Officials: Obama ready to veto a bill blocking ‘fiscal cliff’ without tax hike for rich
By Jessica Chau
Lori Montgomery and Ezra Klein have stories in the Washington Post that say President Obama is prepared to play hard ball with the Republicans on the Bush tax cuts and the fiscal cliff. In the New York Times Economix blog, Laura D’Andrea Tyson and Owen Zidar study the link between income tax cuts for the rich and job creation, and found no such link. The stories are below.
Washington Post, Lori Montgomery, 10/17/2012
President Obama is prepared to veto legislation to block year-end tax hikes and spending cuts, collectively known as the “fiscal cliff,” unless Republicans bow to his demand to raise tax rates for the wealthy, administration officials said.
Freed from the political and economic constraints that have tied his hands in the past, Obama is ready to play hardball with Republicans, who have so far successfully resisted a deal to tame the debt that includes higher taxes, Obama’s allies say.
In the days after the November election, the tables will be turned: Taxes are scheduled to rise dramatically in January for people at all income levels, and Republicans will be unable to stop those automatic increases alone.
If he wins reelection, Obama may finally be able to dictate the terms of a bipartisan debt-reduction deal. And if he loses to Republican Mitt Romney, Obama could make sure that tax rates rise before he hands over the keys to the White House on Inauguration Day in late January.
Washington Post, Ezra Klein, 10/18/2012
I’ve criticized the Obama campaign for failing to detail much of a vision for a second term. But that’s not to say they don’t have one. They do. It’s just a hard one to campaign on.
After promising in 2008 to bring about a new era of cooperation in Washington, they’re campaigning in 2012 knowing that, if reelected, they will start their second term with a brutal, economy-shaking showdown with Republicans over spending and taxes.
If the Obama administration were to really lay out their plans, they would go something like this. In November, President Obama will reiterate, clearly and firmly, that he will veto any attempts to extend the high-income tax cuts or lift the big, dumb spending cuts without finding equivalent savings elsewhere. In fact, as my colleague Lori Montgomery reports, they’re already reiterating that promise.
That veto threat is the center of the Obama administration’s second-term strategizing. The Obama administration believes – and, just as importantly, they believe Republicans believe — that they’ve got the leverage here. The Republican position on taxes is less popular than the Democratic position. The outcome of gridlock is much higher taxes, which is more anathema to Republicans and arguably cheering to Democrats. The big, dumb spending cuts, despite being poorly timed and inanely constructed, are very progressive in their effect, falling heavily on military spending while exempting Medicaid, Social Security, and Medicare beneficiaries.
In a way, the Obama administration’s plan for a second term is much like their plan for the first term: Make a deal with Republicans. Get a big bipartisan solution to our problems. But the means are almost precisely the opposite. Where in the first term, the hope was that they could reach out, talk through the issues, and come to an agreement, the plan for the second is to push the Republican Party off the fiscal cliff, and then force them to reach out in order to get pulled back up.
New York Times Economix blog, Laura D’Andrea Tyson and Owen Zidar, 10/19/2012
The centerpiece of Mitt Romney’s tax plan is an across-the-board 20 percent cut in marginal tax rates. This cut, along with a few other tax changes Mr. Romney has endorsed – such as repeal of the estate tax and the alternative minimum tax – would reduce federal tax revenue from personal income and payroll taxes by an estimated $3.6 trillion to $3.8 trillion over 10 years.
The total is closer to $5 trillion when Mr. Romney’s proposed cut in the corporate income tax rate to 25 percent is included. About two-thirds of this amount would go to taxpayers making $200,000 a year or more – about 5 percent of all taxpayers.
Extending the Bush tax cuts for high-income earners, as Mr. Romney proposes, adds another trillion in lost revenue and increases the share of the benefits going to the top 5 percent. Even if the cost of the Romney tax cuts for the top 5 percent is covered by base-broadening measures, as Mr. Romney promises – but as President Obama and many others assert is mathematically impossible – does it make sense to devote trillions of dollars to lowering income taxes for the top 5 percent? Is this an effective way to create jobs?
Mr. Romney appears to think so. His plan rests on the assertion that lower taxes for high-income taxpayers will increase economic activity and employment – that lower taxes for job creators create jobs and will do so quickly. This assertion, while superficially convincing and ideologically compelling, is not supported by the evidence.
What do we actually see after combing through a half-century of economic data? Neither of these predictions is borne out.