Obama’s State of the Union: Questioning the Worth of “Reform” in Growth Strategy

President Obama has indicated the direction of his administrative policy in his State of the Union address this year with a new economic growth strategy that aims at reinvigorating the U.S.’ international competitiveness and creating jobs.

The background for this is the president’s strong sense of danger as he expressed the need for “reform.”

The spread of the Internet as well as technological innovation has brought about a great change in the world. We’ve also seen the rise in power of China and India. As it is, America’s economic strength has been whittled away as its jobs have been snatched away.

Even though they did escape the financial crisis, the unemployment rate is still as high as nine percent, and for two consecutive years they have been burdened with a budget deficit of over $1 trillion, a historical worst. Financial reform and job expansion are burning issues.

The president revealed his plan to put a five-year freeze on the public health care insurance and pension budget, excluding defense expenditures. According to this plan, over a 10-year period the deficit will be cut by $400 billion (about 32.8 trillion yen).

As for job expansion, the president is mainly investing in technological innovation, including IT and clean energy development, rapid rail transit and infrastructure improvement and training.

He also plans to include a world-class corporation tax rate cut — a first in 25 years — to help stimulate corporate business.

However, this strategy is merely speculation; whether it can be implemented is unknown.

In last year’s midterm elections the Democrats had a crushing defeat when the Republicans took control of the House of Representatives and increased their seats in the Senate. After implementing his strategy, the president will still need to pass several important bills; it will be difficult garner the necessary support from the Republicans.

The situation in the U.S. — i.e. trying to execute this growth strategy with both the increasing pressure from emerging nations and a leadership struggle in their Congress — is not so different from Japan.

For the United States, which is preparing for a presidential and congressional election next year, this is a very serious problem. The Republicans, now aiming at regaining its political power, probably won’t be giving in so easily.

The Republicans, who have always touted their policy of “small government” emphasizing public finance relations, have already begun to decry the president’s deficit reductions.

If the U.S.’ policy management continues to be held up in the chaos of a faction war, such a bad influence will spread to Japan and the rest of the world.

Coping with the troop withdrawals from Afghanistan and Iraq, international terrorism counter-measures, the nuclear cooperation between Iran and North Korea and diplomatic relations in the U.S.-Japan security treaty — all of these important issues just keep piling up on top of each other.

For the president’s idea of reform to come to fruition, he is going to have to demonstrate his leadership qualities by gaining the cooperation of the Republicans.