Biden's State Of The Union Preview

By Brian Gardner, Stifel Chief Washington Policy Strategist

President Biden’s State of the Union could be seen as a soft opening for his 2024 reelection campaign.  He is likely to take a victory lap on his 2022 legislative wins (the IRA and the CHIPS Act), promote climate initiatives, and highlight consumer-related sectors (tech and banking) to argue that his administration is helping consumers.  The speech will likely include some mention of the debt ceiling debate, but the president will probably avoid going into detail about his position ahead of negotiations with Congress.

Getting ready. pic.twitter.com/UhERyDuxTO

— President Biden (@POTUS) February 6, 2023

State of the Union (SOTU) addresses tend to include laundry lists of proposals that will never see the light today and Tuesday’s speech will probably be similar to past speeches, but President Joe Biden’s speech could be notable and potentially market moving for a few reasons.

President Biden’s SOTU speech will probably serve as an unofficial launch of his 2024 reelection campaign.  As such, the speech could include several themes that might reappear during the campaign.  President Biden will likely try to position himself as a champion of the middle class and as part of this effort, he could use various sectors as foils to show he is on the side of average Americans and against Big Business. The technology and the banking industries could be mentioned in the speech.   A focus on tech regulation in the president’s address could include mentions of the administration’s antitrust initiatives, privacy protection, and possibly revisions to liability protections under Section 230 of the Communications Decency Act.  Regarding banks, the president could reiterate calls on banking regulators to review merger rules.  He could also highlight the Consumer Financial Protection Bureau’s (CFPB) recent proposal to cap credit card late fees and push for a similar cap on overdraft fees.

The president is likely to take a victory lap on his legislative victories in 2022 including the Inflation Reduction Act (IRA) and the CHIPS Act.  In addition to highlighting the two new laws, Mr. Biden might also push for an expansion of some of the IRA’s climate provisions including expanding electric vehicle tax credits. However, in the current political environment, any expansion of EV credits seems unlikely.

The IRA capped insulin prices under Medicare, but procedural rules in the Senate prevented capping prices under private health insurance plans.  The speech could include a proposal to expand the insulin price cap to private plans.

The president will likely mention the debt ceiling debate, but investors should not expect new proposals or concessions to Republicans.  Instead, the speech will try to position the president as representing a “reasonable” alternative to the “extreme” demands of the Republicans (a theme likely to play out in the 2024 campaign).  He could also try to calm investors by assuring them that the debt ceiling will be raised and that the government will not default on its bond payments. This poses a conundrum since as long as investors expect a debt ceiling deal, the markets will remain calm and price in a deal.  However, this removes a pressure point on Washington to reach a deal.  Panic in financial markets helps move lawmakers to reach an agreement, so calm markets are actually counterproductive to reaching a debt ceiling deal.  It is likely that markets will continue to price in a debt ceiling agreement until and unless we approach the X-date (the day probably in the early summer when Treasury exhaust its extraordinary measures to manage the debt limit) and headlines hit suggesting that Congress and the administration might fail to reach a deal.