As scheduled, Obama spoke about the economy in Cleveland today. While he formally unveiled the major new incentives and infrastructure projects that we discussed here last night, the big news came when he announced unequivocally that he would not support the extension of the Bush tax cuts for the super-wealthy. The statement was unexpected, as several advisors to the President, past and present, including Peter Orszag, seemed to be advocating for a two year extension, in order to avoid the wrath of the wealthy and their minions. But, Obama, it would seem, had decided that this was where he wanted to draw the line in the sand. So, it looks as thought this is where we’ll fight the Republicans in the run up to the midterm elections… The following clip comes from Salon:
…President Obama has laid his marker down. It is time to tax the rich. If there is going to be a single political battle that will define the two months between his speech Wednesday in Cleveland and Election Day in November, it will be between those who wish to end tax cuts for the wealthiest Americans and those who want to make them permanent. The president has a slick way with words, but he’ll have a hard time wiggling out of these….
But it’s a gutsy, risky move, making the repeal of tax cuts for the wealthy a top priority in the runup to the election. There are members of his own party who are wishy washy on the topic, and despite the president’s assertions, there are plenty of economists, including some former members of his own administration, who will argue that any tax hike is too much of a burden for the current economy to bear. The president and his advisors have made a clear political calculation — the Republican party’s biggest vulnerability is its ideological affiliation with the interests of the wealthiest Americans. But the aggressively populist posture is late in coming, and reigniting Democratic enthusiasm is going to take more than couple of good speeches. Will Senate Democrats back him up? Or will they fold? And will the president back up his own words, by taking follow-up actions, like, say, appointing Elizabeth Warren as director of the Bureau for Consumer Financial Protection…
This, in my opinion, is a great thing. It’s good policy, and it’s good politics. The country, nearly bankrupted by two wars, needs the money, and Obama needs to energize the Democratic base prior to the election. This delivers on both counts. It not only demonstrates to people that he has a spine, but, as the Salon article points out, it also exposes the Republicans for what they are – the party of the wealthy, completely disconnected from the concerns of the middle class… Following is an excerpt from Obama’s speech:
…I ran for President because for much of the last decade, a very specific governing philosophy had reigned about how America should work:
Cut taxes, especially for millionaires and billionaires. Cut regulations for special interests. Cut trade deals even if they didn’t benefit our workers. Cut back on investments in our people and our future – in education and clean energy; in research and technology. The idea was that if we had blind faith in the market; if we let corporations play by their own rules; if we left everyone else to fend for themselves, America would grow and prosper.
For a time, this idea gave us the illusion of prosperity. We saw financial firms and CEOs take in record profits and record bonuses. We saw a housing boom that led to new homeowners and new jobs in construction. Consumers bought more condos and bigger cars and better televisions.
But while all this was happening, the broader economy was becoming weaker. Job growth between 2000 and 2008 was slower than it had been in any economic expansion since World War II – even slower than it’s been over the past year. The wages and incomes of middle-class families kept falling while the cost of everything from tuition to health care kept rising. Folks were forced to put more debt on their credit cards and borrow against homes that many couldn’t afford in the first place. Meanwhile, a failure to pay for two wars and two tax cuts for the wealthy helped turn a record surplus into a record deficit….
And so people are frustrated and angry and anxious about the future. I understand that. I also understand that in a political campaign, the easiest thing for the other side to do is ride this fear and anger all the way to Election Day.
That’s what’s happening right now. A few weeks ago, the Republican leader of the House came here to Cleveland and offered his party’s answer to our economic challenges. Now, it would be one thing if he admitted his party’s mistakes during the eight years they were in power, and was offering a credible new approach to solving our country’s problems.
But that’s not what happened. There were no new policies from Mr. Boehner. There were no new ideas. There was just the same philosophy we already tried for the last decade – the same philosophy that led to this mess in the first place: cut more taxes for millionaires and cut more rules for corporations. Instead of coming together like past generations did to build a better country for our children and grandchildren, their argument is that we should let insurance companies go back to denying care to folks who are sick, and let credit card companies go back to raising rates without any reason. Instead of setting our sights higher, they’re asking us to settle for a status quo of stagnant growth, eroding competitiveness, and a shrinking middle class…
Let me give you a few specific examples of our different approaches. This week, I proposed some additional steps to grow the economy and help businesses spur hiring. One of the keys to job creation is to encourage companies to invest more in the United States. But for years, our tax code has actually given billions of dollars in tax breaks that encourage companies to create jobs and profits in other countries.
I want to change that. Instead of tax loopholes that incentivize investment in overseas jobs, I’m proposing a more generous, permanent extension of the tax credit that goes to companies for all the research and innovation they do right here in America. And I’m proposing that all American businesses should be allowed to write off all the investment they do in 2011. This will help small businesses upgrade their plants and equipment, and will encourage large corporations to get off the sidelines and start putting their profits to work in places like Cleveland and Toledo and Dayton.
To most of you, this is just common sense. But not to Mr. Boehner and his allies. For years, Republicans have fought to keep these corporate loopholes open…
I believe we ought to make the tax cuts for the middle class permanent. These families are the ones who saw their wages and incomes flatline over the last decade – and they deserve a break. And because they are more likely to spend on basic necessities, this will strengthen the economy as a whole.
But the Republican leader of the House doesn’t want to stop there. Make no mistake: he and his party believe we should also give a permanent tax cut to the wealthiest two percent of Americans. With all the other budgetary pressures we have – with all the Republicans’ talk about wanting to shrink the deficit – they would have us borrow $700 billion over the next ten years to give a tax cut of about $100,000 to folks who are already millionaires. These are among the only folks who saw their incomes rise when Republicans were in charge. And these are folks who are less likely to spend the money, which is why economists don’t think tax breaks for the wealthy would do much to boost the economy.
So let me be clear to Mr. Boehner and everyone else: we should not hold middle class tax cuts hostage any longer. We are ready, this week, to give tax cuts to every American making $250,000 or less. For any income over this amount, the tax rates would go back to what they were under President Clinton. This isn’t to punish folks who are better off – it’s because we can’t afford the $700 billion price tag. And for those who claim that this is bad for growth and bad for small businesses, let me remind you that with those tax rates in place, this country created 22 million jobs, raised incomes, and had the largest surplus in history…
Assuming he can stick to his guns, and not back down in the face of Republican pressure, and the frothing of Teabaggers, this could be a defining moment in his Presidency. My hope is that he can pull it off.
And just a few quick notes to end with…. 1) The new top marginal tax rate of 39.6% will still be considerably lower than it has been historically. 2) A majority of Americans feel as though the Bush tax cuts on the super-wealthy should be allowed to expire. 3) Allowing the Bush tax cuts to expire would save us over $800 billion, or 16-times more than Obama is suggesting that we put toward infrastructure improvements. And, 4) The Bush tax cuts never delivered what they promised. All things considered, I’d say this is a damned fine move by the President.