Obama SOTU Proposals 101

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A blog about business and economics.
Feb. 13 2013 9:20 AM

Background Reading for Obama's SOTU Ideas

President Barack Obama shakes hands with House Speaker John Boehner after delivering his State of the Union address before a joint session of Congress on Feb. 12, 2013, at the U.S. Capitol in Washington, D.C.
President Barack Obama shakes hands with House Speaker John Boehner after delivering his State of the Union address before a joint session of Congress on Feb. 12, 2013, at the U.S. Capitol in Washington, D.C.

Photo by Mandel Ngan/AFP/Getty Images

Last night's State of the Union address contained a lot of policy proposals, and unlike some SOTUs they really weren't micro-initiatives. The odds of this stuff passing Congress are low, but they're big ideas and they'll likely set the course for Democratic Party thinking in years to come so it's worth your time to get informed. Here's some good background reading I've found on most of the key ideas:

Universal-ish preschool: Obama didn't quite propose universal preschool per se, but he did propose federal funding for a drastic expansion of preschool affordability. The Center for American Progress which shares a lot of ties with the Obama administration released a big proposal along these lines just last week (amazing coincidence) that probably tells you what the White House would be trying to do if Democrats had a majority in congress. Sara Mead offers some valuable background here including the sub rosa battle between advocates of preschool for 3 and 4 year olds, and those pushing more on a broad spectrum to improve education and childcare options throughout the 0-5 age range. Andy Rotherham thinks these internal divisions inside the advocacy community can be a major political obstacle, but this is one space where groups like CAP play an important role in the world of conceptual consensus-building and practical coalition-management. Back in 2007 in Slate Joel Waldfogel summarized the basic research that makes people so enthusiastic about quality preschool as a potential education game-changer.
Accreditation reform: People learn things all kinds of ways. I learn a lot from reading blogs and magazines. Hopefully people learn from reading me. I look things up on Wikipedia. I read books. I listen to lectures on iTunes. But federal funding is tied to a particular kind of learning in a particular set of institutions—college courses in accredited colleges. And who decides what an accredited college is? Why trade groups composed of accredited colleges do! The White House offered the potentially revolutionary idea of un-linked these financial streams from the accreditation cartels in a bit of a sotto voce moment last night. Kevin Carey has great background on why this matters and how it could be fleshed out.
High school reform: You heard less about K-12 from Obama last night than you often heard in the first term, but you didn't hear nothing. The president plugged vocational education and gave a particular shout-out to German options for students on a non-college path. Dana Goldstein explains what the institutions Obama referenced were and notes that a lot of his models have, in effect, outside financial support that it'll probably be difficult to replicate in a scaled-up context.
US-EU Free Trade Agreement: Recent bilateral trade agreements have often seemed to be more geopolitical than economic in nature, with the Bush/Obama trade deal with Colombia being the prime example in my view. But the European Union is already firmly entrenched in the US economic orbit and is economically gigantic, so a deal with them could make a major difference. Daniel Ikenson offers some evidence that Obama's never actually built the institutional framework that could negotiate an agreement and it's worth noting that the US-EU low-hanging fruit has already been plucked. Your basic manufactured goods flow freely across the Atlantic, so the centerpiece of a US-EU deal would have to delve into thornier terrain like government procurement rules and agriculture. In theory this could be a big deal (American transit agencies would greatly benefit, for example, from making it easier to secure European trains) but it's a heavy lift. The good news is that the initial lift—negotiating a deal—doesn't require congressional action, just for Obama to appoint a smart team to start work.
Trans-Pacific Partnership: Another trade deal, but this time one with potentially large consequences for intellectual property policy. David Levine denounced the IP aspects of this ongoing negotiation for Slate several months ago and I think continuing to pursue the deal in this form is more likely to blow up the elite consensus in favor of trade deals than lead to one being ratified.
Minimum wage: Debate on this is going to focus on whether minimum wage hikes are a job-killer or whether their opponents are big ol' meanies. A perhaps more productive lense is Dylan Matthews' point about cost-effectiveness. As detailed in a 2007 CBO study (PDF) is the minimum wage is surprisingly ill-targeted at the poor. The minimum wage hike enacted that year cost employers $11 billion in aggregate higher pay while only delivering $1.6 billion to poor families. A hike in the Earned Income Tax Credit, by contrast, delivers more than half its money to the genuinely poor. The difference is that an EITC increase has a budgetary cost to the federal government while the minimum wage doesn't. This kind of inefficient policy workaround is what you get when people become excessively focused on the formal aspects of federal budgeting
Manufacturing hubs: The president's call for the establishment of manufacturing hubs probably struck some people as metaphorical, but this is a real DC policy idea with a think tank white paper behind it and everything. Mark Muro and Jessica Lee at Brookings have the canonical statement. The federal structure of the United States government makes coherent regional planning difficult, so my hopes are not incredibly high but it's worth trying to do better.
Fix it first: I wrote about the "fix it first" approach to infrastructure spending last night and we should definitely do this. More broadly, real interest rates continue to be negative so it ought to be a no-brainer to borrow a crapload of money right now to finance projects that can be executed on a five year time horizon. As a matter of political economy, my preference would be to organize the stimulus element as giant corrupt slush-fund for incumbents mayors and governors (most of whom are Republicans, and thus their desire for a slush fund might transcend partisanship) and worry about the wonky improvement to the infrastructure planning process later, but Obama's always been a good government fanatic.
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Note that even though very little of this is going to happen in the real world, if it all did happen it would amount to a massive revolution in American education policy combined with several other big deal initiatives. And that's without considering the substantial climate change proposals that Will Oremus covers here, and the ongoing implementation of the Affordable Care Act.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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