In his first address to a joint session of Congress – a State of the Union speech in all but name – President Donald Trump defended his administration's record during his short 39 days in office and laid out an agenda he said would usher in a "new chapter of American greatness." (See also: President Trump's Speech to Congress Full Text)
Trump did not provide many specifics regarding his proposals, the largest of which will require congressional approval. He did, however, assuage congressional Republicans' nerves by using a teleprompter and reading with a bare minimum of improvisation from prepared remarks that were available online as he spoke.
Trump began by pointing to companies he had variously shamed, cajoled and inspired – often on Twitter – to retain or build operations in the U.S. He named Ford Motor Co. (F), Fiat Chrysler Automobiles N.V. (FCAU), General Motors Co. (GM), Sprint Corp. (S), SoftBank Group Corp. (TYO: 9984), Lockheed Martin Corp. (LMT), Intel Corp. (INTC), Wal-Mart Stores Inc. (WMT), which along with "many others, have announced that they will invest billions of dollars in the United States and will create tens of thousands of new American jobs."
The U.S. economy churns through millions of jobs every month, creating 227,000 net jobs in January, so tens of thousands of jobs are a blip. On the other hand, as Trump pointed out, a breathless stock market rally – the S&P 500 has gained 10.5% since Election Day – indicates that investors are confident. Trump also pointed to executive actions he has signed withdrawing the U.S. from the Trans-Pacific Partnership, expediting the construction of pipelines and curbing the growth of regulatory burdens on business.
Having defended his young administration's performance, Trump detailed "the circumstances we inherited." He said that 94 million Americans are out of the labor force; in fact there were 94.4 million in January, according to the Bureau of Labor Statistics, but that figure counts students, early retirees, housewives and others who are voluntarily out of work. Of those, 5.9 million actually wanted a job – not an insignificant number, but not a third of the country's population. He also pointed to persistent poverty, high and rising national debt, slow economic recovery and a yawning trade deficit. He pinned the loss of manufacturing jobs on NAFTA (which is dubious) and China (less so), but did not mention automation as contributing to the trend. (See also, NAFTA's Winners and Losers.)
Having set the stage, Trump began laying out his agenda, asking Congress to implement the campaign promises he cannot realize through executive action.
Trump placed special focus on infrastructure spending, reiterating a promise for $1 trillion in public-private partnerships to inaugurate "a new program of national rebuilding" that he compared to Dwight Eisenhower's construction of the interstate highway system. While not all of this money would contribute to the federal government's nearly $20.0 trillion in debt, Trump may meet resistance from fiscally hawkish Republicans in his attempts to make this signature promise a reality.
Among the specific infrastructure projects Trump has in mind is a "great, great wall along our southern border," a promise that elicited chants of approval at his campaign rallies. Trump laid into both legal and illegal immigration policy in his address, describing the nation's borders as "wide open, for anyone to cross – and for drugs to pour in at a now unprecedented rate."
He introduced a new office within the Department of Homeland Security, the Victims of Immigration Crime Engagement or VOICE. During his first weeks in office, Trump signed executive orders instructing his agencies to collect data on crimes committed by immigrants, apparently hoping to bolster the assertion he opened his presidential run with in the summer of 2015: "They're bringing drugs. They're bringing crime. They're rapists. And some, I assume, are good people."
The chart above includes legal and undocumented immigrants; the number of Mexican immigrants in the U.S. fell from 2009 to 2014, according to Pew.
Trump also defended his ban on immigration from seven Muslim-majority countries, which has been put on hold by a court, drawing a link between immigration and terrorist attacks, in particular 9/11. Saudi Arabia, Egypt, Lebanon and the United Arab Emirates, where the hijackers were from, are not among the countries affected by the order. AP reported earlier that a new Trump immigration order will remove Iraq from list of countries affected by travel ban.
Trump portrayed immigration as an economic issue, promising that stricter enforcement of existing laws would "raise wages, help the unemployed, save billions of dollars and make our communities safer for everyone."
Trump was also critical of U.S. policy regarding legal immigration, saying "the current, outdated system depresses wages for our poorest workers, and puts great pressure on taxpayers." He advocated the adoption of a "merit-based" system based on Canada's and Australia's, which favor better-educated applicants with higher earnings potential. Trump's previous comments on the issue have sparked fears that he could scrap or radically alter the H-1B visa regime, which Silicon Valley firms especially depend on to import talented workers. (See also, The H-1B Visa Issue Explained.)
Trade and Tax Reform
"I believe strongly in free trade," Trump told his audience, "but it also has to be fair trade." He described a meeting with workers and executives from Harley Davidson Inc. (HOG), whom he depicted as suffering from a kind of Stockholm syndrome due to their experience dealing with protectionist trading partners and the U.S. government's brand of free trade. He alluded to raising tariffs to match other countries' and promised to bring back "millions of jobs."
Yet he spent relatively little time on trade per se, relating it instead to immigration and tax reform. He did not provide details on his proposed tax cuts, which have been through several iterations since he launched his campaign, but he promised "massive relief for the middle class" (independent analyses have found that the highest earners would benefit disproportionately from Trump's plan, while some working and middle class taxpayers would see their rates increase). Trump promised to lower the corporate tax rates – currently among the highest in the world – so that companies would not opt to shift their tax basis overseas through so-called corporate inversions. (See also: Will Donald Trump's Tax Reforms Reform Anything?)
One of the biggest unknowns surrounding Trump's administration is the eventual result of his promise to "repeal and replace Obamacare" or the Affordable Care Act, which he repeated Tuesday night. The president raised eyebrows Monday when he said, "Nobody knew health care could be so complicated." He has consistently advocated a few policies, including the ability to sell insurance across state lines and the expanded use of Health Savings Accounts (HSAs), but the contours of a specific replacement have yet to emerge. On some occasions he has appeared to advocate popular aspects of the law – the inability to deny coverage based on preexisting conditions – while wanting to scrap unpopular bits like the requirement to purchase insurance or pay a penalty. (See also, Is the Affordable Care Act Failing?)
On Tuesday night he laid out five principles he wants to see in a replacement health law: ensuring that patients with pre-existing conditions can get coverage; using tax credits and HSAs to expand coverage, rather than an individual mandate; providing states "the resources and flexibility they need with Medicaid," presumably a reference to the program's expansion under Obamacare; reforming laws to "protect patients and doctors from unnecessary costs" – a longstanding priority of Health and Human Services secretary Tom Price – and lowering drug prices "immediately"; and allowing for the purchase of insurance across state lines. (See also, The Real Reason Drug Prices Are So High.)
Trump reiterated his plan to increase funding for the military, saying, "I am sending the Congress a budget that rebuilds the military, eliminates the defense sequester, and calls for one of the largest increases in national defense spending in American history." In a press briefing on Monday, Budget Director Mick Mulvaney said that the proposed fiscal 2018 budget would boost military spending by $54 billion to $603 billion.
The U.S. has the world's largest defense budget by far, followed by China, which spends less than a third the amount, and Russia.
Mulvaney said that the $54 billion rise would be offset by cuts elsewhere, naming foreign aid in particular. The total foreign aid budget was $43 billion in fiscal 2015, less than the proposed spending hike. Reports Monday cited potential cuts to the budget of the Environmental Protection Agency, which accounted for $7 billion in fiscal 2015, or 0.2% of total federal outlays.
Trump called education "the civil rights issue of our time" and called for increased school choice, referring to programs that allow students to attend privately run, publicly funded schools (opponents of such policies call them "privatization"). "I am calling upon members of both parties to pass an education bill that funds school choice for disadvantaged youth, including millions of African-American and Latino children," Trump said. "These families should be free to choose the public, private, charter, magnet, religious or home school that is right for them."
Secretary of Education Betsy DeVos is a longtime advocate of charter schools who has never taught. She has been largely responsible for a surge in charter school attendance – and a high proportion of for-profit charters – in her native Michigan, but charter school students in Detroit have fallen behind their public-school counterparts; the Detroit public school system had the worst test scores of any urban area in 2009.
For more details on the president's plans see the full transcript of his speech.