Obama Jobs Speech – Obama Finally Gets to Work
Categories: Economy, Featured, Politics, Tax Policy
The Obama Jobs Speech Proposes a Solution and Sparks Tax Debate
President Barack Obama’s jobs speech to a joint session of Congress last Thursday night seemed to provide a blip of hope against a backdrop of unrelenting economic malaise, political gridlock in the capital, and the recent news that job growth had ground to a halt in August, the worst performance since September 2010. In an uncharacteristic display of executive leadership, President Obama abandoned the conciliatory, above-the-partisan-fray tone that has characterized much of his Presidency as well as the sweepingly inspirational, and conveniently vague, platitudes that swept him to electoral victory and, sounding confident and even mildly combative, delivered his plan to get America working again.
Despite a bevy of additional stimulus spending–$194 billion to be exact–there was a surprising amount to like in the Obama jobs speech for the tax averse among us, including extending the existing payroll tax cuts for employees, cutting payroll taxes in half for small business owners, and giving small businesses tax cuts for hiring new workers. Overall, Obama’s new tax credits will result in $253 billion in tax cuts. The President even struck an anti-tax tone, albeit a sarcastic one. Making a jab at those members of Congress who have signed Grover Norquist’s “Taxpayer Protection Pledge,” the President taunted, “I know some of you have sworn oaths to never raise any taxes on anyone for as long as you live. Now is not the time to carve out an exception and raise middle-class taxes.”
Obama’s jobs speech was relatively well received; even the usually intransigent Congressional Republicans described themselves as cautiously optimistic. Eric Cantor and John Boehner signaled a willingness to cooperate. For a while it seemed like Washington may in fact have reached a point where it could address the woeful economic situation without resorting to the drama that surrounded the 11th hour debt ceiling deal reached at the end of July.
But then on Monday came the announcement in the White House Rose Garden. With a full supporting cast of police officers, firefighters, and teachers whose jobs would be saved by the bill arrayed behind the President for full dramatic effect and emotional impact, the President unveiled his plan to cover the $447 billion cost of his proposed plan by… raising taxes, specifically on the wealthy. Although the plan includes reducing payroll taxes for employees and employers, the administration hopes to eliminate or reduce certain tax deductions for individuals making more than $200,000 and families making more than $250,000. The tax changes he proposed would also affect oil companies, hedge funds, and corporate jets, but the vast majority of the bill would be paid for by eliminating deductions for those of a certain income.
The modicum of bipartisan support that the Obama jobs speech had won Thursday night eroded almost instantly. Congressional Republicans immediately balked at the proposal, citing their opposition to the President’s proposed tax hikes. Senate Minority Leader Mitch McConnell went so far as to accuse the President’s proposal of not being serious. There is a certain absurdity to the President trying to goad Republicans into supporting his bill by citing their pledge to oppose new taxes on Thursday night and then turning around and announcing his plans to pay for it with tax hikes on Monday.
Fewer taxes in the business world will surely be a stimulant to the economy, especially small business owners’ taxes, but there’s an objection to permanently raising taxes to cover temporary cuts in payroll taxes and temporary spending. How many employers are really going to be incentivized to go through the costly and time-consuming process of hiring by costs that are only temporarily reduced? And all of this comes at he price of raising taxes on the people with capital, who are most likely to innovate and create jobs. With economic forecasters predicting grim news for months and even years into the future, this doesn’t seem like a very wise trade-off.
All of this, of course, is tied up in the debt ceiling debates of earlier in the summer. Even some Republicans on the Congressional supercommittee charged with finding $1.5 trillion in deficit savings ($2 trillion now, if you factor in the estimated costs of the President’s proposed plan) have signaled they may be willing to consider eliminating some of the deductions for the wealthy that the President has proposed, but that was for reducing the deficit, not paying for a new plan, whose success is far from guaranteed. And if the President does have his way in paying for the jobs bill, it will make finding a way to reduce the deficit even more difficult.
But the Republicans who support this kind of tax increase are few and far between. It was one of the major pillars of the GOP’s position during the debt ceiling debate earlier this summer that taxes not be raised. Obama must have known that Republicans, who have expressed a firm commitment to lowering taxes in America, would object to these taxes once again, not even two months after they rejected them the first time, which begs the question of whether this jobs bill is just a cynical attempt to turn the political tables. That the President initially scheduled the speech to preempt a Republican Presidential debate gives off warning bells enough, but then there’s 2012 to think about. If the jobs bill passes, then Obama enters a election year with major momentum on what is sure to be the primary issue of the campaign. And if it fails, he might be able to gain valuable traction by blaming the Republicans and their refusal to raise taxes.
With the economy unlikely to recover any time soon and the need to reduce the federal deficit more pressing than ever, this is a thorny question, without an easy answer for either side of the aisle. What is clear, however, is that taxes are going to figure prominently not just in the rest of this year’s debate on jobs, but in next year’s elections as well. Nationwide tax relief complaints are turning many voters’ ears to the positions of the Republican candidates on taxes, making this is an increasingly essential political issue. With employment, or rather unemployment, on everyone’s minds, taxes will be central to the coming debate about reviving our economy.