President Obama will give his annual State of the Union address on Jan. 20. Heritage experts identified 33 policies in areas ranging from the economy to religious liberty that the president should consider for his 2015 address.
- Foreign Policy and National Security
- Marriage and Religious Liberty
- Spending and Entitlements
1. Advance economic freedom and opportunity for all. It’s time to restore America’s economic freedom. As documented in the Index of Economic Freedom, America has become much less free economically since 2009, with much-needed job-creating entrepreneurial growth stymied by government interference and a disturbing trend toward cronyism. As Americans more than ever look to their future with growing frustration, 2015 should be the year of action to put America back on the path to freedom and revitalize its entrepreneurial pulse.
Anthony Kim, Senior Policy Analyst, Economic Freedom
2. Promote trade and prosperity. Obama should announce his intent to conclude trade agreements that reduce barriers to international trade and investment, unencumbered by extraneous labor and environmental provisions. Trade agreements must promote economic freedom – not big government.
Bryan Riley, Jay Van Andel Senior Policy Analyst in Trade Policy.
3. Improve small and start-up businesses’ access to the capital needed to grow and create jobs. Implement the bi-partisan JOBS Act passed in 2012 and reduce costly bureaucratic constraints faced by small and start-up businesses seeking to raise capital. Specifically, simplify the statutory small issue exemption, allow venture exchanges, safeguard the current accredited investor thresholds and reduce the regulatory burden on small public companies.
David Burton, Senior Fellow, Economic Policy
4. Recognize that federal housing policy has failed. Just two years after bailing out the Federal Housing Administration with nearly $2 billion, the Obama administration announced last week that it will reduce the fees the FHA charges to insure mortgages. Nearly seven years after bailing out Fannie and Freddie, the most the administration has done is support more of the same policies that bankrupted the companies and put taxpayers on the hook for trillions. The irony is that, while these policies are supposed to make housing more affordable, they do the opposite. It is time to admit that federal housing policy has failed, and long past the time to eliminate Fannie and Freddie as well as to return to a smaller, more targeted role for the FHA.
Norbert Michel, Research Fellow in Financial Regulations
5. Make business tax reform an explicit priority. American families struggling to get ahead during this ongoing weak economic recovery need the stronger growth that fundamental tax reform would provide. Unfortunately, fresh off his victory of raising tax rates on high-earners in 2013, Obama has shown no signs of wanting to engage in a reform that would lower rates to improve the incentives for engaging in the productive activities that generate growth. He has indicated he is interested in business-only reform. We have the highest business tax rate in the world and tax our businesses on their foreign income in an uncompetitive way, so business tax reform would have a significant positive economic benefit. Obama has a proposal he released a few years ago that could serve as a starting point for negotiations with Congress. Business reform will occur only if the president leads the effort. He can signal he is willing to do that in his speech by saying it is one of priorities in 2015, that he is appointing a prominent member of his economic team to lead negotiations with Congress, and setting a deadline for a plan to arrive on his desk. Anything less and business tax reform will not happen in 2015.
Curtis Dubay, Research Fellow in Tax and Economic Policy.
6. Ease up on consumer credit. The Dodd-Frank financial regulation law imbued the new Consumer Finance Protection Bureau with virtually unlimited authority over every form of consumer credit. Not surprisingly, the flood of new regulations has made banking and financial services more costly and less accessible to average Americans. If Obama truly cares about the “middle class,” he will work with Congress to rein in the CFPB and make it more accountable.
7. End export subsidies. Several of America’s most successful multinational corporations regularly benefit from hundreds of millions of dollars in export subsidies. Taxpayers are ultimately on the hook for the loans and loan guarantees provided to foreign firms (and foreign governments such as China, Russia and Venezuela) for the purchase of U.S. exports. The discount financing puts domestic firms at a competitive disadvantage. The Export-Import Bank is a Depression-era relic, and its charter should be allowed to expire.
8. Constrain regulatory excess. Agencies frequently mislead Congress and the public about the impacts of regulation. They fail to properly perform scientific and economic analyses before imposing rules and repeatedly rig many of the analyses that are conducted. Reforms are needed to impose accountability on regulators and Congress, which too often delegates its responsibility for policy decisions to regulatory agencies. First and foremost, all new major regulations should be required to be explicitly approved by Congress in order to take effect.
Diane Katz, Research Fellow in Regulatory Policy
9. Protect Americans from dangerous environmental overreach. The EPA and Army Corps have proposed a rule amending the definition of waters regulated by the federal government. This controversial rule would allow the agencies to regulate almost any type of water body, from most ditches to depressions in land that are dry most of the year except when there is heavy rain. Water quality is important, but this worthy goal does not justify or require such broad overreach by the federal government. Further, the EPA also has prematurely proposed a new standard for ground level ozone, the primary component in smog. According to one study, this rule could be the most expensive regulation in U.S. history if allowed to go forward but would have little meaningful health benefits. The president should direct the EPA and Army Corps to discontinue progress on these sweeping rules.
Daren Bakst, Research Fellow in Agricultural Policy
10. Open access to domestic and foreign markets. With its wealth of natural resources, the U.S. could offer even more opportunities to reap the economic benefits of domestic production by opening federal lands and federal waters that are currently off limits to exploration and development. Furthermore, the recent growth in domestic energy production has positioned the United States to export more energy. Free trade is imperative to a free society because it fosters economic growth and improves human well-being. The president should show leadership and encourage his Department of Energy and Congress to treat energy like any other good or service that is traded freely around the world and allow U.S. producers to export more energy by lifting restrictions on liquefied natural gas and crude oil.
11. Eliminate using taxpayer money to pick winners and losers in the energy marketplace. For far too long, the Department of Energy has attempted to use taxpayer money to drive technologies to the market, crippling the role of entrepreneurs and wasting billions of taxpayer dollars in the process. The rationale for these initiatives is that a gap exists between basic research and economic viability and that spending more taxpayer money will attract private investment for commercialization. When the government attempts to drive technological commercialization, it circumvents the competitive process that properly assigns risks and rewards in an open market. By removing capital from the private sector to support government-supported projects, this intervention also creates a dependency on the taxpayer that can hinder innovation over the long term. Basic research that has promising commercial application will attract private investment. The president should discourage using taxpayer dollars to force commercialization and instead push for change in our national labs that would unlock resources there to be used in the market.
12. Pull back on expensive, onerous regulations that provide little to no environmental benefit. The federal government has implemented stringent regulations that disproportionately affect certain energy sources or technologies. For instance, the EPA’s New Source Performance Standards for new power plants set greenhouse gas emission regulations so stringent that they effectively prohibit construction of new coal-fired power plants. By significantly reducing the use of coal, the EPA’s greenhouse gas regulations will drive up energy costs for American families for no meaningful benefit. Pollution should not go unchecked, but the EPA continually misrepresents costs, exaggerates benefits and uses unsound science to justify unreasonable regulations that have little to do with the costs and benefits and much to do with targeting particular energy sources.
13. Allow all energy projects to form master limited partnerships. Master limited partnerships are taxed as limited partnerships but are publicly traded on the stock market. In the energy sector, the ability to form MLPs is available for mineral extraction, natural gas, oil, pipelines, geothermal and the transportation and storage of ethanol, biodiesel and other alternative fuels. Other renewable energy generation and commercial nuclear activities do not qualify. Obama should pursue an ‘all of the above’ energy policy and encourage Congress to allow all energy project investors to form MLPs, eliminate the tax credits for conventional and renewable energy sources and technologies and lower the corporate tax rate to encourage investment.
14. Restructure public power. Federal utilities known as Power Marketing Administrations were set up to provide cheap electricity to rural areas. They can sell electricity at below-market rates because of their favorable financing terms, such as federal tax exemptions and loans at below-market interest rates. Their construction, rehabilitation, operation and maintenance costs are financed through the main Department of Energy budget, offset collections, alternative financing and a reimbursable agreement with the Bureau of Reclamation. Furthermore, rural electric cooperatives are private organizations, in many cases nonprofit, that provide about 12 percent of the nation’s electricity sales. RECs receive special tax exemptions and low-interest loans from the government. The president has requested a Quadrennial Energy Review examining the nation’s energy infrastructure. In doing so, he should recognize that necessary reforms would remove privileges for federal utilities, municipal power companies and electricity cooperatives, and ultimately sell the Power Marketing Administrations to private buyers.
Nicolas Loris, Herbert and Joyce Morgan Fellow, Thomas A. Roe Institute for Economic Policy Studies
15. Finish review of Yucca Mountain. The president has spent his two terms working against Congress to manage commercial nuclear waste in the U.S. His administration has worked to thwart the plan Congress approved and replace it with an ill-conceived plan to delay the issue further with pilot interim storage sites. But the nation needs a permanent site and Obama’s plan only distracts limited resources and intellectual energy. The president should allow the process to review Yucca Mountain’s permit to be completed. Congress has not abandoned Yucca Mountain, the courts have affirmed it and science has declared it safe for the long term.
Katie Tubb, Research Associate and Coordinator, Thomas A. Roe Institute for Economic Policy Studies
Foreign Policy and National Security
16. Combat Islamist extremism and terrorism. The barbaric slaughter of eight journalists at the offices of Charlie Hebdo in Paris as well as the killing of four hostages at a Jewish grocery store in the French capital was a stark reminder of the threat posed by Islamist terrorists operating in Europe. In his State of the Union address, Obama must clearly identify the Islamist threat the free world is facing and acknowledge that we are engaged in a long, global war to defeat the Islamists. He also must remind Americans of the threat posed by Iran’s nuclear program and the need for U.S. and international sanctions to be maintained and strengthened against Tehran.
17. Address Russia’s imperialist ambitions. This is the first State of the Union address since Vladimir Putin’s brutal annexation of the Crimea and his regime’s invasion of eastern Ukraine in support of separatist forces. The president must urge NATO to stand up to Moscow and make it clear the alliance will fight to defend any member attacked by Russia.
Nile Gardiner, Director, Margaret Thatcher Center for Freedom
18. Send the IMF “Reform Package” back to the IMF—not to Congress. Back in 2010 President Obama supported adoption of a set of changes in the way the International Monetary Fund operates. The resulting IMF “reform package,” which must be approved by Congress before it can take effect, would reduce U.S. control over tens of billions of U.S. taxpayer dollars that have been reserved for IMF lending only in extreme emergency cases. If the IMF reforms are approved by Congress, those funds would be transferred to regular IMF lending procedures and a future U.S. president would not be able to stop morally hazardous bailout loans to countries (for example, Greece) whose governments have been spending too much. Meanwhile, the IMF has been giving bad policy advice to some countries. The IMF should revise its reform package, be content with the ample lending resources it already has and focus on giving better policy advice to get its member countries back on the path to greater economic freedom.
James M. Roberts, Research Fellow for Economic Freedom and Growth
19. Recognize the need to fully fund America’s defenses. The Obama administration’s defense cuts have weakened the nation’s military strength in an increasingly dangerous world. It is unacceptable to sacrifice national security on the altar of bloated and poorly managed entitlement programs, as the Obama presidency has done for the last six years. Obama should publicly recognize the need to fully fund national defense, at a time when military readiness is deteriorating.
Nile Gardiner, Director, Margaret Thatcher Center for Freedom
Spending and Entitlements
20. Recognize that Obamacare is a policy failure. Nearly five years after its passage, Obamacare hasn’t lowered health care costs, millions of people have lost their existing health plan and taxes have increased—for everyone, including the middle class—to pay for more excessive government spending. The law is having a far-reaching and harmful impact on Americans, which is why public opposition remains as strong as ever. It’s time to admit Obamacare is a failure and replace it with a new approach to health reform based on patient-choice and competition.
Alyene Senger, Research Associate, Center for Health Policy Studies
21. Strengthen Social Security for seniors and the disabled. In his fiscal year 2015 budget, Obama makes no mention that the Social Security Disability Insurance trust fund is projected to be exhausted next year. With no policy change, beneficiaries face a 19 percent indiscriminate cut to their disability benefits. Taking money out of the retirement trust fund (which itself will be exhausted by 2034) to shore up the disability program irresponsibly punts on much-needed reforms to both. Although the president’s 2015 budget includes a headline titled “Protects Social Security for Future Generations,” the president lists no policy reforms that would accomplish this. Discouragingly, Obama omitted one significant Social Security cost savings proposal—chained CPI—despite championing it in previous budgets. The president should renew his commitment to strengthen Social Security for seniors and the disabled by declaring it a top priority for this year.
Romina Boccia, Grover M. Hermann Fellow in Federal Budgetary Affairs
22. Resist a gas tax increase, live within the Highway Trust Fund’s means. Last year, Obama proposed creating one huge Transportation Trust Fund to fund Amtrak, subways, buses, highways and bridges, and a host of pet programs that have nothing to do with transportation in the modern sense of the term. Some members of Congress who embrace the president’s vision for a would-be slush fund want to increase the federal gas tax and funnel more money away from roads and bridges to these pet projects, such as the $1 million Arlington, Va., super bus stop. They see the gap between spending in revenue in the Highway Trust Fund (the fund financed with gas tax receipts that are distributed back to the states) as a revenue problem, when the real problem is a spending one. Only in the past few decades have Congress and presidential administrations decided to divert billions of dollars annually to non-road, non-bridge projects, shortchanging the motorists who pay the gas tax. Obama must resist calls for a gas tax increase and instead adhere to a user pays, user benefits system—a system that has encouraged a strong, self-funded federal highway program for years. Then, his administration should pursue pragmatic reforms that begin transferring control over the funding and spending decisions for the interstate highway system, and other projects currently funded with gas taxes, to the states to manage.
23. Scrap plans for a National Infrastructure Bank. Obama should dismiss any thoughts or recommendations from Congress to set up a National Infrastructure “Bank” intended to finance big-ticket infrastructure projects such as streetcars, rail, bridges or even schools. Past proposals have envisioned an IB that likely would give out loans or grants to states or cities, perhaps along with private sector money. Ironically, true banks do not give grants—they only give loans with interest attached. The IB would need a dedicated source of revenue to have a chance at success, which would mean an annual appropriation of General Fund revenue the country simply does not have, as the U.S. is more than $17 trillion in debt. Further, the IB would concentrate power and infrastructure decision-making in Washington, when it is the states in partnerships with cities, or the private sector alone, who know what consumers (read: drivers, etc.) prefer locally and regionally. There is no way that bureaucrats or lawmakers in Washington can be in tune with the specific needs on the ground in cities across the country. Plans for such an Infrastructure Bank should be dead on arrival at the president’s desk.
Emily Goff, Policy Analyst, Transportation and Infrastructure
24. Take steps to brighten millennials’ economic future. Obama’s recent efforts to help millennials are welcome but miss the mark. Obama’s community college proposal will do little to address student debt (now at record levels) and with a $60 billion price tag, will worsen the nation’s debt crisis in the future – a crisis that could hit millennials’ pocketbooks the hardest. Indeed, each millennial’s share of the public debt is $40,000 and is set to climb to more than $140,000 by the time they reach their 40s. Growing debt threatens millennials with the risk of higher taxes and slower economic growth during key earning years. To truly help young Americans, the president needs to address Washington’s exorbitant spending problem. To root out wasteful and duplicative spending—a cause the president has supported—he could endorse a solution such as a bipartisan waste commission to combat these errant expenditures. The president also should renew his support for the Superlative (chained) CPI for Social Security, thus signaling openness to further entitlement reforms. As entitlements are the largest drivers of spending growth—driving 85 percent of the projected increase in spending over the next decade together with interest on the debt—reforming entitlement programs is key to reducing the debt. These reforms—not additional government spending—would help secure a brighter economic future for millennials.
Michael Sargent, Research Assistant, Thomas A. Roe Institute for Economic Policy Studies
25. Measure inflation more accurately. In the past, Obama has suggested the common-sense reform of using a more accurate measure of inflation to index Social Security benefits and tax brackets. The old Consumer Price Index does not account for substitution between different types of consumption, so it overstates changes in the cost of living. The newer measure, Superlative CPI, is not perfect, but it gets closer to measuring the actual cost of living Americans face. The Superlative CPI (technically known as chain-weighted CPI) also would have the effect of keeping some people in higher tax brackets, so it would need to be offset by lowering tax rates enough to offset the tax increase. Regrettably, the president appears to have abandoned this common-sense reform in the face of pressure.
Salim Furth, Senior Policy Analyst, Macroeconomics
26. Reform welfare to encourage work. Obama should address the importance of reforming welfare to encourage work. Unfortunately, few of the federal government’s 80 means-tested welfare programs include a work requirement. Welfare should be reformed to promote self-sufficiency, making it a requirement that able-bodied adults work, prepare for work or look for work in exchange for receiving assistance. Not only does a work requirement promote self-sufficiency, but it also helps ensure welfare assistance goes to those truly in need.
Rachel Sheffield, Policy Analyst, DeVos Center for Religion and Civil Society
Marriage and Religious Liberty
27. Address the marriage crisis. President Obama should address the crisis of marital breakdown in America’s low-income and working-class communities. Today, two-thirds of children born to women with less than a high school education and more than half of children born to women with just a high school diploma are born outside of marriage. In contrast, 90 percent of children born to college-educated women are born to married parents. This trend is creating a divided society: Children of lower-income parents are often left without the stability of a married-parent home and the benefits it provides. On the other hand, their peers in the upper-income portion of America not only have the benefit of their parents’ college education, but also the benefits of marriage. This is dividing America into a “two-caste” society “with marriage and education as the dividing line.” Dr. Brad Wilcox and Dr. Robert Lerman report that 32 percent of income inequality since 1979 can be linked to the decline of marriage. America is in serious need of a pro-marriage message. For too long, Obama has failed to clearly address this issue. The president should use his unique leadership position to call for a restoration of marriage in American communities.
Rachel Sheffield, Policy Analyst, DeVos Center for Religion and Civil Society
28. Protect unborn children and women from late-term abortion. In his State of the Union address last year, Obama remarked that “we believe in the inherent dignity and equality of every human being.” Yet, he has threatened to veto legislation that would limit dangerous late-term abortion procedures after 20 weeks. That’s five months, or halfway through pregnancy, when children can feel pain and women are at increased risk for the negative effects of abortion. The vast majority of Americans, including 60 percent of women, agree with limiting late-term abortion. Today, the U.S. is one of only seven countries – among them North Korea and China – in which elective abortion after 20 weeks is allowed. The president should support legislation that recognizes that every human – from the moment of conception – is a person with intrinsic value and possesses the most basic right to life.
29. End taxpayer subsidies to Obamacare plans covering elective abortion. Before the law was passed, the president and liberal allies in Congress assured the American people that Obamacare would not fund elective abortions. “[U]nder our plan, no federal dollars will be used to fund abortions,” Obama declared in 2009. We now know that’s just another broken promise. Late last year, the Government Accountability Office identified more than 1,000 Obamacare exchange plans that cover elective abortion but remain eligible for taxpayer subsidies. Americans have long agreed that no taxpayer funds should be used for abortion. The president should stick to his promise and support the No Taxpayer Funding of Abortion Act to ensure no federal funds can be used to pay for abortion or health benefit plans that cover abortion, including those offered through Obamacare exchanges.
Sarah Torre, Policy Analyst, DeVos Center for Religion and Civil Society
30. Protect religious liberty in the marriage debate. Obama himself said that there are people of goodwill on both sides of the marriage debate, people he respects. The government should respect them too. So Obama should support the Marriage and Religious Freedom Act, which prohibits the government from discriminating against any individual or group, whether nonprofit or for-profit, based on their beliefs that marriage is the union of a man and woman or that sexual relations are reserved for marriage. The government should be prohibited from discriminating against such groups or individuals in tax policy, employment, licensing, accreditation or contracting.
31. Protect religious liberty of adoption providers. Obama has spoken often about the need to protect the weak and powerless. Who are weaker and less powerful than orphans? Helping care for children in need means promoting a wide array of foster care and adoption agencies—not driving out good providers, as has happened in Boston, Washington, D.C., and Illinois. Policy should respect the freedom of foster care and adoption agencies that believe children do best when raised in a married mother-and-father home. Obama should support the Child Welfare Provider Inclusion Act, which would protect the right of child welfare providers, including private and faith-based adoption and foster care agencies, to continue providing valuable services to families and children.
Ryan T. Anderson, William E. Simon Fellow in Religion and a Free Society
32. Lift the union “seniority ceiling.” Federal law allows union members to accept a pay increase only if their union approves it. Unions often prohibit their members from accepting individual pay increases. Many unions disapprove of performance pay and believe raises should occur on the basis of seniority. For example, United Food and Commercial Workers Local 23 recently fought in court to get unauthorized individual raises rescinded. Local 23 did not want any new hires making more than workers with greater seniority. This system forces union members to wait in line for a raise. No matter how hard they work, they cannot move ahead faster than the seniority schedule calls for. Sen. Marco Rubio, R-Fla., and Rep. Todd Rokita, R-Ill., have proposed legislation–the RAISE Act–that would lift this “seniority ceiling.” The RAISE Act would allow union members to accept individual raises without needing permission. If Obama signed it millions of workers would earn more.
33. End discrimination against non-union members. Federal law allows unions to negotiate contracts that require workers to pay union dues or get fired. These provisions cost workers such as Michael Romanchock their jobs. Romanchock worked at a Pepsi bottling plant in Pennsylvania for nine months without realizing the Teamsters had organized it. He learned about his union representation only when the union sent him a letter demanding dues. Romanchock refused to pay, so the Teamsters had him fired. In the 26 states without right-to-work laws, such coercive contracts compel workers to support organizations whose agendas they often oppose. Unions have become highly ideological organizations that spend billions on politics. Workers who want to support these unions have every right to do so, but they should not be forced to. Federal law allows unions to negotiate contracts that cover only dues-paying members. Obama should announce support for a national Right-to-Work law that makes discriminating against workers who decline to purchase union services illegal.
James Sherk, Senior Policy Analyst in Labor Economics