Another day, another speech, another shot at Republicans.

Photographer: Mark Wilson/Getty Images

Obama's Lofty, Unattainable Goals

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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It's hard to sum up an hourlong speech in a pithy sentence, but let me try anyway: President Barack Obama's message tonight was "We need to stop getting caught up in partisan battles, and compromise on sensible policies to help the middle class -- and by 'we' I mean 'Republicans.'" The speech was not a good speech, as speeches go, because the State of the Union never is; it is a grab bag of theoretical policies that focus-group well and will mostly never happen. But if it was not an immortal work of rhetorical genius, it was politically deft. Obama succeeded, I think, in making himself out as the pragmatic hero of the middle class, against the destructive forces of ideology.

It was light, however, on policy details. "I want to focus less on a checklist of proposals," the president said, "and focus more on the values at stake in the choices before us." He offered name checks of cherished Democratic chestnuts -- universal child care, paid sick and maternity leave, government guarantees of equal pay for women, and a higher minimum wage. He reiterated his support for free community college and investments in infrastructure. He offered a new initiative to do "precision medicine" and offered support for humanity expanding into the solar system, not to visit, but to stay. (Yes, please.) He wants more money to fight Ebola.

But the specifics were rather light, particularly on his extensive array of tax proposals, which will raise a significant amount of money with some rather sweeping changes to the way we tax educational savings, capital gains and estates. There's a reason for that. Americans like to hear that rich people are going to be forced to pay their "fair share." They would probably be considerably less excited to hear that Obama wants to tax the earnings on educational savings accounts, or that any assets they inherit from their parents would be subject to a capital gains tax. To be fair, there are generous exemptions. But there are a lot of affluent-but-hardly-wealthy folks in blue states who would be very unhappy to hear that that nice Westchester home Mom and Dad bought for $15,000 in 1952 is going to be subject to a capital gains tax -- at the same time as they're suddenly paying income taxes on the capital gains and dividends in little Sally's college account.

In some ways, this is a measure of how difficult the American fiscal picture is. Estates get what's known as a "stepped-up basis" on assets -- meaning that when you inherit a house from Mom and Dad and later sell it, you're taxed on the difference between the value at the time you inherited it (your basis) and the value at the time you sell it. Obama proposes to use the price your parents paid as the basis, though the first $200,000 is exempted, and there's an additional $500,000 exemption for homes.

The people this hits will be a small group, but again, it's a group that includes a lot of fervent Obama supporters in blue states. Moreover, there's good reason to step up the basis, because over the decades, records are lost and it can be hard to determine what price Mom and Dad paid, especially for assets that aren't homes. Taxing the earnings on college savings accounts is even stranger, both because this hits the middle class, and because if you tax the earnings, there's not all that much point to having the account; essentially, Obama is taxing college savings accounts in order to fund universal community college. This is scraping the bottom of the barrel, and what it tells you is that Obama has already run through most of the practical and politically palatable ways to tax the affluent.

Of course, these are never-never proposals; the new Republican Congress is not going to open its career by taxing America's college savings. But in a way, that makes it even stranger; since you can't get it done anyway, why bring it up?

The answer is that this gives him an imaginary revenue source he can attach to his equally imaginary plans to subsidize community college and child care. The real benefit of these proposals is that they're complicated and hard to explain. Republicans have been understandably reluctant to attack these policies directly, and for good reason. Obama closed his speech by suggesting that "surely we can all agree" with his goals. This was, of course, completely false -- he articulated the lofty goals behind a cluster of actual policy disputes that Americans very much do not agree upon. But who wants to be the guy jabbering about "529 accounts" and "stepped-up basis on estate assets" while the president is talking about rebuilding the middle class?  

Of course, the Republican response was also light on actual policy proposals, other than beloved chestnuts like deregulation -- which is something I often favor, but also something I'd prefer to favor in specific rather than in general.

I thought it was somewhat more effective than these speeches usually are (there's nothing harder to pull off than a speech response delivered to the cold, unblinking eye of a video camera). Joni Ernst, the Iowa pig farmer turned legislator, wasn't quite as wooden as most of her predecessors, and having grown up with very limited means, she was able to deliver the Republican talking points without being painted as just another rich Republican who doesn't understand the first thing about being poor. But it was light years from articulating a substantial, affirmative agenda for her party. Though to be fair, maybe that's too much to expect from a 10-minute speech.

The slightly less pithy summary of Obama's speech is that he's back in his element: campaigning as the Bipartisan Voice of Reasonable America, rather than trying to govern. Very little is going to happen during the next two years, so he has the luxury of staking out a visionary position above all the ideology, the divisiveness, the grubby business of designing real laws and making real deals. That was Obama at his most beloved, and now that he is a lame duck, he is free to reassume his most attractive political posture. It is very effective as a campaign strategy -- and indeed, it may help to set the Democratic agenda for the next campaign.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor on this story:
Brooke Sample at bsample1@bloomberg.net