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Washington Update: State of the Union - A Valedictory

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President Obama’s penultimate State of the Union address last year centered on his legacy. Coming on the heels of a midterm election in which his party was trounced, he held little back as he outlined a bold and ambitious policy agenda, making it abundantly clear to both his supporters and detractors that he had no intention of quietly riding off into the sunset. For his final State of the Union on Tuesday, that strong rhetoric was understandably tempered, but the overarching theme stayed the same.

At times, Obama was introspective — reflecting on his achievements and examining his failures. He lamented not being able to do better, but appeared emboldened by the fact that his legacy extends beyond his presidency. It was, as promised, an untraditional address. Instead of selling specific policies to the American people, Obama painted a broad vision of the future and defined a national identity for them to grasp. Ultimately, it is policies that drive government, but Obama sought to ensure that even after he leaves office, his principles will continue to serve as a guiding force.


“This State of the Union address was as much about the upcoming election as it was about President Obama’s legacy. In fact, the two are inexorably linked. Regardless of your political leanings, there’s no denying that Obama has left his mark on the nation. Now, as his time in office comes to a close, he’s handing the reins back over to the American people to decide whether to build upon that legacy, or to take the country in a different direction. It is our duty as citizens to not just exercise this right, but to do so in an informed manner that is consistent with our individual beliefs and principles. Our future is in our hands.”

Mary Moore Hamrick
National Managing Principal of Public Policy


In this edition of the Washington Update — State of the Union: A Valedictory, Grant Thornton’s Public Policy group and select industry professionals offer insights on how the president’s legacy will affect Grant Thornton and the relevant market sectors we serve.

Construction

President Obama didn’t discuss construction at length, as he has in previous State of the Union addresses. However, his vision of a more modern, cleaner and energy-efficient America isn’t possible without cooperation and involvement from the industry.

“Once again, President Obama made reference to the need to develop a 21st-century transportation system, which would put tens of thousands of Americans to work. An additional funding source proposed by the president for this infrastructure development would come from higher taxes on fossil fuels. Infrastructure projects designed to transform our transportation system require extensive planning, skilled labor and are long-term in nature. To move this plan forward will require additional dialogue in Washington to combine the use of federal subsidies with private sector involvement to build the transportation system of the future.”

Alvin Wade
National Managing Partner, Construction, Real Estate, Hospitality and Restaurants Practice

Education
Education has always been a strong area of focus for the Obama administration, even serving as a central theme of last year’s State of the Union. So it came as no surprise that it was one of the few issues for which Obama offered specific policy proposals.

“We applaud the president’s recognition of higher education as essential to the growth of the economy and to creating ‘real opportunity for Americans.’ Community colleges serve a vital role in the higher education sector and provide access for students who might otherwise not have the ability to attend college. They will help to keep our country competitive in the years to come. Affordability in higher education is an issue that transcends the sector — from large private research institutions to small liberal arts colleges. It is incumbent on political leaders and higher education professionals to seek solutions that allow greater numbers of students to have access to affordable and quality education without creating an undue burden of debt.”

Mark Oster
National Managing Partner, Not-for-Profit Practice, Higher Education Practice


Energy
In what was effectively his last big pitch for combatting climate change, President Obama pulled out all the stops — marrying environmentalism with capitalism and even environmentalists with Tea Partiers. He promoted the economic benefits of discovering alternative fuel sources, and advocated giving homeowners the freedom to harness and store solar energy.

 “The president touted low gas prices, cutting our imports of foreign oil and certain advances in ‘clean energy.’ While discussing the economy, the president largely continued to cast ‘big oil’ and ‘dirty energy’ in a negative light and did not discuss the current stress and job losses impacting the oil and gas industry. While this administration has lacked a comprehensive energy strategy, President Obama stated in his address he ‘will push to change the way we manage our oil and coal resources.’ I am certainly interested in what he will propose during his final year in office.” 

Kevin Schroeder
National Managing Partner, Energy Practice


Global Public Sector
At a high level, State of the Union addresses are entirely about government initiatives, which makes it ironic that management of the government is rarely discussed. This year’s address was no different, but federal agencies will play a key role in making the president’s ideas a reality.

“To say President Obama’s final State of the Union speech was light on themes of government management is like saying the odds of winning the Powerball lottery are long. There was virtually no mention of what it will take to achieve the stirring vision he laid out in his eighth State of the Union address to Congress. But that doesn’t mean it wasn’t an undercurrent of the talk. Every initiative to which he alluded, from curing cancer to unleashing innovation, will take the best management the government can muster to get done. Reforms to government’s acquisition, human capital and IT management are in process. Based on what it will take to chart the course the president laid out, they’re needed now more than ever.”

Robert Shea
Principal, Global Public Sector

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Health care

Like last year, health care reform received very little attention in this year’s address, likely due to the fact that the ink is barely dry on the veto order the president signed last Friday on a bill which would have effectively repealed most of the major provisions of the Affordable Care Act (ACA). The president did, however, announce that Joe Biden will lead a national effort focused on a cure for cancer, saying, “Let’s make America the country that cures cancer once and for all.” The president underscored this effort by stating the importance of providing resources to the National Institutes of Health and prioritizing our commitment to medical research.

“Regardless of what ultimately happens with the ACA, the legislation arguably provided the stimulus for transformational change in the payment model for health care services, from a ‘fee-for-service’ model to a more consumer-driven value-based system, emphasizing transparency and preventative care. Most would agree that this is a step in the right direction, although the pace of change remains uncertain.

We continue to encourage providers to focus on population health management, especially chronic disease control and preventative maintenance, while also making smart technology investments that improve quality, create clinical efficiencies and boost financial performance.”

Anne McGeorge
National Managing Partner, Health Care Practice


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Tax
This year’s State of the Union address had no bold tax proposals. Unlike past years, it did not include any recognition of the need for corporate reform. However, that doesn’t mean the need for comprehensive tax reform has subsided. Given the president’s agenda, a more modern and simpler code would be more useful than ever now.

“It would be a mistake to assume that tax legislation is now impossible in 2016. The recently enacted $680 billion tax package that made permanent the R&D credit and extended many other provisions proves that this administration will accommodate tax legislation so long as it also addresses administration priorities. The State of the Union address asked, ‘How do we give everyone a fair shot at opportunity and security in the new economy?’ Answers to this question, facilitating the portability of workplace benefits, helping to offset the cost of higher education, and helping those who lose their jobs to train for new jobs could all be addressed through the tax code. If the Republican leadership is willing to incorporate these provisions, significant tax legislation in 2016 could still be a reality.”

Mel Schwarz
Partner, Washington National Tax Office


Technology
Many of the president’s key initiatives — from finding alternative energy sources, to developing a modern transportation system, to curing cancer — are driven by technology. While the president didn’t propose any specific technology policies, he did acknowledge its importance. In listing his “four big questions” for the country to answer, he asked, “[H]ow do we make technology work for us, and not against us, especially when it comes to solving urgent issues like climate change?”

“As the president alluded, technology touches all aspects of our lives, but its role as an enabler was front and center in two of his central signature initiatives — curing cancer and clean energy. In highlighting these initiatives, President Obama provided a partial answer to his own question. Life sciences medical research, especially biomedical research and drug development, is a key ingredient in finding a cure for cancer. And cleantech is a fundamental enabler of the push toward clean energy. A lot can still be done to promote these efforts, but the Trans-Pacific Partnership is one step in the right direction. It contains a number of constructs helpful to growth in the IT and life sciences components of the technology industry.”

Steve Perkins
National Managing Director, Technology Industry Practice


Transportation
President Obama made no specific mention of technology or infrastructure besides mentioning the need to invest in a 21st-century transportation system.

“The regulatory environment for transportation companies continues to be daunting. The president’s discussion on climate change indicates that the regulatory environment may become tougher still for transportation companies.

Congress passed a highway bill last year and the president signed it. However, our infrastructure needs work and the president and the Congress need to continue to work together for a long-term plan to sustain and improve it.

Generally speaking, our transportation clients and targets are concerned that we may see a recession beginning in 2016 and would like to see regulatory and tax reform to help ward off a downturn.”


Randolph Smith II
Tax Partner, Transportation