Trade, global economic competition, job growth, the Federal deficit, spending cuts, taxes, infrastructure investments, bio-tech & clean technology innovation and education reform were the themes and focus of President Obama’s annual State of the Union address to a newly divided Congress last night. And today, it appears that financial Markets are rallying in response to the President’s address with the Dow Jones breaking the 12,000 mark for the first time since 2008. President Obama outlined what he called a plan to “win the future” — his blueprint for Federal spending and budget priorities in critical areas like education, high-speed rail, clean-energy technology and high-speed Internet to help the nation weather the unsettling impact of globalization and new competitive challenges from emerging powers like China and India; and increased economic and trade competition from traditional allies such as Europe, Canada and Australia. “The rules,” he said, of global trade and competition “have changed.”
President Obama challenged Americans to unleash our creative and competitive spirit, to set aside our partisan differences, and unite together around a common goal of outcompeting other nations in a rapidly shifting global economy. He also called for progress on stalled WTO trade pacts – known as the Doha Round – job creation through new infrastructure investments in roads, technological innovation and education, reworking the corporate tax code, and freezing discretionary spending to cut the Federal budget deficit. With Republicans taking control of the House of Representatives and U.S. growth still sluggish, Obama said his proposals were aimed at creating jobs and reorienting the economy to confront challenges from abroad.
‘The rules of global trade and competition have changed.’
Instead of pushing wedge issues like healthcare reform and financial regulatory reforms, as he did in the first two years of his term, Obama with this State of the Union addressed, shifted his administration’s focus to global competitiveness, job growth, education reform and technology and infrastructure investments. This suggests that ‘business-friendly’ issues such as job growth and infrastructure investments, as well as global economic policies will move further up the policy agenda. “Corporate profits are up and the economy is growing again, but we have never measured progress by these yardsticks alone,” Obama said in his speech. “At stake is whether new jobs and industries take root in this country, or somewhere else.” To help “maintain America’s leadership in a rapidly changing world,” Obama called for Congress to extend tax credits to fund college education, proposed joining with business to expand wireless access and pledged to work with states to curb medical malpractice costs, or tort reform, a longstanding Republican talking point.
While Obama echoed themes pushed by the Business Roundtable and the US Chamber of Commerce in recent weeks, he proposed them with his own spin: instead of reducing corporate taxes he proposed cutting corporate tax rates, while closing corporate tax loopholes so that the net budget impact would be zero. The president also called for ending $4 Bn a year in tax subsidies to the highly profitable oil and gas industries. And though he urged Congress to approve a free-trade agreement with South Korea in the coming months, he didn’t give a deadline for pacts with Colombia and Panama. Multinational companies led by Caterpillar have pushed for speedy implementation of those deals as well.
At stake is whether new jobs and industries take root in this country, or somewhere else.
Today, the financial Markets appear to be rallying around the President’s proposed budget priorities. The Standard & Poor’s 500 Index added 0.3 percent at 11:26 a.m. New York time, while the Dow Jones Industrial Average earlier topped 12,000 for the first time since June 2008. Stocks rose, sending the Standard & Poor’s 500 Index to a fourth straight gain, after new-home sales in the US beat estimates and amid speculation the Federal Reserve will keep stimulus measures in place, while commodities advanced and Treasuries fell. The Dollar Index fell 0.2 percent to a two- month low. The 10-year Treasury note yield climbed seven basis points to 3.39 percent. The S&P GSCI Commodities Index rallied over 1%, led by cotton, coffee and sugar prices – an inflationary indicator.
Sources: Reuters, Bloomberg, WSJ, ITN Video: WSJ.com
