Fisher Investments Editorial Staff

The State of Politics (as Usual)

By, 01/26/2012

Inaugurations aside, few events offer the opportunity to experience American politics’ traditional grandiosity like the State of the Union. Widely anticipated by all sides of the aisle, it provides ample fodder for supporters and detractors alike. And it’s not uncommon for many to declare either a presidential victory or defeat, depending on their own political take as well as their perception of the president’s proposals’ validity.

But are such proclamations truly warranted? After all, considering the State of the Union is primarily a policy speech (in theory), it would seemingly make more sense to declare victory or defeat depending on the level of policy implementation following the speech. And in that sense, we’d suggest overall and on average, most presidents (regardless of party) would probably be deemed defeated following their annual reports to Congress.

Consider: In his 2011 State of the Union, President Obama proposed simplifying the tax system by getting rid of loopholes, lowering corporate tax rates, immigration reform, eliminating oil company subsidies and freezing annual domestic spending for the ensuing five years. (Any of that sound familiar?) Last we checked, none of those things were actually accomplished last year, nor is it terribly likely they’re accomplished anytime soon, given the divided structure of our government. The very inclusion of similar items to last year speaks to the fact not much was seemingly checked off the list in the intervening year.

Now, this is by no means unique to our current president—on the contrary, we’d suggest nearly every president has faced similar challenges in terms of presenting his goals to Congress and actually witnessing their successful execution. It also isn’t to suggest nothing on the president’s list of proposals is ever accomplished—there are certainly occasional wins for the president, Obama included.

But it should overall temper expectations—among both supporters and detractors—about the likely number of items ticked off over the course of the subsequent year. While that may distress those who find much to agree with in a given president’s proposals, it should also calm those worried by what may strike them as ill-advised policy prescriptions.

Because the reality is, particularly in an election year, the State of the Union is much more stumping than it is an ironclad agenda to be adhered to by Congress. In effect, it’s a wish list—and a wish list generally targeting votes and support. In that way, perhaps pass or fail State of the Union grades should hinge more on subsequent election results and fundraising coffers.

Love or hate the president’s stated wishes, barring a unified government in Congress and the White House (and sometimes even then), chances are, not much is actually accomplished—for good or ill. And even with a unified government, politicians universally have an ability to say a lot but do very little.

So while we certainly found things to agree and disagree with in the President’s speech Tuesday night, we’re neither overly hopeful nor fearful of resulting legislation. After all, in a year when much of the federal government faces reelection, expect politicians’ rhetoric to far exceed what actually results. What’s more, history teaches us markets prefer legislative inaction. So here’s to another year of lots of hot air and little to show for it.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.


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