What to expect in the State of the Union

Juli Niemann Jan 24, 2012

Jeremy Hobson: Now let’s get to the State of the Union address, which President Obama will deliver to Congress tonight.

Juli Niemann is an analyst with Smith Moore and Company. She’s with us live from St. Louis as she is every Tuesday. Good morning, Juli.

Juli Niemann: Good morning Jeremy.

Hobson: So from an economic perspective, what are you gonna be watching for tonight?

Niemann: Well, a couple things. We probably will hear some new initiatives on growth, but most of that should just “stay out of the way.” Tax breaks — to return and keep it to manufacturing here. This is already happening somewhat in automotive manufacturing, but it won’t happen in electronics because costs and flexibility are so much lower in China. There’s just no way we can begin to match.

But there are other areas where you can. Take away the tax breaks from companies that have moved overseas. And least stop making it easier — and you’re losing some good tax revenue there.

We’re probably going to hear something about tax hikes for the rich; this is the Warren Buffet rule. He says it’s unfair that he pays the lower rate than his secretary. Of course, Mitt disclosed that he pays 15 percent. Now, it’s a big tax check, but it’s a very low tax rate.

And the biggest one is going to be the mortgage situation. Housing can’t recover until you stem the default flood, and that’s the ability to refinance all these underwater mortgages. That will help the housing market move ahead.

Hobson: Well Juli, a lot of stuff there. But does he have any chance of getting any of that done in an election year?

Niemann: Probably the key thing everybody’s going to be focusing on is what can be accomplished. At least this is going to be a populist speech. And long-term deficit reduction is going to be a key thing as well. This is really important because we can’t lower the amount of debt needed to finance it — that’s fiscal health. And the economy, as it recovers, interest rates are going to rise.

And the cost of our debt is going to rise. But if you don’t apply the spending tourniquet right now when the economy needs adjustment… And so you’re going to see all of the deficit hawks really talking about he’ll have to address that as well. But can anything be done with compromise? Probably not. it hasn’t been achieved in eight years, so probably won’t be now.

Hobson: Juli Niemann, analyst with Smith Moore and Company. Thanks as always.

Niemann: You bet.

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