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Obama's risk of going too left in State of the Union

Friday, 24 Jan 2014 | 12:35 PM ET

Presidential State of the Union addresses can be over-hyped and ultimately forgettable affairs with piles of policy proposals that ultimately go nowhere. That's especially true for presidents, such as Barack Obama, who face an opposition party that controls part or all of Capitol Hill and has little interest in passing the White House agenda.

And yet the stakes are still fairly high for Obama as he delivers his fifth State of the Union before a joint session of Congress on Tuesday. The president will be attempting to reset his second term and move beyond the early nightmares of Obamacare implementation and persistent questions about domestic surveillance programs revealed by Edward Snowden, among other troubling issues.

Saul Loeb | AFP | Getty Images

It seems likely that Obama will attempt to set the stage for the 2014 midterm election campaign with an address focused squarely on income inequality and lack of upward mobility for those in middle and lower income brackets.

(Read more: Obama, Ryan wrong on upward mobility, study finds)

He's likely to make a renewed push to extend unemployment insurance for the long-term jobless and urge a hike in the federal minimum wage to $10.10 or more. Liberal groups want him to announce that he plans to unilaterally raise the minimum wage for employees of federal contractors.

Expect more talk of public-private partnerships to boost job creation, especially for the 4 million out of work for a year or more.

Obama is also is likely to cite the currently dropping federal deficit as evidence that the move toward budget cuts that he helped engineer in his 2010 State of the Union address has gone too far and that it's time to worry about creating jobs, something he believes entails more federal government spending.

(Read more: No bank too big to indict, US attorney general says)

Much of what the president will tout—including extending jobless benefits and hiking the minimum wage—is politically popular. And thus far, Republicans have not been successful at presenting a unified alternative vision for creating upward mobility and faster job growth through tax relief, school choice and less government regulation, or some combination of those.

But Obama also risks tacking too far left and setting the Democrats up for disappointment in the Senate races they need to win to avoid a nightmare final two years in which the GOP controls both houses of Congress.

(Read more: Don't tear down the rich: Larry Summers)

If Obama casts aside the budget deficit and $17 trillion national debt he will be at odds with the American people. According to Gallup, Americans view the "economy in general" as the nation's biggest problem followed by the "federal budget deficit" and "dissatisfaction with government." Unemployment ranks fourth.

(Read more: Republicans seek own policy cure to replace Obamacare)

And while the near-term deficit picture has improved following the budget cuts and tax hikes of 2011 and 2012 (dropping to 4 percent of GDP from 10 percent in 2009), the longer-term outlook is still incredibly grim. By 2038, the Congressional Budget Office projects federal spending will equal 26 percent of GDP, well above the 20 percent average of the last 40 years. Much of this will be due to federal spending on Social Security, Medicare and Medicaid.

Americans are still very worried about the nation's long-term fiscal future even if the activist left is not and ridicules any Democrat who even mentions budget cutting and entitlement reform.

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Rep. Eric Cantor, (R-VA), shares his thoughts on ways to reform entitlement programs, health care, and create jobs.

But it's not the activist left that will decide 2014's critical Senate races.

And Republicans already start with a huge advantage, having to defend just 14 seats to the Democrats' 21. The GOP needs a net gain of six to take control. And they have a very strong environment to run in now with a very unpopular president, an economy yet to gain serious traction and a target rich environment.

(Read more: Summers: Fix US economy? Try fixing JFK)

Republicans are virtually assured pickups in South Dakota and West Virginia and could take Montana, Arkansas, Louisiana, Alaska, North Carolina and Iowa. Democrats meanwhile are mostly playing defense with few realistic chances of ousting GOP incumbents.

Much of the energy of the newly empowered Democratic left, which is so heavily focused on income inequality, is coming from already deep blue states in the Northeast and on the West Coast.

They would thrill to a strongly liberal State of the Union speech from Obama. But GOP operatives looking to take back the Senate would probably be even more excited.

—By Ben White. White is POLITICO's chief economic correspondent and a CNBC contributor. He also authors the daily tip sheet POLITICO Morning Money [politico.com/morningmoney]. Follow him on Twitter @morningmoneyben.

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