Posted on 03 Jan 2011 at 11:15pm By GavinoThe New Year is beginning with some optimism following Barack Obama’s Christmas capitulation on tax rates. On 17 December, the president signed legislation extending George W. Bush’s income tax cuts by a further two years, thus infusing some seasonal joy into the pocketbooks of hard-pressed Americans.
Peace and prosperity
In truth, extending current rates for such a limited period is unlikely to generate much economic certainty or growth. But an income tax increase would have further undermined confidence in the United States economy and acted as another drag on investment and consumer spending.
Still, it is far from clear whether this big-spending president has had an economic epiphany. Barack Obama has consistently insisted that tax rates must rise for higher earners on the grounds of “fairness”. And as part of the Christmas deal, the Death Tax bounced up to a new rate of 35 per cent on estates valued over $5 million. It is difficult to conclude that his apparent U-turn comes from discovering the virtue of supply-side economics.
So this was a political calculation. With a Republican-dominated House of Representatives beginning its work this week, and a reelection campaign in the offing, the president made a pragmatic choice: Bank the political credit for the tax rate extension – which in Obama Doublespeak is named the Middle-Class Tax Cuts Bill – and set a bipartisan tone that is likely to appeal to some independent voters.
Of course, some on the left were gushing with praise, viewing the compromise as the beginning of a Clintonesque period of “triangulation”. The Washington Post declared: “Obama exults as Congress adjourns”. The fawning Dana Milbank wrote under the headline: “Look out, Obama the Great”.
Others were less enthusiastic. America’s Chief Keynesian, Paul Krugman, warned against the deal and predicted that it will create negative economic consequences and harm Obama’s prospects in 2012.
But the unstated common factor behind these competing liberal assertions is that no one on the left really has a definitive grasp of what Barack Obama ultimately stands for. Obama’s supporters are vacillating between fervent belief and minimifidianism. This is a philosophy of hope.
Ironically, it is the president’s newfound readiness to compromise on core principles – rather than the legislation he actually signed – that has inadvertently provided a source of optimism for business. Yet if the economy rebounds on the back of this capitulation, it could prove difficult for Republicans to achieve their goal of defeating Barack Obama in 2012.
Happy New Year!
This measure of success is limited only as much as conservatives continue to remind the voters that the cause for this loss of jobs, deficit and market failure was do to the government dictating to the private sector how to perform. Unless we unravel the damage done by Pelosi, Frank and Obama and continue to remind the us that they where the catalyst behind our current situation. If we don’t continually remind the voters we will find that the left will continue their ways blaming conservatives. The only conservative to date making any real progress is Governor Christie with a clear and concise message which the voters can understand and suppport. We should blue print such a message delivery at the federal level.
Hopefully Paul Ryan and the GOP led congress will completely overhaul our tax policies. Politically, it might be easier to start with the corporate tax code.