President Donald Trump delivered his third State of the Union address Tuesday night. The Heritage Foundation’s policy experts weighed in with reaction and analysis.

Economy

Tax Cuts Continue to Boost Jobs and Wages

Thanks to the 2017 tax cuts and other pro-growth economic reforms, like deregulation, the U.S. economy has outstripped expectations. The president touted the economic success of slashing “job-killing regulations” and “enacting historic and record-setting tax cuts.”

He is right, and the proof is in the numbers. 

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Unemployment is at a 50-year low of 3.5%. Businesses have added jobs for 111 straight months, the longest streak on record, and there are more jobs available than people looking for them. 

Wages have also been increasing. Wage growth for the median worker was 4% over the past year. What’s most impressive is that the lowest-income workers in the U.S. have benefited the most from the strong labor market, seeing some of the fastest wage growth of any workers.

Minority and lower-skilled workers have also seen some of the largest drops in unemployment and largest wage gains in recent years. For example, the median black female worker benefited from an 11% wage increase over the last year. Our strong economy is truly benefiting all Americans.

This isn’t happenstance. The 2017 tax cuts made American workers globally competitive again by lowering punitive business taxes to levels similar to most European countries. Coupled with sweeping reforms to outdated and unnecessary regulations, tax cuts have made the U.S. an easier place to do business and hire American workers.

—Adam N. Michel, senior policy analyst, Hermann Center for the Federal Budget

Lifting Americans Off Welfare

The president rightly noted that millions of Americans have risen out of poverty—and have been lifted off welfare—and that 7 million Americans have been lifted off food stamps since the 2016 election.  

The best and necessary foundation for reducing poverty: a strong economy, as the president has delivered. 

Congress and the president should build on this foundation by reforming welfare programs to promote marriage and work as the key long-term pathways out of poverty. Specifically, Congress should reform the $1.1 trillion spent on the means-tested welfare state by reducing welfare penalties against marriage and requiring able-bodied recipients to work or prepare for work as a condition for receiving assistance. 

Additionally, in programs designed to improve behavior, Congress should pay only for outcomes rather than ineffective services—e.g., pay when someone gets and stays off drugs, rather than just paying for treatment that didn’t work.

Finally, Congress should accurately measure benefits. When the government measures poverty, it excludes all welfare benefits. This is unfair to the taxpayer and produces exaggerated, inaccurate figures on poverty in the U.S. Policymakers should fix this by insisting that all welfare benefits are correctly counted when estimating poverty. (For more, see Robert Rector’s paper “Understanding the Hidden 1.1 Trillion Welfare System and How to Reform It.”)

—Marie Fishpaw, director, domestic policy studies

Slashing Regulations

In recounting the strong performance of the economy, the president noted his record of regulatory reform. Indeed, within days of taking office, the president issued Executive Order 13771, which requires federal departments and agencies to take two deregulatory actions for each new regulatory action, as well as to not exceed annual regulatory budgets.

According to the latest status report from the White House, the administration has eliminated $50.9 billion in regulatory costs since 2017. In the coming year, additional savings of $51.6 billion are forecast, including easing automotive fuel economy standards.

Most recently, the White House Council on Environmental Quality issued revised guidelines for the National Environmental Policy Act, which imposes some of the worst regulatory barriers to modern and safer roads, bridges, airports, and railways.

Dozens of regulations have been targeted for elimination, but regulatory reform has been stymied at every turn by lawsuits and other administrative hurdles devised by those who benefit from the status quo.

But there has been a dramatic reduction in the number of new regulations. In the 37 months of the Trump presidency, the administration has issued 73% fewer significant regulations than President Barack Obama (in the same period) and 63% fewer than President George H.W. Bush.

—Diane Katz, senior research fellow, regulatory policy

Paid Parental Leave for Federal Workers

The president applauded Congress for providing federal employees with 12 weeks of paid parental leave and called on lawmakers to provide some form of national benefit for private-sector workers.

The provision of taxpayer-provided parental leave to federal workers makes sense in this case, because the government is the employer. But the addition of this new benefit should have been coupled with more comprehensive federal employee compensation reform.

In addition to receiving significantly higher compensation than their private-sector counterparts, federal employees already had a de facto paid family leave and short-term disability insurance allowance through a very generous sick leave policy. Adding this new benefit on top without reforming the existing (and arguably less efficient) system allows federal employees who are new parents to take at least 20 weeks and up to a full year of paid leave.

—Rachel Greszler research fellow, Grover M. Hermann Center for the Federal Budget at The Heritage Foundation

A New Federal Paid Family Leave Entitlement

The president is right that providing paid parental leave is a model for the rest of the country, but it is a model to be implemented by companies as they are able and on their own terms. It is not a model the federal government should impose through a new national paid parental or paid family leave entitlement.

Instead of a federal program, the president should promote more of the rapid growth that’s already occurring among employer-provided paid family leave programs across the U.S. Employer-provided policies can be flexible and accommodating (and are usually more generous), but one-size-fits-all government policies are rigid, burdensome, and impersonal.

Government programs also have higher costs and consequences, and they are extremely regressive, taxing everyone while primarily only benefitting middle- and upper-income earners.

While most Americans support a national paid family leave program, their support drops precipitously when asked about the costs and trade-offs. Democrats support a program they say would only cost “a cup of coffee a week,” but without government rationing, a national program would cost about seven times as much—closer to a tank of gas instead. 

Even at the modest “cup of coffee a week” cost, support for a national program drops below 50%. And only 29% of workers support a national program if it were to mean lower benefits for them or fewer promotions for women. But that has been the consequence with government paid leave programs abroad.

And despite the argument that paid family leave increases women’s labor force attachment and earnings, California’s program was found to have the opposite effect, reducing the employment, earnings, and even fertility rates of new mothers who used the program.

Although access to paid family leave is valuable (and employers are responding by increasingly offering it), there are many other things that are more important to working families. When asked which of six factors would best allow workers to balance work and family, 34% said “more flexible work schedules” and 25% said “ability to work remotely/telecommuting,” while only 6% said “more paid maternity or paternity leave.”

The Working Families Flexibility Act would give lower-wage workers the option to accumulate paid time off. Universal savings accounts would help families save for all kinds of life events, and fewer regulations would free up business resources to help employers provide paid family leave. And none of these would create another unfunded middle-class entitlement.

—Rachel Greszler, research fellow, Grover M. Hermann Center for the Federal Budget

Failure to Mention America’s Spending-Driven Debt Problem

One issue that the president failed to address Tuesday night is the nation’s looming spending-driven debt crisis.

Last week, the Congressional Budget Office released its budget and economic projections for the next 10 years. The budget office estimates that the national debt held by the public will increase to nearly 100% of gross domestic product by 2030, driven by entitlement spending and growing interest payments on the national debt.

Moreover, these projections could be optimistic, assuming that lower interest rates slow the growth of interest payments on the debt and that Congress approves no major disaster and emergency spending.

The good news is there is still time to change course and avert a debt crisis, but the president must take the lead in this effort.

The first opportunity to initiate reforms is the release of the president’s fiscal year 2021 budget next week. The president’s first three budgets pledged to cut spending and fundamentally reform the role of the federal government.

President Donald Trump must continue to push for bolder reforms that focus the responsibilities of national government back to its constitutional roots. Current and future generations cannot afford for Washington’s reckless pattern of spending to continue.