Gannett News Service
PREVIEWING MONDAY’S STATE OF THE UNION ADDRESS BY PRESIDENT BUSH

By JOHN YAUKEY

Gannett News Service

WASHINGTON – The good news for President Bush as he prepares to deliver his final State of the Union address Monday: U.S. casualties in Iraq are down significantly.

But so is the stock market, highlighting a raft of worrisome economic trends Bush will have to deal with in his speech, maybe more prominently than he was planning only weeks ago.

The urgency of the shaky economy was evident Thursday as House leaders and the White House agreed on a $150 billion economic stimulus package that includes rebates of between $300 and $1,200, and $50 billion in breaks for business.

“It was done in record time,” House Speak Nancy Pelosi, D-Calif., said of the deal.

Bush said the package “has the right set of policies and is the right size.”

The Senate is scheduled to begin work on the package next week with the goal of getting it to Bush by mid-February.

Recent polls show the economy now equals or surpasses Iraq as the top concern among voters, who watched their 401(k)s lose all their 2007 gains in just days.

The president and his top aides have been stressing that despite the turmoil, the nation’s economy is fundamentally sound, and he’s expected to hit that theme hard Monday night, mixing concern with confidence.

But his audience will be anxious – about more than just the stock market:

• Unemployment hit 5 percent in 2007, up from 4.4 percent in 2006, and the rate is higher in some states.

• Some 5.6 percent of mortgages were in danger of foreclosure in the third quarter of 2007, according to the Mortgage Bankers Association. That was up from 4.7 percent in the third quarter of 2006.

• Inflation for 2007 hit an almost two-decade high of 4.1 percent.

All of this follows a significant loss in home values nationwide, stripping thousands of dollars of wealth from average families.

In addition to the stimulus package, it’s not clear yet what else Bush will propose to stabilize the economy or how much of that he will discuss Monday night.

Bush has repeatedly called for making his tax cuts permanent, and the Federal Reserve is expected to follow Tuesday’s huge interest rate cut with another reduction as early as next week. But economists say there are limits on what any president can do to shore up a shaky economy.

“The president has his bully pulpit, which he can use on Monday,” said Vincent Reinhart, former director of the Federal Reserve Board’s Division of Monetary Affairs. “But the bad news is that there are not that many fiscal policy tools available in a timely fashion.”

The economic downturn comes at an inauspicious time for the legacy-mind Bush, eager to draw attention to some of the best news out of Iraq since the start of the war, now in its fifth year.

Perhaps more than any other issue, Iraq will define the Bush presidency, and he is expected to discuss it in detail Monday night.

Last year’s controversial troop surge is showing signs of success – militarily at least. About 75 percent of Baghdad’s neighborhoods are secure, a dramatic increase from about 8 percent a year ago, according to the Pentagon.

American fatalities are roughly half, or less, of what they were a year ago.

By summer, troop levels are scheduled to drop from about 160,000 to 130,000, and American commanders are planning for possibly further reductions by year’s end.

Still, Bush’s critics argue that the troop surge he will declare a success Monday night is really a failure because it never produced the kind of political reconciliation in Iraq necessary for long-term stabilization.

“We’re still mired down in political dysfunction, ” said moderate Sen. Ben Nelson, D-Neb., who sits on the Armed Services Committee. “Unless Iraq steps up, the cycle of dependence will continue.”

Gannett News Service

THE SPEECH: BUSH’S PAST, PRESENT AND FUTURE

What President Bush has said in previous State of the Union addresses:

Clean air and climate change

What he said: In his 2003 and 2005 addresses, Bush called on Congress to pass his “Clear Skies Initiative,” which he said would cut air pollution from power plants by 70 percent over 15 years and improve Americans’ health.

What happened: Congress never passed Bush’s plan and he dropped it because of a lack of support. Critics said the legislation favored utility companies at the expense of public health and weakened existing law. They also said it did nothing to mandate reductions in carbon dioxide emissions that cause global warming.

What’s next: Congress is working to pass legislation to limit global warming emissions. No major clean air legislation has been passed, but the Environmental Protection Agency is under a court order to decide by March whether to adopt tougher regulations to reduce smog.

Education

What he said: From the moment he took office, Bush championed public school accountability.

What happened: He worked with Congress to pass the No Child Left Behind Act, forcing states to test students in math and reading each year and requiring them to narrow the achievement gap between whites and minorities. He signed the law in January 2002.

What’s next: No Child was supposed to be renewed by January 2008, but Congress is debating changes. Many of the law’s basic principles – annual testing, publication of scores, free tutoring for poor children – are expected to survive.

Energy

What he said: In every address since taking office, Bush stressed the need for America to become more energy independent and called on Congress to pass comprehensive energy legislation to increase domestic oil supplies and invest in renewable energy.

What happened: At the end of 2007, the Democrat-controlled Congress passed an energy bill that sets higher fuel economy standards for motor vehicles for the first time in 22 years and requires annual production of 36 billion gallons of renewable fuels by 2022. The bill, which Bush signed into law, requires cars and light trucks sold in the United States to average 35 miles per gallon by 2020.

What’s next: Congress is not expected to take up major new energy legislation again until there is a new president. If Democrats remain in control, they would like to pass legislation requiring utility companies to produce a bigger share of electric power from renewable sources and raising taxes on oil companies to subsidize alternative energy development. Those provisions were removed from the 2007 bill because of Bush’s objections.

Immigration

What he said: Immigration has been a recurring State of the Union topic for Bush. He stressed the need for comprehensive immigration reform that would strengthen border security while giving illegal immigrants a path to citizenship.

What happened: Bush addressed the issue numerous times during weekly radio addresses and lobbied Congress to support his plan. But lawmakers have failed to reach an agreement on reform. The most recent legislative push took place last year when a comprehensive immigration bill collapsed in the Senate after fractious debate.

What’s next: About 12 million illegal immigrants remain in the country and lawmakers are not expected to be able to pass a bill to address the problem this year. Immigration is a hot topic for the presidential candidates.

Medicare

What he said: In 2003, Bush described Medicare as a “binding commitment of a caring society.” He urged Congress to expand it “by giving seniors access to preventive medicine and new drugs that are transforming health care in America.”

What happened: Five months later, Congress approved a bill to create a new prescription drug benefit, Medicare Part D, the largest expansion of the program in its 40-year history. The benefit has been judged a success because it has substantially increased the number of seniors with prescription drug coverage, reduced out-of-pocket expenses and increased use of prescriptions.

What’s next: Patient advocates and others are pushing to make the drug benefits more generous.

Social Security

What he said: In his 2005 address, Bush asked Congress to join him in saving Social Security from bankruptcy. He urged creation of voluntary personal retirement accounts for younger workers to divert a portion of their Social Security tax into investments as part of the solution.

What happened: Many Democrats and seniors’ groups, including AARP, opposed Bush’s approach. Congress held hearings but passed no reform legislation. Bush submitted budget proposals in 2006 and 2007 that included private Social Security accounts, but Congress did not approve either proposal.

What’s next: A retirement tsunami of baby boomers combined with a dwindling work force will exhaust the Social Security Trust Fund reserves, currently projected to occur in 2041. Many experts agree it will take politically difficult compromises that include benefit cuts and revenue increases to solve the program’s long-term financial problems.

Tax cuts

What he said: In 2006, Bush asked Congress to extend 2001 and 2003 tax cuts set to expire in 2011. He said they spurred economic growth and he warned that the expiration of child tax credits and lower income tax rates and capital gains taxes would constitute a “massive tax increase.”

What happened: The Republican Congress was unable to permanently extend the tax cuts and the new Democrat majority that took power in 2007 opposes renewal of most of the tax breaks.

What’s next: Bush and congressional Republicans are expected to push hard for renewal of all temporary tax cuts approved since 2001. Democrats do like some of the tax breaks, such as the child tax credit, and may pick and choose other tax cuts to extend.

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