“Setting The Terms”: Foolproof Win-Win Strategy Plan For President Obama
Over the weekend I was mulling both of our crises, the political one (dysfunction, paralysis) and the policy one (looming tax-mageddon, sequestration). Yep, I mull these things on Saturdays. How, I wondered for the 486th time, can Obama get the Republicans to dig their heels out of the mud and get the upper hand politically while also doing some good for the country? Here’s how.
Obama should go to Congress and say: “I offer you the following deal. I will extend all the Bush tax cuts for one year—yes, even for the wealthiest Americans. One year. In exchange, I’d like you to agree to fund the initial, start-up $10 billion for the Kerry-Hutchison infrastructure bank, and the $35 billion I asked of you last September in direct aid for states and localities to rehire laid-off teachers and first responders. Then, after I am reelected, my administration and I will take the first six months of 2013 to write comprehensive tax reform, and Congress will then have six months to pass it, and we’ll have a new tax structure that we’ve both agreed on.
“The business community complains about uncertainty? This is certainty. The Bush rates will stay in place for one more year. We will give corporations our word that the basic corporate rate will be lowered in our package from the current 35 percent. The top marginal rate on the very highest earners will go up—I will continue to insist on that. But not for a year. The rates on middle- and low-income payers will stay the same or go down slightly. We will look at tax expenditures and loopholes and so on and close the ones that aren’t justified. But businesses will now have no reason to doubt what the tax rates will be next January and will have confidence that we’re going to work something out, if you agree to this very reasonable compromise.”
Obama gives some ground, the Republicans give some ground. Nobody gets everything, but everybody gets something. Isn’t that what compromise is? And the “certainty” point is key—it takes away an argument against private-sector investment and job creation that some in the business world have been making, at this moment of record corporate profits.
I’m well aware that liberals may hate this. I’ll get to that. But the politics of this idea seem awfully sound to me. Obama would have the Republicans over a barrel. He will have offered a huge concession on the high-end tax rates, which the media will note. If the Republicans say no, which of course is likely because the infrastructure bank is socialism and no one wants teachers anyway, then it becomes manifestly clear to swing voters that Republicans are the true obstructionists. Voters will get that Obama will have made a major concession here. They’ll see that the GOP fail to respond in kind, and most of them will draw the logical conclusion.
And if the Republicans say yes, then even better: They will have made Obama, at this eleventh hour of his first term, into the bipartisan leader they’ve so successfully prevented him from being. And more important than that, there are the real-world upshots of public investment in infrastructure—a proposal that has the support, by the way, of the left-wing United States Chamber of Commerce—and the rehiring of hundreds of thousands of laid-off workers.
The Republicans will be boxed in. They’ll think up a clever response. They always do. They’ll try to bring in defense spending, perhaps, or insist on two years. They’ll obviously set out immediately on trying to figure out a way to box Obama in and make the Bush rates permanent. They’ll think of nine other things I’m not cynical enough to conjure up. They’ll dismiss it as a gimmick, but I’d wager that Obama can sell the idea that his giving ground on high-income tax rates is serious, not gimmicky. And if Obama stands firm, the lines are simple and clear: “I’m giving up something, and I’m asking you to give up something, for the sake of helping put Americans to work, and of doing the jobs we’re paid to do.”
My idea doesn’t deal directly with budget sequestration, and the huge cuts that are supposed to kick in January 1. Maybe Obama can propose that those be deferred for a while as well. Or maybe he is better off just leaving that to the senators who are allegedly working on it now. It might muddy things up.
Now, liberals. There will be outrage that Obama caved on his one heretofore firm condition on taxes. Under other circumstances, I might be outraged. But these strike me as pretty decent circumstances. Remember, Obama agreed to extend the Bush rates once before, in December 2010, and a fair number of liberals and independent analysts were basically fine with that deal. That time, what did Obama get? His own tax cuts, to the payroll tax, and some unemployment insurance extensions. This time, if the GOP actually agreed, he’d be getting far, far more—Republicans agreeing for the first time in the Obama era to real stimulative spending. Liberals should cheer this outcome—just as they should cheer the idea that, unlike during the December 2010 deal or the debt fiasco of last year, Obama would be looking like the guy who set the terms. He’d look strong, not weak, and he’d be very nicely teed up for reelection.
Which is why the Republicans will say no. Though it’ll be worse for the country, it would be great for Obama politically. Mitt Romney, of course, would dismiss Obama’s offer too, so my ploy would bring the added benefit of making Romney look extreme and unreasonable to centrist voters. Obama could then campaign saying that he tried repeatedly to reason with Republicans and was rebuffed at every turn, even when he offered to lower tax rates for millionaires. Romney and the GOP will campaign saying, “We’ll give you the tax cuts without all this spending.” Obama will then have to make the case that spending—investment—has value. But he has to make that case anyway. In my scenario, he can make it in a context in which he can prove to voters that the other party won’t budge one single inch. He’ll finally look like, to resuscitate a phrase we haven’t heard much of in the last two years, the adult in the room.
By: Michael Tomasky, The Daily Beast, June 12, 2012
“Wave Of Unlimited Contributions”: GOP Right Wing Raises Mega-Cash For Hypocritical Attack Ads
Sixty million dollars sure sounds like a lot of money. That’s how much the Obama campaign and the Democratic National Committee raised in the month of May. Michele Bachmann figures it’s such a huge number that she can scare conservatives into giving her Congressional re-election campaign money by citing it. “Our victories this week have the Democrats on the run, but $60 million dollars in one month will help them fight back hard and I’m concerned they are preparing to dump their piles of cash on me and other Constitutional conservative candidates,” reads her latest fundraising e-mail.
There’s only one problem, for Bachmann and the Democrats alike. Republicans out-raised them by a comfortable margin. The Romney campaign and Republican National Committee together brought in $76.8 million in May.
Democrats are gamely trying to spin this by arguing that it is cyclical: Obama and the DNC were way ahead of Romney and the RNC because the Republicans had not settled on a candidate. Now that they have, a flood of donations will come in on their side, but in the end it will even out.
That’s true, but Obama has to vastly out-raise Romney if he is to compete on the airwaves this fall. That’s because the wave of unlimited contributions from corporations and eccentric billionaires unleashed by the Supreme Court is going much more to the right than the left. Last week Politico reported that right-wing groups are planning to spend $1 billion on the election. “Just the spending linked to the Koch network is more than the $370 million that John McCain raised for his entire presidential campaign four years ago,” noted Jim Vandehei and Mike Allen. “And the $1 billion total surpasses the $750 million that Barack Obama, one of the most successful fundraisers ever, collected for his 2008 campaign.”
What is that money going to? Some of it, including much of the $400 million being spent by the Koch-related groups, will go to grassroots field operations. But most will go to advertisements.
And what will the advertisements consist of? Intellectually dishonest attacks on Obama’s record. Consider this hit job from Crossroads GPS, one of the two groups run by Karl Rove that together will raise and spend $300 million on the campaign. The commercial, which is being distributed with a $7 million ad buy, features a ticking debt clock and a narrator complaining that Obama is “adding $4 billion in debt each day” and “borrowing from China to pay for his spending.”
Coming from Karl Rove, this is more than a little hypocritical and misleading. Rove, of course, was the political mastermind of the Bush administration. The national debt nearly doubled under Bush–who inherited surpluses and left office running a massive deficit—from $5.7 trillion to $10.6 trillion. That’s because he passed tax cuts and increased spending. Bush’s first Treasury secretary, Paul O’Neill, blamed the political operation in the White House—in other words, Rove—for being irresponsible and ideological rather than serious about governance.
While it is technically true that the debt has continued to rise under Obama, this is hardly his fault. According to the Congressional Budget Office, roughly half of current deficits are due to the tax cuts Bush signed and the two wars Bush started. Meanwhile, Obama inherited a recession caused in part by Bush’s reckless mismanagement. During recessions governments run deficits because tax revenues decline even if rates stay the same, and automatic spending on programs such as food stamps and Medicaid increases as more people become eligible. Moreover, anyone with a basic understanding of macroeconomics knows that tax cuts and stimulative spending are often required during a recession to boost demand and help generate economic growth. In light of all this, Rove is more responsible for the current deficit than Obama is. But Rove blames Obama for it anyway.
Crossroads GPS actually proposes to make the deficits worse. As Jonathan Salant points out at Bloomberg News: “For all the talk about the debt, Rove’s group wants to continue all of the Bush tax cuts, as well as eliminate the estate tax on multimillionaires. Crossroads GPS doesn’t offer any specific spending cuts to pay for these policies.”
Republicans hope to convince the public to blame Obama for the debt they created, and to vote for more of the same policies that created it. And with an enormous spending advantage, they may be able to.
By: Ben Adler, The Nation, June 7, 2012
“This Republican Economy”: A Policy Of Dreams, A Gigantic Con Game
What should be done about the economy? Republicans claim to have the answer: slash spending and cut taxes. What they hope voters won’t notice is that that’s precisely the policy we’ve been following the past couple of years. Never mind the Democrat in the White House; for all practical purposes, this is already the economic policy of Republican dreams.
So the Republican electoral strategy is, in effect, a gigantic con game: it depends on convincing voters that the bad economy is the result of big-spending policies that President Obama hasn’t followed (in large part because the G.O.P. wouldn’t let him), and that our woes can be cured by pursuing more of the same policies that have already failed.
For some reason, however, neither the press nor Mr. Obama’s political team has done a very good job of exposing the con.
What do I mean by saying that this is already a Republican economy? Look first at total government spending — federal, state and local. Adjusted for population growth and inflation, such spending has recently been falling at a rate not seen since the demobilization that followed the Korean War.
How is that possible? Isn’t Mr. Obama a big spender? Actually, no; there was a brief burst of spending in late 2009 and early 2010 as the stimulus kicked in, but that boost is long behind us. Since then it has been all downhill. Cash-strapped state and local governments have laid off teachers, firefighters and police officers; meanwhile, unemployment benefits have been trailing off even though unemployment remains extremely high.
Over all, the picture for America in 2012 bears a stunning resemblance to the great mistake of 1937, when F.D.R. prematurely slashed spending, sending the U.S. economy — which had actually been recovering fairly fast until that point — into the second leg of the Great Depression. In F.D.R.’s case, however, this was an unforced error, since he had a solidly Democratic Congress. In President Obama’s case, much though not all of the responsibility for the policy wrong turn lies with a completely obstructionist Republican majority in the House.
That same obstructionist House majority effectively blackmailed the president into continuing all the Bush tax cuts for the wealthy, so that federal taxes as a share of G.D.P. are near historic lows — much lower, in particular, than at any point during Ronald Reagan’s presidency.
As I said, for all practical purposes this is already a Republican economy.
As an aside, I think it’s worth pointing out that although the economy’s performance has been disappointing, to say the least, none of the disasters Republicans predicted have come to pass. Remember all those assertions that budget deficits would lead to soaring interest rates? Well, U.S. borrowing costs have just hit a record low. And remember those dire warnings about inflation and the “debasement” of the dollar? Well, inflation remains low, and the dollar has been stronger than it was in the Bush years.
Put it this way: Republicans have been warning that we were about to turn into Greece because President Obama was doing too much to boost the economy; Keynesian economists like myself warned that we were, on the contrary, at risk of turning into Japan because he was doing too little. And Japanification it is, except with a level of misery the Japanese never had to endure.
So why don’t voters know any of this?
Part of the answer is that far too much economic reporting is still of the he-said, she-said variety, with dueling quotes from hired guns on either side. But it’s also true that the Obama team has consistently failed to highlight Republican obstruction, perhaps out of a fear of seeming weak. Instead, the president’s advisers keep turning to happy talk, seizing on a few months’ good economic news as proof that their policies are working — and then ending up looking foolish when the numbers turn down again. Remarkably, they’ve made this mistake three times in a row: in 2010, 2011 and now once again.
At this point, however, Mr. Obama and his political team don’t seem to have much choice. They can point with pride to some big economic achievements, above all the successful rescue of the auto industry, which is responsible for a large part of whatever job growth we are managing to get. But they’re not going to be able to sell a narrative of overall economic success. Their best bet, surely, is to do a Harry Truman, to run against the “do-nothing” Republican Congress that has, in reality, blocked proposals — for tax cuts as well as more spending — that would have made 2012 a much better year than it’s turning out to be.
For that, in the end, is the best argument against Republicans’ claims that they can fix the economy. The fact is that we have already seen the Republican economic future — and it doesn’t work.
By: Paul Krugman, Op Ed-Columnist, The New York Times, June 3, 2012
“The Brittle Grip”: Wall Street And The Financial Sector Aren’t Accustomed To Criticism
Republicans often say that the business community feels threatened by President Obama — that he’s hostile to money, hostile to business, etc. You’ve heard this before. And much of it is campaign chatter. But not all. I don’t think we can understand the dynamics of this campaign without getting that a lot of it is actually true — not the reality necessarily (in my mind not the reality at all) but the perception of it in key parts of the financial sector like Wall Street, venture capital and the dread world of private equity.
The case of Wall Street is in many ways the hardest nut to crack. President Obama took a huge political hit for massive amounts of public money that went to bailing out the major banks. By most measures, along with his predecessor, he more or less saved US and global capitalism. And yet, when you talk to people in finance, this is entirely forgotten. What you most often hear about are two or three statements from the President that are still potently remembered.
Most often it’s a late 2009 quote when he said “I did not run for office to be helping out a bunch of fat cat bankers on Wall Street. They’re still puzzled why it is that people are mad at the banks. Well, let’s see. You guys are drawing down 10, 20 million dollar bonuses after America went through the worst economic year in decades and you guys caused the problem.”
That’s not something you’d expect folks in finance to like particularly. But it did come after about a year of the President getting grief from Wall Street while simultaneously taking the political hit for bailing the same folks out with tax payer dollars.
I’ve heard similar things talking to folks in the business community in DC. And what strikes me again and again is how much it comes back to a handful of statements and anecdotes, things people remember the President saying over the last three plus years.
Some of this shouldn’t surprise us, I suppose. President Obama has pushed more regulation of business than his predecessor. (It’s certainly a change after eight years of George W. Bush; and it’s an eight years over which quite a lot has changed in the country.) He’s supported — though as yet not acted on — his call to roll back the Bush tax cuts. But Bill Clinton did all of this and more. Clinton after all is the guy whose tax hikes the Bush tax cuts in large part repealed. By most objective standards the President is actually more solicitous of the business community than most or all Democratic presidents over the last half century.
So what’s the explanation? Over recent weeks I’ve come to think that something else is in play: namely, the dramatic run up in wealth at the top of the income scale, not just over the last 35 years but particularly over the last 15 years. More or less since the beginning of the Clinton years. In a sense it’s the other side of the 99% vs 1% meme that has been the most successful legacy of the Occupy Wall Street Movement.
This is less an argument than a theory in progress. So I’d like your input. But I think the very wealthy and those who work in the most advanced and aggressive parts of finance are more defensive about their wealth than in the past — at least in terms of the political expression of it. There’s really no time in the last century in which you’d expect that a candidate running for a major political office who’d been responsible for shutting down a lot of factories wouldn’t have that come up in a major way in a campaign. Simply no way. Agree or not, it would be entirely par for the course. And yet now it’s treated as a possibly unexpected or unacceptable development.
That’s weird.
At the same time, the most important voices in the media are much, much wealthier than in earlier eras. The very wealthy are their friends and peers. Concentrated wealth simply has a stronger hold over mass communications than in the past — not necessarily in venal or corrupt terms but often simply by owning minds and mentalities. What all that amounts to is that people on Wall Street and the financial sector aren’t accustomed to a lot of criticism.
All of it goes to explaining a basic conundrum — President Obama is, when compared to Democrats over the last half century, objectively quite middle of the road. And yet the reaction from Wall Street and the halls of finance is one you’d think meant he was trying to bring capitalism to its knees. The President’s policies and tenure in office simply don’t explain the reaction. And I don’t think political spin does either. We need to look deeper into the political economy of the nation at large to understand it.
By: Josh Marshall, Editor and Publisher, Talking Points Memo, May 21, 2012
“Romney’s Tax Plan In Disgusting Perspective”: Making The Bush Tax Cuts Look Like A Gift To Poor People
In my post this morning on Cory Booker, I noted that Mitt Romney’s tax plan would save households taking in more than $1 million per year an average of at least $250,000 ever year. Let us just dwell on this number for a minute.
Earlier this month, Obama claimed the $250,000 figure. Politifact got to work on it. It turns out, says Politifact, that Obama was telling the truth, and in fact if anything could be described as using the more conservative of two ways of looking at the matter, according to an analysis by the Tax Policy Center.
You can read the Politifact description, which is thorough and clear. It comes down to this in plain language. As you know the Bush tax cuts are set to expire at the end of the year. Let’s say Romney is elected and the Bush cuts are extended, as Romney says he’ll do (and then some). If you don’t credit Romney with extending the Bush cuts–that is, if you just assume they were going to be extended anyhow–then his plan cuts the tax bill for those making more than $1 million a year by $250,000.
But if you credit President Romney with the extension of the Bush cuts, then Romney’s gift to uber-million households come to $390,000 a year. To see how insane this is, let’s add a little perspective: Let’s look at those same Bush tax cuts.
According to this report from Democratic staff in Congress on the impact of Bush cuts that was issued in 2007, households earnings $1 million or more per year received an average cut of $120,000 per year. Let’s think about this.
The Bush tax cuts “accomplished” the following: lowered the tax burden of the very rich to lowest point in 50 years; added $1.8 billion to the deficit; exploded the publicly held debt as a share of GDP; and didn’t really lead to a single net job (depending on how you measure, which will be the topic of a future post).
In other words, they were a disaster for the economy, and brutally inequitable.
And now, Romney’s plan would give the above $1 million per year households twice as much as Bush did, or three times as much. It’s really and truly sad and unbelievable that something like this is even discussed seriously by serious people. This plan makes Bush’s look like a gift to poor people. Of course Romney would say he’s cutting the lower classes’ taxes too, which he is, but that just proves how much more aggressively the Romney plan would deplete the treasury, which again we’ll dig into in detail at other points.
Voters know Bush wrecked the economy. For Romney this deserves to be and can be much a bigger pain than Bain.
By: Michael Tomasky, The Daily Beast, May 21, 2012
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