In a blatant display of political gamesmanship, President Obama has called upon Congress to extend the Bush tax cuts for the middle class for one year and end them for anyone earning more than $250,000 per year.
The president is well aware that there is no chance the House of Representatives will pass legislation that will increase taxes on the affluent. Complicating the president’s gambit are comments by Minority Leader Nancy Pelosi (D-CA) and Sen. Chuck Schumer (D-NY), who want to increase the aforementioned threshold to $1 million. If Congress does not respond by the end of the year, all American taxpayers will face a tax increase in 2013.
Democrats have estimated the loss of revenue from the wealthy will be up to $1 trillion over the next ten years if the Bush cuts remain in place. The opposition believes that a significant tax increase will hurt the economy’s prospects and job growth.
The president has focused on the middle class and “tax fairness” for most of his tenure. Democrats are hoping that this strategy will be simple for voters to grasp and cement the president’s reputation as the protector of the lower classes.
Republicans see it differently. They believe it is a terrible moment to increase taxes on the affluent, as they are the “job creators.” Conservatives believe the proposed tax increase on the rich will strengthen their case against Obama from an economic perspective. Mitt Romney and Republican leaders want a one-year extension of the tax breaks for all Americans. During 2013, they propose to reform the tax code and eliminate loopholes. This will result in more federal revenue that can be used to decrease the national debt and annual deficits.
The position taken by Democrats is in stark contrast to the Republican perspective. The former is portraying the latter as defenders of the rich at the expense of the middle class.
Republicans will hammer away on Obama’s inability to improve the economy and increase job growth, the Democrat preference for bigger government, and big spending initiatives (such as Obamacare.
When it comes right down to it, both parties are in a hyper-campaign mode trying to appease their bases and pick up undecided voters with promises neither may be able to keep.
What is most interesting is that nothing really matters at this time as Obama’s demands will be ignored by House Republicans. Romney’s philosophy is moot unless he is able to win the election. Even after the election, the party that wins the White House will not have a filibuster-proof majority in the Senate. So, legislative victories will be few in 2013 and beyond.
Nothing that surfaced today is any different from what the politicians have been saying for the past two years. Both are playing a game of chicken trying to find votes. The president has the power of the bully pulpit, and the Republicans control the House. For this reason, voters should not expect too much to happen for the balance of the year, notwithstanding rhetoric to the contrary.
Some of the strong statements made by the president in his address include the following:
- Since in office, he has reduced taxes for each middle class family by $3,600.
- If the middle class tax cut is not extended, each family will pay $2,200 more next year.
- The biggest challenges are jobs and reclamation of security lost by the middle class.
- We want a society where hard work pays off and allows us to get ahead.
- Republicans want prosperity to flow from the top to the bottom.
- Democrats want a strong middle class.
- The tax benefits that Obama wants to cut (for the affluent) are the least likely to promote growth.
- Obama cut taxes for small business 18 times.
- 97% of small businesses fall under the $250,000 threshold.
(Note: None of these assertions have been confirmed.)
I would say Obama is sticking to his strategy of fomenting class differentiation, otherwise known as class warfare. His tax raising projects (Obamacare and no extension of tax cuts for the affluent) may hurt him at the polls even though the vast majority of Americans will not be impacted by these initiatives.