From a small business perspective, President George W. Bush's State of the Union address had some things to cheer, along with some proposals to fret over.

Let's take a look at a few key areas.

On the tax front, the President clearly stated his desire to make the 2001 and 2003 tax cuts permanent. Bush declared: "In the last five years, the tax relief you passed has left $880 billion in the hands of American workers, investors, small businesses, and families -- and they have used it to help produce more than four years of uninterrupted economic growth. Yet the tax relief is set to expire in the next few years. If we do nothing, American families will face a massive tax increase they do not expect and will not welcome. Because America needs more than a temporary expansion, we need more than temporary tax relief. I urge the Congress to act responsibly, and make the tax cuts permanent."

Indeed, key tax cuts, including the reductions in personal income, capital gains and dividend tax rates, phasing out the death tax, and expanding small business expensing, have provided a significant boost to private-sector investment and economic growth. It is no mere coincidence that our economy has experienced a dramatic pick-up in private investment and averaged solid real GDP growth since the most important tax cuts were passed in mid-2003.

On the trade front, President Bush wisely challenged protectionism. He noted: "Keeping America competitive requires us to open more markets for all that Americans make and grow. One out of every five factory jobs in America is related to global trade, and we want people everywhere to buy American. With open markets and a level playing field, no one can out-produce or out-compete the American worker." Such sentiments are good news for the small businesses that dominate international trade, as 97% of U.S. exporters, for example, are small firms.

Health care also was a positive in the State of the Union speech. President Bush said: "We will strengthen health savings accounts -- making sure individuals and small business employees can buy insurance with the same advantages that people working for big businesses now get. We will do more to make this coverage portable, so workers can switch jobs without having to worry about losing their health insurance." This is a critical recognition that the answers to problems in our health care system lie through the marketplace, not through more government regulations and mandates.

Unfortunately, there were some worrisome twists in the State of the Union. For example, on Social Security, the President chose not to push for the sound, pro-growth idea of private accounts, which provide higher returns and ownership rights to individuals. Instead, he called for another commission - this one to address the impact of Baby Boomers on Social Security, Medicare and Medicaid. Does Washington really need another commission?

The spending story was mixed as well. While the President praised efforts at earmark reform and requested a line-item veto, he also called for hurling more tax dollars at education and energy. Runaway federal spending has been a serious problem over the past five years, and these measures indicate a lack of seriousness on getting expenditures under control. Big spending increases, and accompanying budget deficits, plague efforts to make the tax cuts permanent and to move ahead with pro-growth tax reform.

Energy, though, turned out to be one of the most worrisome parts of the President's speech. Gone were positive references to removing governmental obstacles to expanded energy exploration and development. They were replaced with faulty government-led, industrial policy initiatives.

Just as with taxes, trade, and health care, the free market - guided ultimately by consumers - is far better equipped to address the nation's energy needs, especially when the alternative is a bunch of politicians and government bureaucrats. As history has shown over and over, industrial policy means waste and higher costs.

In the end, the State of the Union speech was a positive-to-mixed bag of proposals from the small business perspective. We just needed a bit more on empowering free enterprise, and a bit less on empowering government.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.