President Biden’s State of the Union Address

The President is required by the Constitution to deliver this speech annually to provide an update on the current state of the country.   It is largely ceremonial at this point, though, and feels much more like a campaign speech than anything else. Likely you will have read or seen about the substance of the speech, but we wanted to highlight some areas and provide a bit of colour. The content this year reflects the domestic focus of the Biden administration. Mr. Biden focused largely on employment, securing entitlements, taxation, law & order, and health care.

The President faced a very different combined chamber of Congress in 2023 than he did last year.  After having a slim majority throughout his entire presidency, he’s now facing a divided Congress – one where Republicans, who now control the House, have already launched several investigations into his administration.

The key highlights the President made were around the economy.  In employment, the official unemployment rate is at a 50 year low (3.4%) – though that doesn’t tell the complete story.  No surprise also that supply chain resilience and manufacturing featured heavily.  Biden touted semiconductors as a US invention that needs to re-shore.  To do so, though, he argued that the US needs to boost spending on infrastructure to bring it back up to a world-class level.  Importantly, the President also highlighted the fact that building back American infrastructure needs to be fronted by a Buy America policy – and announced that any new federal construction products must be built with American products. He argued that this stance is completely consistent with international law.

The Inflation Reduction Act (“IRA”) featured very little in the speech. The massive spending bill got only a brief mention, though he made the claim that it’s the most significant investment ever to combat climate change and listed a couple of key areas (EV’s and energy efficient household appliances).  As is always the case in a Democratic speech, equity in the tax code featured heavily, but with very little detail.

On the international front – trade featured minimally while Ukraine and China featured heavily.  Again, it is clear that this Administration is willing to support allies in time of need, but when it comes to international economic policy – the thinking in Washington is heavily influenced by China policy.