Tuesday 28th January saw US
President Barack Obama give his annual State of the Union address to the
American people. Considering America’s role as the lynchpin of global trade,
what does the State of the Union mean for the global economy?
The State of the Union speech was a tradition
started by American founding father George Washington. Although it has been
dropped and revived, the State of the union speech is now an American
tradition. It acts to lay out the President’s agenda for the year. It acts in a
similar way to the Queen’s speech at the opening of Parliament.
So what does Obama’s speech tell us about the
global economy? Critics and pundits are already commenting on how Obama’s
speech was one that was politically charged. It certainly was; Obama made it
quite clear that he is going to bypass a Republican House of Representatives
wherever he can to get his agenda passed.
This was the key overarching theme that we
should be interested in. Obama has had enough of being blocked at every turn.
His anger has been ignited particularly by the House’s reluctance to raise the
national minimum wage.
This was the central issue as far as global
economy was concerned and it played out in several ways. It is a key issue
because a higher minimum wage would increase American spending power. America
as the world’s largest economy is crucial to helping the global economy expand
by injecting money into it. More spending by America leads to more room for
business growth; strengthening economic activity around the world.
This played out directly and indirectly. Directly
Obama raised the minimum wage for federally contracted workers to $10.10 an
hour; a significant increase that will broaden the spending power of numerous
low level government workers. It gives the American economy a cash injection.
The indirect approach was used by Obama to urge
Congress to raise the national minimum wage and to urge state legislatures to
do the same. He’s unlikely to get anywhere with this message with the
Republican controlled House, however he could with the states. 20 of them have
already done so off their own backs and with a crucial election year coming up,
more may do so.
