Around the Halls: President Obama’s State of the Union Address

On January 27, President Obama delivered his first State of the Union address to a joint session of Congress. Scholars from around the halls of Brookings offer their thoughts on the speech and on various issues the president addressed, from updating the nation’s high-speed rail infrastructure and investing in the education and skills of the American people, to the budget deficit and the nation’s economic growth.

In this edition:

• Robert Puentes: Obama Moves High-Speed Rail Forward »
• Russ Whitehurst: The State of the Union in Education »
• Isabel Sawhill: The State of the Union: Not One but Three Deficits »

Just look around. We’re engaged in a fiercely competitive world, where established nations like Germany, and rising nations like China, India and Brazil, are making transformative investments in renewable energy, modern ports, energy grids, and in modern, efficient high speed rail.

So it may have come as a surprise to some when the first major project out of the box announced was the Tampa-Orlando Corridor. Cynics might say this is yet just another example of how politics dictates Washington’s infrastructure investments and a departure from the strategic investments other countries are making.

But constructing high-speed rail corridors is not a simple proposition when considering a country as exceptionally expansive as the United States, especially in a severely constrained fiscal environment. Contrary to many European countries with less land area and a dominant metropolitan capital, the United States has multiple metropolitan centers throughout the country, and many are well over 500 miles from one another. This creates tensions when selecting corridors and developing criteria to prioritize investments.

The unfortunate byproduct of super high demand and intense competition for the funds is that the federal government appears to have reinforced the peanut butter approach to spreading money around very thinly. The list of projects released by the White House show no less than 13 corridors in 31 states receiving rail money with eleven others getting funds for planning and studies. This is the opposite of what many have called for which is to concentrate resources in just a few corridors.

Yet in several important ways, the high speed rail grants do represent a departure from the norm.This is where the high speed rail grants represent a departure from the norm.

This is not a legacy program that has languished in the bureaucratic halls of the transportation department but, rather, a new and innovative program birthed from the American Recovery and Reinvestment Act. Instead of allocating money by formula or having it earmarked to death by Congress, these funds were designed to be awarded on a competitive basis. States sent in requests for the grants and those applications were evaluated based on quantitative metrics including economic, social, and sustainability benefits. Projects also had to be far enough along in their development, take advantage of innovative technology, and promote a range of public and private partnerships.

This is nothing short of a sea change for how Washington thinks about infrastructure investments.

So how does Florida stack up? It looks like the Tampa-Orlando corridor hits a couple key conditions. It is relatively “shovel ready” in that key environmental impact assessments and other procedural hurdles have been cleared. It leverages private sector funds as the Disney Corporation donated $25 million in land for one of the station locations and a private partner, not the state, will assume the risk of ridership revenue to cover the costs of the system.

Plus, it is potentially a national showcase project. One lesson our European competitors have taught us is that it is important to get the initial investment right. Then demand for additional investments increases, political and public support follows, and the national system is built incrementally.

An American high speed rail network is not going is solve all our problems. There is an unfortunate juxtaposition between the President’s announcement and the decisions coming down now in metro areas across the country – like Chicago, Cleveland, and St. Louis, among others – to slash transit service (buses and/or subways) due to dreadful budget problems. How can we justify even the relatively paltry $8 billion for high speed rail at a time when workers in our major metros are finding it harder and harder to get to work?

A fair question. Our transit agencies represent perhaps the best example of the folly of focusing exclusively on job creation and ignoring job preservation.  There is no doubt that transit operating subsidies are needed to keep jobs in sectors that are being battered by forces that are not entirely within their control. We need to stop the hemorrhaging of jobs.

Yet we still need to identify, map, prioritize, finance, and then implement transformative investments such as high speed rail. President Clinton recognized this in his speech to congress in 1993 when he discussed his ambitious plan to invest “in our roads, bridges, transit facilities; in high- speed railways and high-tech information systems; and in the most ambitious environmental clean-up of our time.”

All these investments were needed then and they’re still needed now. Florida is as good a place as any to start building the next American economy.

A wonderful thing about America is the number of its leaders who were not to the manor born. Most depended on a good education, heavily subsidized, to get where they are.  That is the president’s personal story, so he spoke from the heart and experience last night when he said, “We need to invest in the skills and education of our people…the success of our children cannot depend more on where they live than on their potential.”

Few would disagree with his sentiment.  It dates to the founding of the republic and has been a recurring theme in State of the Union addresses for 40 years.  The question is not whether to invest in education, but how.

The president described two investment schemes.  The first is to make Race to the Top perpetual.  Currently Race to the Top is a one-shot competition among states for $4+ billion in Stimulus Act funds.  It got the attention of cash starved states, 40 just submitted applications, and it afforded Secretary of Education Arne Duncan extraordinary latitude to impose his policy priorities on the nation, e.g., the expansion of charter schools, closing or restructuring low performing schools, linking teacher evaluation to student test scores, and national standards. The president proposes to make Race to the Top an annual competition, funded at $1+ billion, and to allow school districts to compete.

I’m all for using carrots instead of sticks to spur reform, but we ought to get at least a hint of what we’re going to get from the billions invested in Race to the Top 1.0 before we make it permanent.  And do we really want to cede this much control over education policy to the executive branch of federal government?  A recent newspaper headline screamed: Duncan Carving Deep Mark on Policy. What will a new administration or a new secretary pursue?  Will charter schools be out or vouchers in?  Will national standards be scrapped or a national curriculum instituted?  Will teacher unions be boosted or bashed?  These are policy decisions that, if they’re to be dictated by Washington at all, should flow from specific legislative authorization that allows the public a voice, messy though that process is.  The reauthorization of the Elementary and Secondary Act, now overdue, rather than the 2011 budget bill, is the place to decide whether an annual Race to the Top competition is worthwhile and what reform policies it should impose on states and school districts

The second of the president’s education themes is to make higher education more affordable. He proposes to increase Pell grants, give families a $10,000 tax credit for four years of college, limit debt payment on student loans to 10 percent of income, forgive student loans after 10 years for those who choose careers in public service, and spend more on community colleges.

There is good evidence that investment in higher education pays off for nations and, on average, for individuals.  But the price of higher education in the U.S. has outpaced the rate of inflation for so long that we now spend roughly twice as much per student as the rest of the developed world.  Middle class parents understandably worry about how they will be able to afford college for their children, and far too many children from low-income backgrounds are scared away because they or their parents think it is financially out of reach.  Further, many of our postsecondary institutions do a lousy job on such basic productivity measures as graduation rates.  Pouring more taxpayer money into higher education will exacerbate problems of rising costs and low productivity unless it is coupled with a major initiative to increase accountability.  It is complicated, but let’s start with a website in which any parent or prospective student, based on their own financial profile, can compare any set of postsecondary institutions on costs of attendance and the total loan obligation that would be incurred for on-time graduation, and array this against the labor market returns that accrued to previous students at those institutions 2, 6, and 10 years after their enrollment.  Imagine postsecondary institutions having to compete on the career success of their students and actual costs of attendance.  Imagine students and their parents being able to determine whether the University of Phoenix is or isn’t a better deal that the University of Northern Iowa.

The president introduced themes, not details.  Perhaps he intends to couple more investment, whether through Race to the Top or in postsecondary, with real accountability for costs and students success.  That is the way forward, and it will receive bipartisan support.

Some pundits have complained that the president’s State of the Union speech was all over the map, making it a kind of Rorschach test for the listener. For me, three distinct themes came through: the U.S. has a deficit of jobs, a deficit of dollars, and a deficit of trust.

Of these, the deficit of trust is by far the most important because, as the president suggested, without it the country becomes ungovernable. Instead, voter frustration leads the public to vent their anger at the polls by dismissing those in power at regular intervals and politicians become ever more fixated on the next election with the result that nothing of great substantive importance ever gets done. It’s a vicious cycle that undermines our ability to confront the great challenges of our day.

The most immediate challenge is the need to put the economy back on track and to establish a solid foundation for economic growth. Unfortunately, there isn’t a whole lot that a president can do to create jobs that doesn’t entail spending a lot of money in the short run; and whatever fiscal stimulus was supplied by last year’s recovery act could soon become a drag on the economy as the spending earlier put in motion by the act winds down. By proposing new tax cuts to help boost hiring and investment in the private sector, the president recognized both this reality and the need to rely on measures with at least some modicum of support from the right.

Creating jobs in the short-run will, of course, add to the deficit and the accumulation of debt over the long run. The president correctly noted that he inherited a very large deficit created by a series of tax cuts, a prescription drug bill, and two wars that weren’t paid for during the previous administration. Most of the remaining deficit is the result of a depressed economy and is necessary to prevent an even worse downturn. But the president signaled his understanding that we need to begin to deal with this fiscal deficit as well as our jobs deficit and the deficit of trust. He pleaded again for health care reform which has some potential to reduce future deficits (although this is far from certain and the public instinctively understands that covering more people costs more money, not less). He also called for freezing nonsecurity discretionary spending for three years. A freeze is a good idea although it would affect only a small slice of all spending and fill only a tiny fraction of the gaping hole between future spending and revenues.

Finally, the president called for a bipartisan commission. But a presidentially-appointed commission cannot solve the problem without a change in the political culture that has so degraded our ability to confront a variety of problems. Republicans are overwhelmingly opposed to tax increases, and Democrats aren’t going to agree to the kind of major reforms of Social Security and Medicare unless everything, including revenues, is on the table. All in all, the proposals to reduce the fiscal deficit won’t do the job. But that’s because the deficit of trust is impeding progress and putting the nation on a path to nowhere.

The president said he wouldn’t quit. My fervent hope is that he will keep trying to change the way Washington works. Nothing could be more important.