State of the Union: 3 takeaways for markets from President Biden's speech
In his second State of the Union address, President Biden took on China, the debt ceiling, and supply chains
President Biden's State of the Union address on Tuesday was measured in tone, optimistic about the economy, and managed to balance both humility and defiance in the portions of his speech directly aimed at Beijing and Moscow.
Biden signaled that he will likely run for president in 2024 to, as he put it, "finish the job." But that will likely do little to quash speculation of presidential bids from the likes of Sen. Joe Manchin (D-WV), who still hasn't ruled out a 2024 run.
And amid the shouting and shushing in the House chamber, the address highlighted a number of issues of global consequence that are intensifying halfway through Biden's first term.
Biden calls out China
"In the past two years, democracies have become stronger, not weaker," Biden said during the address. "Autocracy has grown weaker, not stronger. Name me a world leader who would change places with Xi Jinping. Name me one."
Biden's call-out of Xi Jinping, the leader of the Chinese Communist Party, was a dare to the leaders of nation-states who have so far sat on the fence in terms of choosing between the U.S. and China — particularly in finance and global trade.
Biden also alluded to the U.S. decision to strike down a Chinese surveillance balloon that had flown above America. For the business community, it was a clear signal from the Biden administration that the U.S. government remains aligned in terms of addressing the global China challenge.
"Make no mistake about it: As we made clear last week, if China threatens our sovereignty, we will act to protect our country. And we did," Biden said. "Look, let’s be clear: Winning the competition should unite all of us. We face serious challenges across the world."
Biden's remarks on China come as Speaker Kevin McCarthy (R-CA) has created a bipartisan House Select Committee to look into the issue. For as much as America's decades-long era of a two-party system has led to hyper-polarization — it's worth noting that even perhaps the most hyper-partisan of all Rep. Marjorie Taylor Greene (R-GA) at one point was shouting about China in the chamber.
While not even McCarthy would support her lack of manners, on the issue of China — there is unity even amongst the fringe political characters in Washington.
Debt ceiling showdown
Biden dug in on the debt ceiling and showed an unwillingness to negotiate with Republicans on cuts to government spending and entitlements.
"Instead of making the wealthy pay their fair share, some Republicans want Medicare and Social Security to sunset," Biden said, prompting loud boos from Republicans.
"If anyone tries to cut Social Security, which apparently no one’s going to do, and if anyone tries to cut Medicare, I’ll stop them," Biden continued. "I’ll veto it. And look, I’m not going to allow them to be taken away. Not today. Not tomorrow. Not ever. But apparently, it’s not going to be a problem."
Biden's positioning came just about one week after he met with McCarthy at the White House to discuss the debt ceiling. One of the biggest unknown Washington variables for the business community remains how the negotiations over the nation's borrowing limit will impact the markets.
Biden noted that during the Trump administration, Republicans voted to raise the debt ceiling three times.
The president also sought to portray a strong U.S. economy, even as Federal Reserve Chairman Jay Powell told David Rubenstein just hours before that the process of bringing U.S. inflation down will "probably be bumpy."
Biden touts American manufacturing
"Folks, I know I’ve been criticized for saying this, but I’m not changing my view," Biden said about global supply chains. "We’re going to make sure the supply chain for America begins in America. The supply chain begins in America."
Biden's comments come as some Europeans have openly griped that the Inflation Reduction Act hurts Europe more than it helps America.
However, that didn't stop Biden the industrialist from highlighting areas of bipartisan success for his administration — most notably the CHIPS Act, which seeks to dramatically increase U.S. chip production to make the U.S. less reliant on China.
"With this new law, we’re going to create hundreds of thousands of new jobs across the country," Biden said. "And I mean all across the country. Throughout not just the coast, but through the middle of the country as well."
The president's speech also included progressive talking points delivered in a centrist manner.
"I'm a capitalist," he said before calling on billionaires to pay more in taxes. He also shamed Big Oil CEOs for record profits during a global energy crisis.
But then, Biden the senator from refinery-heavy Delaware emerged, saying: "We’re going to need oil for at least another decade."
Even Speaker McCarthy smirked.
Kevin Cirilli is a visiting media fellow at the Atlantic Council's Global China Hub and the Krach Institute for Tech Diplomacy at Purdue. Follow him on LinkedIn here.
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