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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Between a rock and a hard spot
The United States federal government will spend 3.8 trillion in 2012; it will take in 2.5 trillion, which leave a debt of 1.3 trillion. To balance this budget Americans will have to raise taxes by 50% or cut spending by 35%, or a combination of the two. Plus we must start making payments on our 17 trillion dollar federal debt. If we raise tax sufficiently to reduce the 2012 debt, the American people will revolt. Congress will not cut spending by 35% because they will have to cut the programs of the vested interest groups that keep them in power. If we don’t start paying on the federal debt lenders will question whether we are going to pay our debts, and interest rate will increase as the risk of not getting paid raises. With the reelection of Obama it is obvious the American people have no understanding of our economic condition. With Obama wanting a tax increase of 1.6 trillion over 10 years and congresses wiliness to negotiate on this should tell us that our leadership doesn’t have clue either. We are going bankrupt!!!
Bankruptcy does some good things; it gets rid of the debt, it reevaluates the assets, gets rid of bad management and obsolete ideas and America can start again.
If the past four years has taught us anything, it's that house Republicans have had a MUCH bigger problem reaching across the aisle. Obama and the Dems have tried doing that repeatedly. As usual, they've had to swallow more concessions than the other side. Even Health Care Reform's final bill ended up filled with Republican meddling and demands. I have no doubt Obama IS reaching across the aisle now but it doesn't mean Republicans get their way on everything. I often see people twisting this around, of course, as if Obama's the one who isn't reaching. Those people are in a bubble and clearly haven't been paying attention, they just think what they want to think. Frankly I don't see much difference between the Obama of then and now.
The only thing we've learned from his first four years is that reaching across the aisle to the Republican extremists didn't help a whole lot.
typical bias media bs propaganda! Obama and democrats had the power for 2 full years and did nothing but stop any bills from
being voted on that the other side put up and never passed a budget but had time to pass the horrendous Obama care which now
the truth about it being a plan for single payer big govt takeover of healthcare with higher rates and services cut and medicare 700
billion to fund it and business either laying off people or cutting healthcare! and then his regulations that have shut down cheap
energy and gave billions to failed green companies of his friends family and big unions which just got 18,000 layedoff! and you see
the high energy and food prices skyrocket and more taxes on middle class and unemployment! he's a socialist anti american!
We need the old partisan hack Obama like we need a root canal on an unsaveable tooth... The pain will be much less when we get rid of the bad tooth (Obama)...
Obama is a lazy, courrupt, arrogant imbecile as are all the morons that voted for him. The good thing is they will suffer far more than the rest of us...
I remember Obama talking of a windfall profit tax on energy producers since they make they're profit from OUR country. This was when he ran the first time,of course it never happened.
The president and congress talk of tax increases. But little if any talk of cutting spending and the size of government.
Ron Paul was right about a lot of things.We need to get rid of agency's that aren't constitutional or that are just a bad idea. We need to get out of stupid never ending wars. Close many overseas bases. Just having a giant military just because it provides jobs at tax payers expense is stupid.
The country wont make it on debt that just grows larger. No enemy well bring us down,unless you consider the government the enemy.
Why dose the government own so much land? sell some.
The reason the United States is split is because this president is only interested in ideological purity. Don't tell me you haven't figured this out yet! I can't see any changes coming, the new president is the same as the old president. And by the way, don't blame this whole mess on the Tea Party and the Republicans, the "takers" play a huge part of why we're in the mess we're in.
Please, You are better than that~~~ Old and New Obama spells doom for our fiscal house and our future.
At this point people are voting with their pocketbooks and smart people are stock piling money.
We are going to need it, because the bankrupt government needs all the tax revenue it can get.
I say go off the fiscal cliff, chop all spending, raise entitlement ages.
The medicine is tough love.
Do it now, before its to late and we go out like the Romans, and the Brits.
Obama won fair and square.The Repubs just cry and bellyache.The party of NO did nothing
but obstruct on Obamacare.For a solid year all the Repubs did was waste time and
never offer a plan.Since the Repubs act like children, Obama should treat them such.
the federal government, Only then will we work on fixing the
money spent on hand outs.
People that were for Obama in this Election are receiving some
form of handout from our current President.
So let the fiscal cliff come!!!!!
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