. from its dependency on foreign oil.

A large audience is expected to watch the address. An estimated 43 million people watche the 2011 State of the Union address.

For the president, a lot is riding on the speech. He’s up for re-election and tonight’s speech could easily be viewed as the official kickoff for his campaign. He will undoubtedly attempt to differentiate himself from his Republican rivals, who have been making their cases in numerous televised debates for months. Attention on the Republican race has been growing as the number of candidates has winnowed down to four in recent weeks, with two front-runners emerging – former Massachusetts Governor Mitt Romney and former Speaker of the House Newt Gingrich. 

Obama will also undoubtedly be playing to Americans' strong disapproval of Congress. The president’s approval ratings have been below 50% for much of his term as the economy has struggled to gain traction, but Congress’ approval ratings are at historic low

The president will try to make his case that short-sighted Republican politics have blocked his efforts to kick start the economy.

Republicans paint Obama as a typical ‘tax and spend’ liberal Democrat whose big government ideology has made a bad economic situation worse.

Follow Dunstan Prial on Twitter @DunstanPrial