11/14/2012 8:00 PM ET|
Now we need the old Obama
We need a return of the 2008-vintage president to reach across the aisle and restore confidence if we’re going to avoid another recession.
The yard signs have come down. The political ads have mercifully stopped. And now, the task turns from campaigning to governing and compromise.
The "fiscal cliff" of tax hikes and spending cuts worth $720 billion, or 5% of gross domestic product, threatens on Jan. 1. Just beyond that, we have to contend with the Treasury's debt limit -- and the tussle over raising it last time nearly torpedoed the economy in August 2011. To focus the mind even more, we also have the threats of credit rating downgrades, further loss of CEO confidence and a potential new recession.
The ugliness of our politics hit a new nadir this year as President Barack Obama's message of hope and change devolved into character attacks while Republicans focused on the makers versus the takers, the 47%, and so on. The focus was on things like Mitt Romney's tax returns, binders of women, and horses and bayonets. For the next step, we need the old Obama back -- the one who talked of post-partisanship, kept Republicans in his Cabinet and seemed more interested in results than ideological purity -- to navigate the fiscal cliff that has markets and businesses so worried. (See what's in the fiscal cliff.)
Republicans, against all odds and in a reversal of the post-2010 Tea Party ascendance, seem ready to strike a deal. And if it happens, the market will surge.
The change we need
As I've said in recent columns and blog posts, including "Obama, GOP face off at the edge," the stakes couldn't be higher. Businesses have pulled back and capital expenditures are dropping at a pace not seen since the 2008 meltdown because uncertainty about Washington is so high. Analysts at Société Générale estimate that, since 2007, political bickering has shaved 2.5% from GDP and resulted in 2.1 million lost jobs.
In dollar terms, that's nearly $400 billion in lost output and wages for average Americans.
Yet despite this, and despite that $6 billion spent on some 1.2 million political ads, the electorate largely returned the status quo to power in Washington. Obama lost a few states in the Electoral College. Republicans lost a few seats in Congress. But Americans are sending the same group back, ostensibly with the wish that a compromise is found.
Thankfully, with a demographic wave working against them, Republicans have changed their tack. They could be realizing that obstructionism -- deployed since the 2010 midterms -- and their commitment to Grover Norquist's Taxpayer Protection Pledge are failing.
Yes to new taxes?
The key to unlocking a bipartisan deal is taxes.
House Speaker John Boehner R-Ohio kicked off the wave by saying that this was the president's moment to succeed and that Republicans would be willing to accept new taxes -- if they came from tax reforms and a reduction in credits and deductions rather than increases in marginal tax rates. This would raise revenues but do so in a way that wouldn't further damage business confidence, because a simpler tax code would reduce compliance costs and end-of-year headaches.
If we're talking about replacing the revenue from ending the so-called Bush tax cuts on the wealthy, then only around $60 billion per year is needed -- and that is doable, according to research from the Tax Policy Center (.pdf file). Conservatives are falling over themselves to walk through the opening made by Boehner and to support a tax idea originally pushed by Obama as well as his 2010 Simpson-Bowles deficit committee.
Rep. Paul Ryan, R-Wis., the GOP's vice-presidential candidate, has come out in support of the revenues-via-reform idea as he prepares to return to his post as House Budget Committee chairman to play a key role in the coming fiscal cliff negotiations.
Glenn Hubbard, Romney's economic adviser, wrote in the Financial Times that to avoid the fiscal cliff, we need to raise average tax rates through revenue-via-reform instead of simply raising marginal rates -- something that will "distort behavior and reduce activity." For the rich, popular deductions on things like mortgage interest, charitable giving and health insurance should be on the table.
And Weekly Standard editor Bill Kristol wondered why Republicans haven't been willing to negotiate with the president on taxes. Appearing on Fox News Sunday, he said: "The Republican Party is gonna fall on its sword to defend a bunch of millionaires, half of whom voted Democratic, and half of whom live in Hollywood and are hostile to Republicans."
Obama, in his postelection speech, emphasized the need for the wealthy to pay a little more. The revenues-via-reform idea gives him that. But we cannot solve the fiscal cliff merely by raising taxes, since the real, long-term driver of the deficit is unfunded entitlement programs going broke because of out-of-control health care costs.
Two sides of the coin
As I've said before, the deficit isn't just about taxes and spending. It's about short term versus long term and cyclical versus structural.
There is the short-term, cyclical deficit (caused by our middling economy) that results in more spending on things like disability benefits and food stamps and which lowers tax revenues, since the employment-to-population ratio is at early 1980s levels.
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It fascinates me that obama and the mentally deficient followers of his want to raise taxes and yet seem to understand that it WILL cause damage to the economy........Seems, they, like most childish people want it both ways.......tax increases AND a strong economy.
By the way, all those who have not read "Atlas Shrugged", now is the time. For those that have, be John Gault to what ever degree you can. We, the working, producing, thinking class still have the power to save the country.......It will, as it did in the days of the founding, require pain. And we will be the ones who will inflict it......not the leaches, the socialist, the great government schemers. They, in their dependence on the largess of the producers are in the weaker position.
I am glad to see Anthony refering to the Bush Tax Cuts correctly.
as the "so-called Bush tax cuts" on the wealthy,"
As 85% are for the middleclass.
Oh, man...half you disliking my post will get the shock of your life in 2016 as we enter into a Great Depression...get your heads on straight...this is no recovery. I'm a realist ...they're taking us in slow..a nice slow controlled burn...inflation increasing just to the point of not throwing off balance...hidden unemployment numbers, still hidden, but having to rise just a bit. Diligent savers ARE going to get burned...unless they are saving in HARD ASSETS...like raw land, gold, silver.
Ok...I'll make it brief...we're under globalization-equalization...our salaries cannot be substantually higher than someone in China or India....once globalization has equalized everything...then we can have singularity in finances, control...and yes domination. Hang-on, this ride is going to get fun...if you don't want to be on the ride...you had better start buying up loads of silver...you will escape the pain....silver counter's the pain. I know most will dislike this post...us wavefront viewers we get trashed all the time. The good news is....once silver becomes a household name....where everyone saw it coming but few acted...you'll remember me and how you disliked this post. :)
Anthony, you need to do some research dude. Obama never reached across the Aisle for anything in 2008. there was a a huge democratic majority in the house and a solid one in the senate.
Do your homework before you publish!
the old obama? the golfer?
the liar? the pandering jackass?
that old obama?
I kinda like the new one that says "um...."when he's asked if he made an order to to put our citizens in the middle east on alert for 9/11. ...um, huh?
Most of the people that post in here must be Republicans that make over 250K.
It's time for the Republicans in the HOUSE to wake up or they will soon vanish.
"REPUBLICANS CAN COME ALONG FOR THE RIDE, BUT THEY WILL HAVE TO RIDE IN THE BACK OF THE BUS"!
Obama bi-partisanship at its' finest!
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[BRIEFING.COM] S&P futures vs fair value: -6.60. Nasdaq futures vs fair value: -12.80. The S&P 500 futures trade nearly seven points below fair value, putting the benchmark index on track for a lower start to the session after losing 0.5% yesterday. The cautious sentiment carried over into the Asian session where the Nikkei lost 2.6% while the dollar/yen pair slid below the 102.80 area. Also of note, copper extended its recent decline, but despite the early weakness, the red metal ... More
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