The Editors

Presidential State of the Union addresses, even when delivered by a speaker as skilled as Barack Obama, tend to be compilations of big statements with relatively few specifics. The reader or listener mines these speeches for hints of the President's overall direction and emphasis. The specifics of a President's policy initiatives are in his (or her) proposed federal budget, not in a speech, even one as highly touted as the State of the Union.

Without overreading one 7,335-word speech, we take note of the following:

Unless we missed them, the President's several well publicized nonprofit initiatives, the Social Innovation Fund, the Promise Neighborhoods program, the unprecedented expansion of community service stipended volunteer programs, and others went unmentioned.

The story of this speech was an appeal to Main Street, with plenty of attention to incentives for small businesses, including a "new small business tax credit…that will go to over one million small businesses who hire new workers or raise wages." He also promised to the eliminate capital gains tax on small business investment and promised to reuse $30 billion of TARP funds to "help community banks give small businesses the credit they need to stay afloat."

This brings us back to the nonprofit sector. As we have long pointed out, nonprofits are employers of some 15 million workers and all but a tiny proportion are the equivalent of "small businesses," except that they are not for-profits. But, as nonprofits, they can't use tax credits like small businesses, because they don't pay taxes like for-profits do.And just like small businesses, many small nonprofits are having trouble staying "afloat," but they need federal grant support, strengthened state government budgets, and expanded government funding in general for social programs.

As rumored, the President didn't promise much in the way of expanded governmental activities for social programs: "Starting in 2011, we are prepared to freeze government spending for three years…[but] [s]pending related to our national security, Medicare, Medicaid, and Social Security will not be affected." The President promised to "work within a budget to invest in what we need and sacrifice what we don't" and to "continue to go through the budget line by line to eliminate programs that we can't afford and don't work," ostensibly to make room for his desired investments. But as we have said elsewhere, promising to hold the line on discretionary spending while making military spending and other areas sacrosanct is a formula that doesn't inspire much hope. President Obama isn't the first president and probably won't be the last to say he will hold the line on government spending, and find revenue by eliminating waste and inefficiency.

His ability to do so, of course, is limited by his ability to persuade Congress to go along with his ideas. Just this week, his own party comrades in the Senate scuttled the President's proposal for a bipartisan fiscal commission to come up with budget solutions. In the speech, President Obama pledged, it appears, to create the commission through executive order. But the Senate's rejection of the President's proposal is evidence of how hard it might be to cut programs the President thinks "don't work" and implement his new program proposals that have no track record at all yet.

The President's domestic discretionary spending freeze, however, will not begin until next year, "when the economy is stronger," he said; did he mean Fiscal Year 2011 which starts this year but is the next fiscal year, or did he mean Fiscal Year 2012, which starts in calendar year 2011? It isn't clear.

This may not be all President Obama's fault. Many of us forewarned that the composite impact of the tax cuts of Obama's predecessor combined with the inexorable rise of mandatory expenditures in the budget would eventually squeeze the life out of the discretionary budget, especially if the President protected the defense establishment and our nation's military adventures in Iraq, Afghanistan, and elsewhere from cuts. But the President's ability to push a social agenda—and realize expensive components of national health insurance reform—could be compromised by this contradictory and, to many, unwise promise to freeze spending.

Let's hope that the President's budget freeze doesn't undo the promise and potential of this administration to the nonprofit sector. A glimmer of hope was his proposal that students would only be required to devote ten percent of their post-college income toward paying their student loans, which would be forgiven after 20 years. He said that student loans would be forgiven after 10 years if graduates "choose a career in public service." Let's assume that the President's definition of public service includes the nonprofit sector, the bulk of which is the locomotive of public service at all levels of society. But that and other initiatives benefiting nonprofit organizations and nonprofit employees won't happen if the President freezes federal domestic spending and Congress prevents the Executive Branch from making necessary investments from within that capped amount.

For society overall, the President made remarks that sounded promising, ranging from supporting increased regulation of the banking sector to finally ending this nation's adventure in Iraq. But for the nonprofit sector itself, the President's speech was a bit sparse. Let's cross our fingers for a more positive interpretation when the President delivers his FY2011 budget proposals. The alternative is not fun to contemplate.