The State of the Union is very important to see the spirit of the age. Under the reign of Bush freedom was all important. He used the words freedom and liberty in one year more than 40 times. Under the reign of Obama it is all about justice, fairness.
That is important: when the emphasis is on freedom markets are more inclined to be risk-on, when the emphasis is on care and justice (only when the institutions are already OK) this usually is bad for inflation and risk-on. In our book we distinguished three domains of the spirit of the age (according to how van Staveren and McCluskey did): freedom, care en justice. In some times the emphasis is on freedom, in others on care and/or justice.
The republicans say freedom is by far the most important: freedom, freedom of speech, the possibility to make lots of profits, the right to defend your belongings with guns and as less as possible government intervention.
The democrats go more for justice (it is not fair that the secretary of Warren Buffett pays a higher tax % of her income than her boss; something that is partially set right by making her a special guest at the State of the Union ceremony) and care (Obama-care where everybody can get medicare, but also a better environment/ cleaner energy etc; this was mentioned in the State of the Union, but not prominently).
There were no shocking plans proclaimed that could move the markets. Obama did drop a hint that he will come in a few days with a grand plan for mortgages, how to get easier refinancing at the current low mortgage rates. ("I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low rates. No more red tape. No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won't add to the deficit and will give those banks that were rescued by taxpayers a chance to repay a deficit of trust”. )
The proposal to impose a Buffett- tax on the rich so that they pay at least 30% taxes is not feasible in the congress and widely seens as election propaganda.
The republicans of course were disgraced about all the talk of Obama about justice: Daniels (GOP) said: "We do not accept that ours will ever be a nation of haves and have nots; we must always be a nation of haves and soon to haves."
(cartoon from conservativebyte.com)
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