Barack Obama and the Democratic majority House in its last few days not only passed a substantial Tax break plan (that will dramatically increase not only economic growth, but perhaps more importantly the perception of impending economic growth), but also got through some other, very substantial legislation during one of the most athletic "lame duck" sessions in history. Among the other initiatives are:
•A repeal of the ban on gays serving openly in the military, which Obama signed Wednesday. Military leaders will need months to implement it.
•A $4.2 billion measure that will benefit rescue workers who toiled at the World Trade Center in the weeks after the 9/11 attacks. It offers health assistance for those sickened by dust and debris. Congress passed the bill Wednesday after trimming its cost from $6.2 billion.
•A sweeping rewrite of the nation's food-safety laws that will give the Food and Drug Administration more power to inspect food production facilities and issue mandatory recalls of tainted products. After a phase-in period, high-risk food facilities will be inspected every three years.
•A $4.5 billion child nutrition plan that will expand the school lunch program and allow the government to set new standards for school meals, including in vending machines. The measure, championed by first lady Michelle Obama, would increase by 115,000 the number of low-income students who qualify for free or discounted meals.
It does make you wonder why all of this had to wait until after the mid-term elections especially when public opinion on these laws are very favorable. However, public impression of President Obama has seemed to improve and it would not be surprising for his public opinion ratings to move north of 50% and stay there for the remainder of his term. It is nearly impossible to defeat a sitting president with those ratings, so these legislative victories may have some additional long-term effects.
Tuesday, December 21, 2010
Friday, December 17, 2010
Tax Breaks and the Comeback Kid
The report of Barack Obama's demise is a bit premature. In fact, I think he just needed to lower everyone's expectations. Nothing does that in politics quite as well as getting trounced in midterm elections and losing the House.
Few expected the lame-duck session in this environment to provide compelling results, and yet if you scratched below the surface, this is exactly what you should have expected.
The Dems were in the final weeks of having control of the House and will lose several voting seats in the Senate. There were also several items on the Dems to-do list still in the hopper and the President felt strongly about several of them.
As I mentioned in my post Stand or Deliver, the President began the lame-duck session needing to pass some legislation that provided tax cuts for the Middle Class. He had to give in to Republican desires to also provide them for marginal taxable income above $250,000 for families, but was able to negotiate several other key Dem benefits that would have been impossible come January. In fact, they should have been impossible in December since the Repubs could have just kept saying no and then passed something in January when they had a strong majority in the House.
The Senate passed the Tax Cuts by a resounding 81-19 and after some chest-pumping by House Dems attempting to modify the new Estate tax rate (35%) and exemption level ($5 million), the same legislation passed the House 277-148 just before midnight.
If this were it, I would say Obama may have paved his path to re-election, but in the waning hours of this session of Congress, he stands a good chance to get his desired repeal of the Don't Ask, Don't Tell law, get additional health coverage for 9/11 responders and to a lesser extent may also have a shot to get the START treaty passed. Not only is Obama getting more Dem-centric legislation passed in his first 2 years than almost any previous president, he is starting to get Republican votes and moderate voters love a president who can do that.
For the second time this month, I am posting a link to an article written by Charles Krauthammer, this one on Obama's Comeback. If Mr. Krauthammer and I can see eye-to-eye on things, perhaps this bipartisan stuff has a chance.
Few expected the lame-duck session in this environment to provide compelling results, and yet if you scratched below the surface, this is exactly what you should have expected.
The Dems were in the final weeks of having control of the House and will lose several voting seats in the Senate. There were also several items on the Dems to-do list still in the hopper and the President felt strongly about several of them.
As I mentioned in my post Stand or Deliver, the President began the lame-duck session needing to pass some legislation that provided tax cuts for the Middle Class. He had to give in to Republican desires to also provide them for marginal taxable income above $250,000 for families, but was able to negotiate several other key Dem benefits that would have been impossible come January. In fact, they should have been impossible in December since the Repubs could have just kept saying no and then passed something in January when they had a strong majority in the House.
The Senate passed the Tax Cuts by a resounding 81-19 and after some chest-pumping by House Dems attempting to modify the new Estate tax rate (35%) and exemption level ($5 million), the same legislation passed the House 277-148 just before midnight.
If this were it, I would say Obama may have paved his path to re-election, but in the waning hours of this session of Congress, he stands a good chance to get his desired repeal of the Don't Ask, Don't Tell law, get additional health coverage for 9/11 responders and to a lesser extent may also have a shot to get the START treaty passed. Not only is Obama getting more Dem-centric legislation passed in his first 2 years than almost any previous president, he is starting to get Republican votes and moderate voters love a president who can do that.
For the second time this month, I am posting a link to an article written by Charles Krauthammer, this one on Obama's Comeback. If Mr. Krauthammer and I can see eye-to-eye on things, perhaps this bipartisan stuff has a chance.
Thursday, December 9, 2010
Stand or Deliver
The situation behind today's post makes about as much sense as the 1980's song/video by Adam Ant, Stand and Deliver.
President Obama had a choice, STAND on his belief that the top 2% of wage earners should not have the decrease to their top marginal tax rates extended, or DELIVER a package of benefits to the low and middle class including a 2% payroll tax decrease in 2011, a 13 month extension of extended unemployment payments, the extension of college tuition tax credits and a business investment depreciation waiver that would highly incent businesses to spend money now. Obama chose the later.
For the first time in his presidency, Barack Obama is hearing the combination of praise from the Right and outrage from the Left. Today, House Democrats passed a resolution saying they reject the deal brokered by Obama and House Republicans saying they will not bring it to the floor for a vote. I kind of doubt that. Maybe the House Dems will negotiate some small changes and bring that up for a vote, but one of the first things a good negotiator does is understand who has leverage and how much. In a few weeks, the 112th Congress will be seated and the Republicans, not the Dems, will be in the majority. They are most certainly going to bring the extension of the Bush Tax Cuts for all up for a vote and it will pass. There is also no reason to believe they will be as generous in also providing the above-mentioned tax benefits for the middle class. That is called leverage. The Dems know it or at least should know it. Everything else has just been grandstanding for their constituents.
If Nancy Pelosi believes she can get a modified plan agreeable to the Republicans that doesn't include Bush Tax Cut extensions for taxable family incomes over $250,000, by all means have at it. If she thinks she can get the Republicans to agree to modifying the Estate Tax proposal from a $5Million waiver and 35% tax on amounts above that level, go for it. (I think the level should be somewhere between $3-$5Million, but feel strongly that that Estate Tax should not be higher than the highest marginal income tax rate, so I am good with 35% right now.)
Despite all the sturm and drang from Dems on the Obama Compromise/Capitulation on taxes, this is the very best deal the Dems could have dreamed to get in the last month of their majority in the House. In fact, Charles Krauthammer, who I so rarely agree with you would think one of us is intentionally choosing an opinion that is directly opposite that held by the other, is calling this Obama Tax Compromise the Swindle of the Year. I agree with him so much, that for what undoubtedly will be the only time in history, I will show the opening lines of his recent editorial in the Washington Post:
Krauthammer maintains and I certainly agree that "...the package will add as much as 1 percent to GDP and lower the unemployment rate by about 1.5 percentage points. That could easily be the difference between victory and defeat in 2012." I could quote more to reinforce my points, but please go to the article and read for yourself.
So the Republicans, led by Tea Party supporters, swept into the House and Senate with a big push for lowering the deficit. Of all the outrage I am hearing and reading about, strangely, very little is coming from the Right on the deficit increase. Democrats, long the sponsors of taking care of the middle class have before them perhaps the largest stimulus legislation ever affecting the middle class and they are complaining that high wage earners are getting to keep an additional 3-4% of their taxable wages above $250K for another 2 years.
It does appear that we are cursed to be living in interesting times.
President Obama had a choice, STAND on his belief that the top 2% of wage earners should not have the decrease to their top marginal tax rates extended, or DELIVER a package of benefits to the low and middle class including a 2% payroll tax decrease in 2011, a 13 month extension of extended unemployment payments, the extension of college tuition tax credits and a business investment depreciation waiver that would highly incent businesses to spend money now. Obama chose the later.
For the first time in his presidency, Barack Obama is hearing the combination of praise from the Right and outrage from the Left. Today, House Democrats passed a resolution saying they reject the deal brokered by Obama and House Republicans saying they will not bring it to the floor for a vote. I kind of doubt that. Maybe the House Dems will negotiate some small changes and bring that up for a vote, but one of the first things a good negotiator does is understand who has leverage and how much. In a few weeks, the 112th Congress will be seated and the Republicans, not the Dems, will be in the majority. They are most certainly going to bring the extension of the Bush Tax Cuts for all up for a vote and it will pass. There is also no reason to believe they will be as generous in also providing the above-mentioned tax benefits for the middle class. That is called leverage. The Dems know it or at least should know it. Everything else has just been grandstanding for their constituents.
If Nancy Pelosi believes she can get a modified plan agreeable to the Republicans that doesn't include Bush Tax Cut extensions for taxable family incomes over $250,000, by all means have at it. If she thinks she can get the Republicans to agree to modifying the Estate Tax proposal from a $5Million waiver and 35% tax on amounts above that level, go for it. (I think the level should be somewhere between $3-$5Million, but feel strongly that that Estate Tax should not be higher than the highest marginal income tax rate, so I am good with 35% right now.)
Despite all the sturm and drang from Dems on the Obama Compromise/Capitulation on taxes, this is the very best deal the Dems could have dreamed to get in the last month of their majority in the House. In fact, Charles Krauthammer, who I so rarely agree with you would think one of us is intentionally choosing an opinion that is directly opposite that held by the other, is calling this Obama Tax Compromise the Swindle of the Year. I agree with him so much, that for what undoubtedly will be the only time in history, I will show the opening lines of his recent editorial in the Washington Post:
Barack Obama won the great tax-cut showdown of 2010 - and House Democrats don't have a clue that he did. In the deal struck this week, the president negotiated the biggest stimulus in American history, larger than his $814 billion 2009 stimulus package. It will pump a trillion borrowed Chinese dollars into the U.S. economy over the next two years - which just happen to be the two years of the run-up to the next presidential election. This is a defeat?
Krauthammer maintains and I certainly agree that "...the package will add as much as 1 percent to GDP and lower the unemployment rate by about 1.5 percentage points. That could easily be the difference between victory and defeat in 2012." I could quote more to reinforce my points, but please go to the article and read for yourself.
So the Republicans, led by Tea Party supporters, swept into the House and Senate with a big push for lowering the deficit. Of all the outrage I am hearing and reading about, strangely, very little is coming from the Right on the deficit increase. Democrats, long the sponsors of taking care of the middle class have before them perhaps the largest stimulus legislation ever affecting the middle class and they are complaining that high wage earners are getting to keep an additional 3-4% of their taxable wages above $250K for another 2 years.
It does appear that we are cursed to be living in interesting times.
Friday, December 3, 2010
Dollars, Taxes
That is what the current debate in DC is all about really. No, not the city with a team that has a star on their heads, the conflict between dollars owed as part of the National Debt and the concept of maintaining tax cuts put into place 10 years ago that expire at the end of this year. These "Bush tax Cuts" were passed through Reconciliation (attached to the budget which can't be filibustered, only voted up or down) and therefore have a 10 year expiration date. At the time, there were no budget cuts made to offset the tax cuts so they have added a nice chunk to the current National Debt.
Which is one reason why we are where we are today.
Our National Debt is at an all-time high and projected to continue growing. However, Congress is battling over whether to maintain tax breaks just for taxable income levels up to $250,000 or to extend them for all levels of taxable income. That is right, the measure passed by the House (with no Republican support) does provide the continuation of the Bush Tax Cuts for everyone. It just stops the benefits at a taxable income level of $250,000 for families ($200,000 for individuals). The plan passed in the house would increase the margin tax rate on dollars above the $250,000 level by 3-4%. So, 100% of all taxpayers get to keep a tax cut. For 98% of all taxpayers, they get the exact same amount of tax cuts as passed by the 2001 and 2003 Bush Tax Cuts. It is just the marginal taxable income above $250,000 for the highest earning 2% of the population that Congress is arguing about. It seems counter-intuitive that we can talk about suffocating debt throughout the Fall campaign season and then be willing to make it bigger just a month later, but that is where we are.
President Barack Obama campaigned on not raising taxes on those making less than $250,000 (in some conversations he said 95% of the American public). In fact, he has lowered taxes already for a little over 95% though the Making Work Pay tax credits of $400 for an individual and $800 per family in 2009 and 2010.
In some Democratic circles, there is the desire to call the Republicans bluff and make them filibuster for this extra tax cut for the top 2% of earners while holding tax cuts for the lower and middle class hostage. People harken back to when preisdent Bill Clinton called the bluff of Newt Gingrich and the Republican Congress on the budget and shut down the government. People became outraged and called their local congressman. A budget had to be passed at some point and Clinton was able to draw a line in the sand and stay there until Congress was forced to come back to him and accept his budget. The same cannot be said about the current Tax Cut situation. The Republicans would be quite OK with letting the tax cuts subside because they know that more harm would be done to Obama than to them. So Obama and the Dems do not have a strong bargaining position. I think the Dems could have played chicken with the Repubs if they had brought this bill to the floor much earlier in the year, but that luxury is gone.
The National Debt will still be a problem 2 years from now regardless of what bill does or doesn't get passed now, but the tax cuts are a big deal now. Also on the table are the continuation of extended unemployment benefits.
The sign of a good negotiator is one who realizes what they can't get, and uses that to maximize how much they get. At this point it is very likely that President Obama realizes his only choices are the temporary extension of all Bush Tax Cuts or none of them. He doesn't want the lower and middle class to be worse off, so he will settle on the 2 more years of tax cuts for taxable income above $250,000. The mark of how good a job he does in negotiating is to see what he gets in return. I assume there will be a 1 year extension of extended unemployment benefits, but it would be interesting if he is able to slip in anything else as well. Stay tuned.
Which is one reason why we are where we are today.
Our National Debt is at an all-time high and projected to continue growing. However, Congress is battling over whether to maintain tax breaks just for taxable income levels up to $250,000 or to extend them for all levels of taxable income. That is right, the measure passed by the House (with no Republican support) does provide the continuation of the Bush Tax Cuts for everyone. It just stops the benefits at a taxable income level of $250,000 for families ($200,000 for individuals). The plan passed in the house would increase the margin tax rate on dollars above the $250,000 level by 3-4%. So, 100% of all taxpayers get to keep a tax cut. For 98% of all taxpayers, they get the exact same amount of tax cuts as passed by the 2001 and 2003 Bush Tax Cuts. It is just the marginal taxable income above $250,000 for the highest earning 2% of the population that Congress is arguing about. It seems counter-intuitive that we can talk about suffocating debt throughout the Fall campaign season and then be willing to make it bigger just a month later, but that is where we are.
President Barack Obama campaigned on not raising taxes on those making less than $250,000 (in some conversations he said 95% of the American public). In fact, he has lowered taxes already for a little over 95% though the Making Work Pay tax credits of $400 for an individual and $800 per family in 2009 and 2010.
In some Democratic circles, there is the desire to call the Republicans bluff and make them filibuster for this extra tax cut for the top 2% of earners while holding tax cuts for the lower and middle class hostage. People harken back to when preisdent Bill Clinton called the bluff of Newt Gingrich and the Republican Congress on the budget and shut down the government. People became outraged and called their local congressman. A budget had to be passed at some point and Clinton was able to draw a line in the sand and stay there until Congress was forced to come back to him and accept his budget. The same cannot be said about the current Tax Cut situation. The Republicans would be quite OK with letting the tax cuts subside because they know that more harm would be done to Obama than to them. So Obama and the Dems do not have a strong bargaining position. I think the Dems could have played chicken with the Repubs if they had brought this bill to the floor much earlier in the year, but that luxury is gone.
The National Debt will still be a problem 2 years from now regardless of what bill does or doesn't get passed now, but the tax cuts are a big deal now. Also on the table are the continuation of extended unemployment benefits.
The sign of a good negotiator is one who realizes what they can't get, and uses that to maximize how much they get. At this point it is very likely that President Obama realizes his only choices are the temporary extension of all Bush Tax Cuts or none of them. He doesn't want the lower and middle class to be worse off, so he will settle on the 2 more years of tax cuts for taxable income above $250,000. The mark of how good a job he does in negotiating is to see what he gets in return. I assume there will be a 1 year extension of extended unemployment benefits, but it would be interesting if he is able to slip in anything else as well. Stay tuned.
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