January 31, 2018

Examining the State of the Union

Marty Paone, Rich Meade

Insight into the president’s annual address to Congress

In his inaugural State of the Union address, President Donald Trump spoke for an hour and 20 minutes, making it the third longest SOTU in history. Keeping with tradition, the president recounted his first year in office and illustrated his priorities to come. Prime Policy Group Vice Chairman, Rich Meade, and Senior Advisor, Marty Paone, reflect on these remarks, through their expert Republican and Democratic lenses.

 

Republican Perspective

During his address to Congress, the president made many calls for them to take legislative action to address goals he put forward. There is a lot of emphasis on what the President said in his speech, but there was also some relief about what the President did not say, especially in reference to specific trade agreements such as NAFTA and KORUS. President Trump only said he wants to fix trade deals and negotiate new ones, without mention of pulling out of these two trade agreements.

Early in the evening, President Trump called upon Congress to empower his Cabinet Secretaries to reward good federal workers and remove those who undermine public trust or fail the American people. A rewrite of our federal workforce policies could bring dramatic changes to the federal government. It is unclear whether there would be bipartisan effort to tackle the issue. However, he also called for an end to sequestration on defense and a need for building up our nuclear arsenal, which does have bipartisan interest.

One significant policy proposal put forward in the President’s speech is an infrastructure package that generates at least $1.5 trillion in new infrastructure investment in roads, bridges, highways, railways and waterways. Previously, he had been calling for a $1 trillion investment. Last night he talked about leveraging federal dollars to unleash spending from state and local governments as well as the private sector.

Investment in workforce development, including investment in job training and supporting vocational schools, was also a major legislative directive. Similarly, the president also called for paid family leave. Everyone will be anxious to see the details on a paid leave proposal and if it is included in Monday’s expected budget release. This Congress is not likely to act on a paid leave initiative, but it could gain traction next year, particularly if one or both chambers flip to Democratic control.

His speech offered perhaps the most specificity on immigration reform, as the President put forth four pillars of an immigration reform bill he hopes Congress will pass.

The last three pillars of the president’s plan will make it difficult for Democrats, and even some Republicans, to support such a package. Conversely, it was hoped that these three elements would induce otherwise reluctant Republicans to accept the Dreamers portion of the proposal.

Democratic Perspective

State of the Union speeches are traditionally broad brush descriptions of the current state of affairs and the president’s desire for future progress. In that vein there was nothing unusual in last night’s speech. Presidents have in the past been known to ‘fudge’ a bit on the facts, and this was no exception; i.e. using job figures since the election and not his inauguration.

President Trump’s address touched on many areas like an infrastructure program, immigration reform, defense spending, the recently enacted tax bill, trade, reducing federal regulations, job training, family leave, lower prescription drug prices and other items. He asked for bipartisan cooperation in dealing with these issues, but Democrats will likely question his sincerity, as they view such a request through the prism of his incessant Twitter attacks and other inflammatory rhetoric.

On immigration the president has put forth an ambitious offer, one which has drawn considerable fire from his base, because it offers a path to citizenship for 1.8 million Dreamers. His plan also calls for a large investment in border security – the wall – doing away with the Visa lottery program and reducing chain migration. While the offer is ambitious, it does not deal with the elephant in the room: what to do with the 11 million illegal immigrants currently in the country. Two thirds of these people have been here over a decade, and 8 million of them comprise 5 percent of our domestic work force.

The President also noted the need to free defense spending from the confines of the sequester, which is currently the law of the land for both defense and non-defense discretionary spending. He did not, however, seek the same relief for domestic spending. This would make domestic spending compete for the programs like battling opioids, going after drug dealers, lower prescription drug pricing, family leave, job training, education, child nutrition, farm programs, TSA, homeland security, Coast Guard, FAA, etc., to all compete for an ever smaller pot of money because of the sequester. The Budget Control Act sequester has already had a limiting effect on such spending – 2017 domestic spending outside of Social Security and Medicare as a percentage of GDP was 11.3 percent, which is less than it was in 2008 before President Obama took office (11.7 percent), yet the nation’s population in need of such services has grown by over 21 million citizens. So it’s no surprise that Democrats have called for the lifting of the sequester caps for both sides of the ledger. As a reminder, here are only eight days remaining before the government once again faces a shut down or the need for another Continuing Resolution to keep the lights on. Hopefully this one will only be needed to give the appropriators time to flesh out a spending agreement that reflects a lifting of the caps for defense and non- defense spending.

The President called for a hefty $1.5 trillion infrastructure program, but thus far his funding proposal seeking to leverage this spending with only a $200 billion federal contribution. This has been met by with consternation from both sides of the aisle. If an infrastructure bill is going to be enacted, the funding mechanism must be addressed, and the traditional method of increasing the gas tax to replenish the Highway Trust Fund will be a difficult lift in an election year. The current five-year highway bill signed by President Obama in December 2015 contained some gas tax revenue and a patchwork of other offsets. To pull this off, the Department of Treasury and the Office of Management and Budget will have to devise new offsets for this bill that won’t be labeled as tax increases.

There is still more to be done. Democrats will now be watching to see if the president will move toward achieving bipartisan consensus on last night’s proposals. In addition to DACA, there is the government funding/BCA cap issue; a Disaster Supplemental for Texas, Florida, Puerto Rico and the Virgin Islands; Flood Insurance; Tax Extenders; Debt Limit extension; Pensions; a new Farm Bill and a host of others. While his base may not support bipartisan compromises, if the President secures them, his chances of maintaining Republican control of Congress in 2018 improves dramatically, as does his 2020 reelection prospects.


Rich Meade

Rich Meade, a Vice Chairman at Prime Policy Group and Chair of the firm’s Healthcare Practice has over 25 years of experience in legislative, regulatory, political and public relations strategy. He previously served as Chief of Staff to the House Budget Committee. Rich has helped his clients navigate many complex regulatory and legislative landscapes to achieve many public policy successes including transitioning to a new Medicare payment and quality system, and developing, with the Centers for Medicare and Medicaid Services (CMS) and Office of the National Coordinator for Health Information Technology (ONC), a health information exchange (HIE) on the Nationwide Health Information Network (NwHIN).

Marty Paone

Martin P. Paone is a Senate Procedure expert and serves as a Senior Advisor at Prime Policy Group. Marty rejoined the firm after a two-year hiatus spent working for President Obama as his Deputy Assistant for Legislative Affairs and Senate Liaison. Marty served on Capitol Hill for 32 years, including 13 years as Democratic Secretary.