Obama and the Middle Class: Friend or Foe?

President Obama’s Feb. 12 State of the Union Address painted a very broad picture of his priorities for his second term in office. The speech, which lasted just less than an hour, received the predicted post-address partisan commentary. Those who support the president raved at his ambitious vision, while detractors chided the president for saying he wants to help the middle class but promotes policies that actually hurt them. Obama spent a substantial portion of his speech addressing the need to revive the middle class. Republicans and Democrats have used the middle class as a political chip for their own priorities — though in very different ways. They seem to agree that the middle class must be strengthened and grow, while disagreeing on how to do so.

Obama called on Congress to approve a minimum wage increase to $9 an hour, which would undoubtedly put more money into the pockets of hard working adults. However, the president also required the fiscal cliff compromise to extend unemployment benefits. Ironically, many states’ unemployment benefits already pay more than the minimum wage increase that he advocates. This creates a disincentive for the unemployed to go back to work — to make less money than they would through federal unemployment insurance.

The president’s address also discussed global warming. Obama called on Congress to take an aggressive stance to curb pollutants, threatening to take action himself if Congress refuses to act. Industry could see, as a result, substantial regulations from the Environmental Protection Agency (EPA) concerning anything that pollutes, but most likely anything carbon emitting. Regulating carbon emissions, economists have said, is likely to drive up the consumer price of just about everything. Electricity producers in Midwest and Southern states that rely on coal and natural gas for electricity will see higher costs of doing business, which they would likely pass along to average middle-class Americans. There is little doubt that any policy to curb global warming could have drastic impacts on the price of everything from electricity to food that every American needs.

The terms “revenue” and “investment” were predominant in the president’s remarks. He seemed to classify revenue as a loose term that generally refers to raising taxes or eliminating tax breaks or credits. Investment seemed to refer to anything that the government would spend money on. Essentially the old nomenclature of “tax and spend” has been updated so politicians can mask what they’re really trying to do. Details of this particular part of Obama’s plan were not specified, so the devil is not readily apparent. But the need for higher taxes was central to the president’s campaign, and it seems that higher taxes are on their way. With a corporate tax rate of 35 percent, America already has the highest rate of any developed country, but because of tax breaks and credits, very few corporations are taxed at that rate. Closing corporate loopholes, as the president has suggested, would effectively increase taxes on corporations and businesses while the economic recovery is still fragile. This could mean eliminating tax credits that help small businesses purchase expensive equipment or tax breaks for those who employ the handicapped or disabled. It is also unclear how Obama intends to use the revenue from these tax policy changes.

Yet of all the topics covered in the State of the Union Address, it was Senator Marco Rubio’s response that really got the pundits chirping. In the middle of his response on behalf of Republicans, the Junior Senator from Florida reached for a bottle of water outside the frame and took a sip, interrupting his comments. Commentators berated his action as unprofessional and awkward rather than focusing on the content of his message, which was a “back to basics” message of conservatism. Arguing that lower taxes, smaller government and fewer government regulations would free the economy, Rubio outlined Republican plans to build the middle class in sharp contrast to the plan Obama outlined.

A great deal of the State of the Union Address will certainly prove nothing more than political posturing, while a few of his proposed policies will almost certainly see action. It is unlikely an increase in minimum wage will get through Congress during these difficult economic times. It is also unlikely that Congress will act on global warming. It is, however, likely that Congress will at least look into gun control legislation — though the shape of the argument has changed drastically over the last few months from a weapons ban to an ammunition limit. Tax reform and immigration reform also seem likely to receive substantial attention this year, though it is currently uncertain what will come of it either.

Congress will also certainly face difficulty addressing the looming sequestration — automatic and across the board government spending cuts scheduled to take place in March. How that will play out is really anyone’s guess at this point, but one thing is certain: Kicking the can down the road affects all of us. The stock markets, employers, even the federal government are at a perpetual stand-still until the issue is resolved for good. It is a real possibility, however, that Congress will again skirt the issue and wait to deal with it at another time.

Politically, this tactic is polling more detrimental for Republicans than Democrats. It seems the public generally blames the Republican-controlled House and its ideologically divided caucus for failing to resolve the issue. However, it is worth mentioning that it is the Democratic-controlled Senate that has failed to pass a budget in four years — a budget that could have alleviated, if not eliminated the need for such drastic spending cuts. Both parties are to blame for the conundrum, and both parties are happy to blame one another. The saddest part is that it is likely to get more uncertain for businesses before it gets better, as Congress remains out of touch with the real victims of their division.

Will Brown is NUCA’s Government Relations Manager.


NUCA’s Washington Summit

May 7-9, 2013 | Washington, D.C.

NUCA’s Washington Summit provides the opportunity to meet your Congressional Representatives and express your positions on issues that affect you, your business and your industry. Even if you’ve never been to Washington, let alone lobbied Congress, NUCA staff will walk you through the issues and effective tactics for speaking to your Representatives. This is your chance to be heard along with other contractors and small business owners like you. Remember, these Congressmen and women work for you. Mark your calendars and come to Washington. In these difficult times, our industry needs to be heard!