State of the Union – A Signal Group Analysis

Signal Group

An issue-by-issue take of President Donald Trump’s first official State of the Union address.

Overview
Many will claim that the president’s first State of the Union address was an appeal to the Trump base, but that is too simplistic of a conclusion. Instead, the speech – though short on the emotion and excitement we have come to expect from the president, thanks to the presence of teleprompters – was classic Trump.

Similar to his predecessors, Trump took advantage of the national stage to take a victory lap on his first year’s accomplishments, which will also define the 2018 midterms. Red meat to Republicans on taxes, judges, regulation, energy, and security and sacrifice provide validation to the Trump base that he is “Making America Great Again.” However, these themes were countered by flashes of Trump’s effort to redefine traditional Republican positions in a more populist manner related to immigration, expanding family leave, prison reform and America’s role in the international community – including American generosity and trade. Further, the speech ignored traditional core Republican concerns related to spending and deficit expansion and was short on policy details to pin down the administration.

The speech (and the Democratic response that followed) set the framework for the 2018 Republican agenda. With the Republican retreat this week, the challenges for the Republican leadership will be to have the necessary family conversations on how they will seek to move Trump’s agenda this year. Overlaying this goal, however, is protecting the Republican majority in the House and Senate, a task which has become increasingly complicated over the last few weeks. On immigration, only a Trump endorsement of any final Senate legislation creates a path for House passage, and we expect this type of deference to the president’s policy priorities to inform the Republican congressional agenda between now and November.

For most elected Republicans, the speech was welcomed, and the Trump base will surely be more energized to rally around the president. His powerful use of the First Lady’s Gallery to humanize the critical points of the speech – from heroism in the face of disaster, to the sacrifice and bravery of men and women in uniform, to the need for stronger border security and immigration reform from a safety and security perspective – connected the themes to the American story. Ultimately, the address will complicate Democrats’ ability to reject those priorities outright and embolden the Republican Congress to expand the narrative to drive legislative wins in 2018.

Signal Group professionals analyzed key sections of the president’s address and the Democratic response. As always, please contact us for an in-depth analysis of how, given the policy landscape, we can further assist you in advancing your Washington agenda.

(Contributors include: Rob Chamberlin, Charles Cooper, Mark Duffy, Nadeam Elshami, Noe Garcia, Chelsea Koski, Robert Marcus, Jeff Markey, George Riccardo, Abel Vandegrift, Brad Wolters)

The Economy and Tax Reform
Declaring that “there has never been a better time to start living the American Dream,” President Trump dedicated a significant portion of his State of the Union address to aggressively touting economic growth over the last year, highlighting rising wages, increased manufacturing jobs, low unemployment, a strong stock market, and several specific examples of American companies adding U.S. jobs and investments. His early reference to economic growth within his remarks is a clear indication that he views the economy as a strong talking point that he can leverage to be on offense – it is one that he views as a core accomplishment of his first year in office and will be repeatedly referenced in years to come. This theme will likely mirror Republican messaging on the campaign trail and reflects a confidence that voters and the general public share his positive views on the economy.

The president also used his remarks about the economy to tout his largest legislative accomplishment – signing comprehensive tax reform into law. In doing so, he focused on highlighting provisions that are targeted to middle class families and small businesses, although he did mention the reduction of corporate tax rates so that “American companies can compete and win against anyone else anywhere in the world.”

In addition to these “victory laps” around the economy and tax reform, the president promoted workforce development, job training, and paid family leave – a rare moment of promoting issues that have bipartisan appeal and which parallel a recent executive order on apprenticeships and Ivanka Trump’s family leave initiative.

Trade
The president’s comments on corporate tax reform segued into his point that “America has also finally turned the page on decades of unfair trade deals.” President Trump reaffirmed his commitment to working to “fix bad trade deals and negotiate new ones,” while remaining vague on specifics on the NAFTA renegotiation and national security investigations into steel and aluminum imports.

The address did hint at stronger enforcement of existing trade rules, referring directly to the Section 301 investigation into China’s theft of intellectual property. His comments were aligned with the Trump campaign’s promise to “protect American workers,” and last night we were given broader insight into how the administration is prioritizing actualizing on that promise.

Though the remarks did not provide a clear sense of how President Trump plans to take decisive action to impose tariffs against countries that “don’t play by the rules,” they played well with his base. Time will tell how popular the rhetoric remains, and whether it translates into policy.

In a reversal of the overarching and lingering sentiment from the president’s more globally-focused Davos address, his trade comments were very much aligned with the America First mentality. From a political standpoint, policymakers on both sides of the aisle learned nothing new, but what is clear is that competing voices with different ideological views on trade within the White House continue to fight for influence over the long-term direction of U.S. trade policy.

Foreign Policy and Defense
When it came to foreign affairs and national security, the address similarly contained no surprises; it was more remarkable for what was not mentioned than what was. The president praised the “defeat of ISIS,” but admitted there was more work to be done. Asking Congress to lift defense spending caps came at the right time – ISIS has not surrendered, but rather disappeared into Iraq, Syria, Libya, and other locations around the world where they are certain to reemerge.

The president listed traditional GOP foreign policy goals, including sustained military operations in Afghanistan, with looser rules of engagement, and moving the U.S. embassy from Tel Aviv to Jerusalem. Further, he pledged to keep open the detention facilities at Guantanamo Bay in order to prevent captured terrorists returning to the battlefield, noting that ISIS leader al-Bagdadi was once in U.S. custody but released.

He surprisingly did not call for the end of the Iran deal, but rather called on Congress to address flaws, leaving the door open for continued U.S. participation in the JCPOA.

The president’s strongest rhetoric was saved for North Korea. He made clear he would not adhere to the policies of previous administrations, but rather utilize “maximum pressure” to prevent continued operation of the DPRK’s nuclear program and emphasizing the need to modernize America’s nuclear arsenal as part of a strong national defense strategy. The speech contained only a passing mention of Russia – the nation that attacked the 2016 U.S. election, according to the U.S. intelligence community. Africa and Europe were not mentioned at all. Policymakers will not find any new foreign policies in this speech, but the American people may be alarmed by the aggressive posturing towards North Korea. The administration has yet to provide figures on just how costly a military intervention on the Korean Peninsula would be.

Trump’s call for Congress to end sequestration and fully fund the military is nothing new to policymakers, but accomplishing this goal has proven to be elusive thus far. Ending the funding deadlock will require compromise on both sides of the aisle, given Democrats’ resistance to raise defense spending without an equal bump in domestic spending. In a nod to his base, President Trump emphasized his two kept promises – to destroy ISIS and to keep Guantanamo Bay open.

Immigration
President Trump’s introduction to immigration in the State of the Union address was on par with his typical harsh rhetoric regarding illegal immigration. Though he referenced drugs and crime at large, he singled out MS-13 and gang violence, using the deaths of Kayla Cuevas and Nisa Mickens, who were savagely murdered by the gang, as an example of how illegal immigration negatively impacts our country.

Not surprisingly, the president did not bend on his hardline stance regarding his immigration policy. Trump’s four pillars for immigration reform uphold his campaign promise of building a wall across the southern border, increasing the number of border patrol agents, the end to chain migration, and the termination of the visa lottery program in return for granting a pathway to citizenship for 1.8 million undocumented immigrants through DACA.

The president sold the immigration package as a compromise to Congress, stating that neither side was getting what it wanted but that this solution felt like a fair deal. If we remove the harsh rhetoric around the four pillars deal, the actual substance may find common ground. Based on ongoing conversations already happening on Capitol Hill, the deal has some traction.

Healthcare
In years past, healthcare has been a dominant topic during the State of the Union, but this year it became a secondary topic. While the president mentioned the abolishment of the Affordable Care Act’s individual mandate as part of the tax reform package passed in December, the only forward-looking statement dealt with the price of prescription drugs. The president stated that confronting the issue of high drug prices is one of his foremost priorities of the year.

While the issue of high drug prices has routinely polled as a popular issue among voters, there has been little substantive action by Congress or the Executive Branch thus far during the Trump administration. In the speech, the president proposed no specific policies or plans and while there are pockets of Congress that are interested in addressing this issue, there is no consensus on how to move forward. Efforts by previous administrations to use existing authority to reign in drug prices was met with significant congressional backlash. While the president’s statements may be appealing to voters, it will be necessary to wait and see if the president’s words galvanize action.

Opioid Crisis
Mentioned only once during the address, President Trump gave little detail on his plans to address the opioid epidemic – a major talking point of his campaign and a bipartisan issue with universal appeal. Going off script to say, “it is terrible, we have to do something about it,” he focused on the emotional angle highlighting baby Hope, the daughter of a homeless injection drug user who was adopted by a New Mexico police officer. The 49 seconds on the topic echoes Trump’s larger response to the epidemic that has cost the lives of 66,000 Americans in the last year: emotion-driven tough talk on the issue, but no actionable steps taken.

Money is the name of the game to address the epidemic. The public health emergency fund, called into action in October with the president’s declaration, holds only about $57,000, and no other funds have been put forth by the president to date. Congress has allocated limited funding over the past two years (approximately $2.1 billion), but there is currently no force to drive a solution.

Communities in pockets across the country are seeing overdose headlines day after day, and nearly everyone knows someone impacted by the epidemic. There is a real opportunity for solution-oriented policymaking with funding to curb the epidemic that public health experts say could cost the United States a half million lives over the next decade.

Prison Reform
In one of just a few moments of true bipartisan spirit, President Trump proposed federal prison reform in his address. The president said: “As America regains its strength, this opportunity must be extended to all citizens. That is why this year we will embark on reforming our prisons to help former inmates who have served their time get a second chance.”

While Democrats are not publicly overly optimistic about President Trump’s comments on prison reform, privately the party would welcome a real dialogue on reform, especially on one that is focused on reducing recidivism. Having the president deliver a few lines that are similar in tone to President Obama, and having the Koch brothers weigh in with support, gives Republicans in Congress the room to pursue reform.

Prison reform was a priority for the last years of President Obama’s administration. In Congress, the House bipartisan leadership and President Obama’s senior staff were engaged in the process of finding a way forward. However, competing policy and political interests in the House and Senate doomed the process in 2016.

As was the case last Congress, details are critical.  And while a bipartisan agreement is possible, it will take some real effort on all sides.

Natural Resources
The president’s remarks on energy were limited and narrowly aligned with his campaign talking points from the 2016 election. He used these remarks to position several of his campaign promises as key accomplishments over the last year. He highlighted, for example, ending “the war on American energy,” and ending the “war on beautiful coal.” He did not provide details of specific policies, but used the occasion to remind his base that he remains focused on domestic energy production and that his first year has already posted victories within this policy space. Absent from his remarks were other campaign promises that have led to significant policy disputes over the course of his first year – most notably the withdrawal from the Paris climate agreement.

Infrastructure
Perhaps most surprisingly, given the administration’s hints at a forthcoming plan, last night’s address was short on detail when it came to the infrastructure proposal. The only exception to that rule, though, was the $1.5 billion figure of how much investment the administration would like to generate. Trump reiterated leveraging state and local dollars and private investment where appropriate, as well as streamlining permit and approval processes – all ideas which have been floated before.

Infrastructure clearly remains a focus for the administration and a possible win prior to the midterm elections. However, it clearly was not the main focus of the speech and the president did not spend a great deal of time on it, leading many to wonder just how much of a priority it is. Big picture thinkers see infrastructure as an opportunity to bring both sides together prior to the elections and put a win on the board for all. Naysayers do not believe there is a path forward without directly spending a large sum of federal dollars.

Lessons can be learned from the tax debate, where the president’s proposal was also short on detail and long on outcome. Letting Congress figure out how to pass a bill, along with leadership from the administration without too much interference, could be a template for success. Nevertheless, without support for funding or a more definitive plan, there may be too much room for argument and no route for agreement.

Although more will become clear in the coming weeks, as the administration releases more details, the address did encourage support for passing an infrastructure package. To get there will require sustained focus from the administration and Congress, and comity all around.

Democratic Response
With the pick of Representative Joe Kennedy (D-MA) to deliver the response to the president’s State of the Union address from Diman Regional Vocational Technical High School, Democrats used the biggest bully pulpit afforded to the minority to deliver their economic message and make the case for returning to the majority. Democrats attempted to deliver on three distinct, but intertwined, goals following the speech:

  1. Oppose President Trump’s policies that are anathema to the Democratic voters and candidates.
  2. Maintain unity while using any opportunity to leverage their minority status.
  3. Articulate a clear economic vision for base voters, independent voters, the new generation of activists and dissatisfied Trump voters that differentiate the party from the GOP.

The Democrats succeeded in reaching their first goal. The president’s support for his own immigration proposal – which many Democrats and some Republicans oppose, his unwavering backing of the Republican-passed tax reform law, and his ill-defined infrastructure proposal made the opposition to his speech by Democrats all but unanimous.

Maintaining long-term unity following the speech is yet to determined. In all likelihood, House Democrats will remain united, which gives leverage to the leaders to negotiate with Republicans and the White House. However, as we saw during the last shutdown, there are enough Senate Democrats who are facing tough re-elections and who are willing to reach across the aisle to perhaps negotiate a DACA and funding deal, even if leadership may not be on board.

As is usually the case, achieving the final goal will be the most difficult and its success the most tangible. Unfortunately, it cannot be measured until Wednesday, November 7, 2018.