Bloomberg News

Obama’s Go-It-Alone Strategy Falls Short for Wider Agenda

January 28, 2014

Obama

President Barack Obama works in the Oval Office, Washington, on Jan. 27, 2014. Photographer: Alex Wong/Getty Images

President Barack Obama will say in tonight’s State of the Union address that he’s prepared to act without Congress to advance parts of his agenda. That won’t get him very far.

When it comes to the biggest issues for U.S. companies -- immigration, corporate taxes, trade and transportation spending -- there’s very little Obama can do on his own without agreement from a divided Congress.

Obama’s vow to bypass lawmakers is an acknowledgment of narrower ambitions for his sixth year in office, and a sign that the gridlock that stymied action on key business priorities is likely to continue in 2014.

In tonight’s speech, he’ll promise to sign an executive order raising the minimum hourly wage to $10.10 for workers hired under future federal contracts. It would take an act of Congress to raise the wage for all workers.

“Certainly there are things a president can do without Congress, but they are limited by that little document we call the Constitution of the United States,” said Vin Weber, a Republican consultant and former U.S. representative. Executive action mainly has effect “around the edges.”

Avoiding Congress

With elections for the House and Senate coming in November and polls showing the public dissatisfied with the economy and the way Obama is handling his job, the president’s ability to sway lawmakers is diminished. His fifth State of the Union address is scheduled to begin at 9 p.m. Washington time.

Over the last month, Obama and his top aides have emphasized the power of his pen and phone: signing executive orders to alter policy and calling on people such as business, labor and education leaders to urge them to act on their own.

“I think he’s given up on Congress and I think that’s a mistake,” said John Feehery, a Republican consultant who was a top aide to former House Speaker Dennis Hastert. “He can’t go it alone. He can’t just legislate from the White House.”

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As part of his economic agenda, Obama, 52, has proposed lowering the corporate tax rate to 28 percent from 35 percent and curtailing tax breaks to offset any revenue loss.

Such changes are likely to generate one-time revenue, perhaps from altering the timing of tax deductions or imposing a transition tax on companies’ untaxed foreign earnings. Obama has proposed using that one-time money to pay for infrastructure rather than using it to lower the rate.

Lawmakers have been stymied on tax policy because they disagree on the details of business tax changes and on whether individual taxes should increase.

Trade Authority

On trade, Obama is pursuing deals with 11 Pacific rim nations and with the 28-member European Union. While he doesn’t need congressional approval to complete negotiations, neither treaty may take effect unless Congress has ratified it.

He also is seeking so-called fast-track authority for both deals to prevent lawmakers from making changes. That approach is backed by industry groups including the U.S. Chamber of Commerce, the business community’s largest lobby, and the National Association of Manufacturers.

Illustrating the hurdles for Obama’s agenda, resistance is coming from some of his fellow Democrats, such as Representative Sander Levin of Michigan, who want more input on the accords.

Business groups have been pressing for more spending on roads, bridges and rail projects. The nonpartisan Congressional Budget Office has projected that the U.S. Highway Trust Fund, which pays for road and bridge projects, will be insolvent by 2015 unless Congress raises the gasoline tax. Republicans, who hold the majority in the House, have thrown up road blocks to tax increases.

Immigration Debate

Immigration is one area where leaders in both parties and the business community say they are optimistic about the prospects for legislation this year.

House Speaker John Boehner, an Ohio Republican, told his caucus on Jan. 8 that they must address it. The Chamber of Commerce announced plans to increase its advocacy on the issue, while the Business Roundtable, representing chief executive officers of major companies, and a technology group formed by Facebook Inc. CEO Mark Zuckerberg also have been pressing for action.

Jim Manley, a Democratic consultant and former aide to Senate Majority Leader Harry Reid of Nevada, said he doubts Congress will pass the sort of comprehensive change that Obama wants, including a path to citizenship for 12 million undocumented residents. Agreement may be possible on a more limited expansion that affecting immigration children and young adults, or green-card holders, he said.

Climate Change

Aside from that “I think the only thing you’re going to see is passing appropriations bills and confirming nominations,” Manley said.

Obama may use executive authority to advance his agenda on the environment and climate change. He also will be making a decision on TransCanada Corp. (TRP)’s Keystone XL pipeline, a project backed by congressional Republicans and opposed by many of his supporters.

Acting unilaterally risks payback from congressional Republicans who can begin congressional committee investigations, raise legal challenges, or fight him on unrelated issues from raising the debt ceiling to immigration rights.

“If the president and his advisers get too aggressive, they’re risking having their authority challenged by the other side of the aisle,” Weber said.

The difficulty facing Obama going it alone is especially true when dealing with what he has called the “defining challenge of our time,” reducing income disparity in the U.S.

Needing Congress

Lawmakers ignored his plea in last year’s address to raise the minimum wage and congressional elections coming in November won’t make reaching an agreement any easier.

“It would be challenging to move the needle on inequality in the near term even with Congress’s cooperation,” said Jared Bernstein, Vice President Joe Biden’s former chief economist. “It would be really hard to do it without.”

Using one bit of leverage he has, Obama tonight will announce he’s setting a minimum wage of $10.10 an hour for federal contract workers, according to the White House.

The wage increase will take effect when new contracts are signed and won’t cover existing employees until their contracts are renewed, according to a White House statement. Valerie Jarrett, senior adviser to Obama, said on Bloomberg Television today the order covers “a couple hundred thousand” people.

White House spokesman Bobby Whithorne said today in an e-mail that he didn’t have a cost estimate.

Overtime Rules

The president will press Congress to raise the minimum wage across the country from the current level of $7.27 an hour, according to a White House statement.

The president also could use regulatory authority to raise the salary threshold for exemption to the overtime rules in the Fair Labor Standards Act, effectively meaning many more workers would have to receive pay at time and a half for working more than 40 hours per week, Bernstein said.

Obama already has used the “bully pulpit” of the presidency to put pressure on college presidents to contain tuition increases and to do more to assure the children of economically disadvantaged families attend.

Manley said Obama’s approach is “just dealing with the reality on the ground” when it comes to dealing with Congress.

“The president and his team have been spending far too much time thinking they can negotiate with House and Senate leaders,” Manley said. “I see this now as moderating expectation and trying to focus on what’s doable.”

To contact the reporters on this story: Margaret Talev in Washington at mtalev@bloomberg.net; Mike Dorning in Washington at mdorning@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


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