Amid a backdrop of heightened geopolitical tensions, a global pandemic, and rising inflation, President Joe Biden delivered his first State of the Union (SOTU) address to a joint sitting of Congress on Tuesday evening, touching on his accomplishments during his first year in office and providing a path forward in uncertain and turbulent times.
- President Biden praised Ukrainians' courage and vowed to continue isolating Russia and Vladimir Putin through wide-ranging economic sanctions.
- Biden stressed that lowering costs, manufacturing locally, and fostering innovation remained the best way to tackle rising inflation.
- The president said the nation's high vaccination rate, declining hospitalizations, and unwavering resilience will allow it to move forward from the pandemic.
- Biden noted that he expects the government deficit to decline substantially through the remainder of 2022.
- The president proposes levying a 15% minimum tax rate on global corporations.
Below, we'll summarize the address's key topics that relate to the current political climate, economy, and financial markets.
Russian Invasion of Ukraine
President Biden commenced his address by heaping praise on Ukrainians' courage, saying it inspires the world, before condemning Russia's invasion of Ukraine, calling it "premeditated and totally unprovoked." He added that the free world is holding Russian President Vladimir Putin accountable through wide-ranging economic sanctions, including restricting Moscow's access to international financial systems, effectively crippling its $260 billion war chest to fund the invasion. Biden added that the U.S. would continue to clamp down on Russian oligarchs, seizing their yachts, luxury apartments, and private jets. He also announced that all Russian flights are barred from entering U.S. airspace.
Inflation: A Top Priority
Biden stressed that lowering costs, manufacturing locally, and fostering innovation remained the best way to tackle rising inflation. "We have a choice. One way to fight inflation is to drive down wages and make Americans poorer. I think I have a better idea to fight inflation: Lower your costs, not your wages. Make more cars and semiconductors in America. More infrastructure and innovation in America," he said. The president also called for climate investment initiatives to lower costs, such as weatherizing homes, doubling clean energy production, and reducing the price of electric vehicles (EVs).
Inflation has been a hot-button topic for months, with the headline number accelerating to 7.5% in January on the back of COVID-related supply chain blockages, promoting concerns of rapidly rising interest rates. The president said that domestic manufacturing had the added benefit of reducing the nation's reliance on foreign supply chains.
Biden acknowledged the challenges COVID-19 had presented over the past two years but said that the nation's high vaccination rate, declining hospitalizations, and unwavering resilience allowed it to move on from the pandemic. As of March 2022, roughly three-fourths of American adults are vaccinated against the virus, while hospital admissions are down by 77%. "Most Americans can remove their masks, return to work, stay in the classroom, and move forward safely," the president said. Biden also urged Americans to use the post-COVID era as an opportunity to come together, rather than viewing the disease as a partisan dividing line.
Biden stressed the importance of revitalizing American manufacturing, saying the "Rust Belt" label belongs in the past. The president noted a shift over the past few years of U.S. companies opting to build their factories on home soil rather than setting up operations overseas. He used the auto industry as an example, saying that significant investments by Ford Motor Company (F) and General Motors Company (GM) to build EVs domestically had created 14,000 jobs across the country.
Lowering Deficit in Focus
The president pledged to monitor and lower costs without it coming at the expense of allowing families to prosper. Biden noted that he expects the government deficit to decline substantially through the remainder of 2022. "By the end of this year, the deficit will be down to less than half what it was before I took office," he remarked. The president told the chamber that he had reduced the deficit by more than $1 trillion in a single year and asserted that he planned to level the economic field for Americans by encouraging competition. "Capitalism without competition is not capitalism. Capitalism without competition is exploitation."
There's No Escaping Taxes
Biden proposed to levy a 15% minimum tax rate on global corporations, saying large companies avoid paying federal income tax. "Last year, 55 of the Fortune 500 companies earned $40 billion in profit and paid zero in federal taxes. It's not fair," the president asserted. The president also challenged lawmakers to adopt his tax code reform plan, ensuring that no one earning less than $400,000 per year would pay additional taxes.