State of the Union 2011

As we approach tonight’s State of the Union address by President Obama, it reminds me of the Sherlock Holmes mystery when the British detective asked his assistant Dr. Watson about the dogs that didn’t bark. Key to understanding the president’s remarks will be the issues that he leaves out.

We all expect an uplifting speech about investments in the future such as education, scientific research and infrastructure. But what won’t he address? Here are some things to look for.

(1) Cuts in Social Security spending such as raising the retirement age from 67 to 69 over a period of years. Many people have suggested this is one of the least painful ways to trim back this very popular entitlement program without inflicting great pain on the elderly. He is unlikely to embrace this proposal.

(2) Reform of the tax code to reduce individual rates from a high of 35 percent to 28 percent and to eliminate or trim current popular deductions such as those for charitable contributions and interest on home mortgages. The president’s deficit reduction commission recommended lowering both the individual and corporate rates and eliminating a wide range of tax breaks. The commission suggested this could be done in a way that actually generates additional tax revenues, which could be used to pay down the deficit. It is unlikely that the president will embrace the proposal on changing individual rates, and it is likely that any corporate tax changes he suggests will be “revenue neutral” and will not generate additional revenues to help pay down the deficit.

(3) The space program. While Obama may make some general reference to scientific knowledge learned from our space program, it is unlikely that he will embrace significant future spending on space exploration, which could be subject to the knife when his budget is presented to Congress several weeks from now.

(4) Domestic oil-and-gas production. He may well repeat calls for curtailing our dependence on imported oil but it is unlikely that he will defend the domestic oil-and-gas industry, which must be maintained over the next several decades in order to prevent us from importing more oil to meet our needs while we develop alternatives energy sources. In fact, he may well repeat the call to end tax preferences for the domestic industry that were contained in his last two budgets but rejected by Congress.

(5) Immigration reform. It may get a passing reference but there is no indication that the administration will make this highly charged issue a major priority during the next year while he tries to move to the center politically.

I expect the president to get good marks from the media for challenging us to be more competitive and to ensure that our population is well educated as we strive to produce products and services that will sell around the world and create jobs at home.

However, keep your eyes on the dogs that don’t bark.

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