Obama goes after Wall Street but is silent on FTT

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US President Barack Obama used his last State of the Union speech before the November election to paint himself as the champion of the middle class, by demanding higher taxes for millionaires and tight reins on Wall Street. He made no reference, however, to a tax on financial transactions like the one proposed by the European Commission.

Taking advantage of a huge national platform to make the case for his re-election, Obama on Tuesday (24 January) defiantly defended his record after three years in office and laid blame for many of the country's woes at the feet of banks and what he called an out-of-touch Congress.

He proposed sweeping changes in the tax code and new remedies for the US housing crisis, setting as a central campaign theme a populist call for greater economic fairness.

He mentioned taxes 34 times and jobs 32 times during his hour-long speech, emphasising the two issues at the heart of this year's presidential campaign.

However, Obama made no reference to a tax on financial transactions, which was the centerpiece of European Commission President José Manuel Barroso's own State of the Union speech in September.

Washington has rejected the introduction of financial tax at international meetings. Britain also opposes an EU-level levy.

Strong rhetoric but opposition in Congress

While the biggest proposals in Obama's speech are considered unlikely to gain traction in a deeply divided Congress, the White House believes the president can tap into voters' resentment over the financial industry's abuses and Washington's dysfunction.

Standing before a joint session of Congress, Obama unleashed a partisan attack over taxes and vowed no return to "the days when Wall Street was allowed to play by its own set of rules."

"Washington should stop subsidising millionaires," Obama declared as he proposed a minimum 30% effective tax rate on those who earn a million dollars or more.

With polls showing most Americans disapprove of his economic leadership, he still faces the stiff challenge of convincing them that the candidate who was swept into the White House in 2008 promising hope and change now deserves another term.

The US unemployment rate was 8.5% in December. No president in the modern era has won re-election with the rate that high.

Foreign policy

Obama mentioned Europe only once throughout the hour-long speech when he said "The renewal of American leadership can be felt across the globe. Our oldest alliances in Europe and Asia are stronger than ever."

Taking aim at China – an election-year target of Republicans and Democrats alike over its currency and trade practices – Obama proposed the creation of a new trade enforcement unit within the federal government.

Promising what amounts to a peace dividend, Obama also proposed using half of the "savings" from ending the war in Iraq and winding down in Afghanistan to pay down US debt, with the other half going to fixing decaying roads and railways.

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