Fear and Bribery

Dear Friends,

In case there was any doubt that President Obama has given up trying to change the way things are done in Washington, he provided us with two more examples today.  First, Larry Summers is using fear to get support for President Obama's cave in to the Republicans.  Reuters reported (here),

"Failure to pass this bill in the next couple weeks would materially increase the risk that the economy would stall out and we would have a double-dip," Summers told reporters at the White House.

I guess President Obama adopted the tactic of fear from the Karl Rove playbook.

Now the Associated Press is reporting that the way has been cleared for the passage of President Obama's extension of the Bush tax cuts.  Here are the first two paragraphs of the report (here).

The White House and key lawmakers cleared the way Thursday night for swift Senate action to avert a Jan. 1 spike in income taxes for nearly all Americans, agreeing to extend breaks for ethanol and other forms of alternative energy as part of the deal.
Tax provisions aimed at increasing production of hybrid automobiles, biodiesel fuel, energy-efficient homes, coal and energy-efficient household appliances would be extended through the end of 2011 under the bill.

Another traditional Washington tactic, when you can't sell the bill on its merits, then bribe Senators and Representatives with more money.  I am not generally opposed to government subsidies for alternative energy, but I am opposed to bribery.  I read a quote in the last couple of days from Senator Franken (D-Minn.) that he was interested to see what happened about ethanol tax credits.  Well now we know.  I certainly hope that President Obama didn't just buy his vote.  I will write him (here) along with Senator Klobuchar (D-Minn.) (here).  They are my Senators.  I would urge you to do the same.

Thanks for reading and please comment,
The Unabashed Liberal

Tax Increase for poverty level families

Dear Friends,

The only group of people that will see a tax increase under President Obama's capitulation to the Republicans are families that earn $40,000 or less and individuals that earn $20,000 or less.  The New York Times article entitled "Tax Package Will Aid Nearly All, Especially Highest Earners" (here) contains the following paragraphs:

In fact, the only groups likely to face a tax increase are those near the bottom of the income scale — individuals who make less than $20,000 and families with earnings below $40,000.

The proposal does not include an extension of Mr. Obama’s signature tax cut, the Making Work Pay credit, which provided a credit of up to $400 for individuals and $800 for families of low and moderate income. Instead, the plan creates a one-year reduction in Social Security payroll taxes, which are generally levied on the first $106,800 of income. For an individual earning $110,000, that provision would reduce payroll taxes by $2,136.
Although the $120 billion payroll tax reduction offers nearly twice the tax savings of the credit it replaces, it will nonetheless lead to higher tax bills for individuals with incomes below $20,000 and families that make less than $40,000. That is because their payroll tax savings are less than the $400 or $800 they will lose from the Making Work Pay credit.

Just as a point of reference, a taxpayer with $1.0 million of income will save over $100,000 in taxes as a result of President Obama's sell out to the rich.  That savings is 2.5 times the total income of the family that will see its taxes increase.  How can anybody support that kind of a deal?  It is immoral.

There is still time to stop President Obama and the Republicans.  Write and call your Representative and your Senators at least once a day.

Thanks for reading and please comment,
The Unabashed Liberal

Not a Done Deal

Dear Friends,

The deal that President Obama cut with the Republicans about the extension of the Bush tax cuts is not a done deal and shouldn't be approved by Congress. 

The deal includes

• a two year extension of the Bush tax cuts for all - clearly much more favorable for the rich than for the middle class and since most of the money goes to the rich not very stimulative of the economy
• a low estate tax and an adjustment to the alternative minimum tax (read another tax cut for high income earners)
• a 13 month extension of unemployment benefits - good for the middle class and good for stimulating the economy but according to Senator Sherrod Brown (D-Ohio), the Senate Democrats could have gotten that through the Senate anyway because there would have been enough Republican Senators who would have been forced by their constituents to vote for it if President Obama and the Democratic leadership had put the pressure on
• an extension of several popular tax cuts, including some for businesses, at least two of which the Republicans had been fighting to preserve - these are somewhat stimulative but who knew it was hard to get Republicans to agree to tax cuts
• a reduction in the employee portion of payroll taxes - good for the middle class and stimulative to the economy - problem is that the Republicans will argue that Social Security and Medicare need to be cut further because there is less funding now

All in all the package is far more beneficial to the rich than the middle class and is not very stimulative to the economy that is to say it will not create jobs, but it will certainly increase the deficit big time.  As far as anybody knows, the cost of this deal somewhere in the $800 billion range is a direct increase to the deficit.  That is not good for the American people and it does not create jobs. 

The Democrats in Congress can stop this deal from happening.  The Democrats in the House have already passed the right bill that extends the tax cuts for incomes under $250,000.  They just need to stick to their guns.  In the Senate, we need enough Democrats to stand up and filibuster so that the deal cannot get passed.  Doing this will not prevent unemployment benefits from being extended or even the tax cuts for the middle class being extended.  It will reset the playing field so that a real compromise that is beneficial to the 98% of the American people with incomes under $250,000, that does not further explode the deficit and that does not continue to increase the vast gap between the very wealthy and the rest of America can be reached.

Please write and call your Representative and Senators.  Make your voice heard.  We can stop this immoral deal.

Thanks for reading and please comment,
The Unabashed Liberal

What Fight?

Dear Friends,

At his press conference today, President Obama showed the most emotion when he was rebuking me and other liberals and claiming that we just wanted a fight and didn't really care about the real implications for the American people.  This approach is insulting and inappropriate.

I want to make my position clear.  I am not opposed to compromise.  I do it every day as part of my job.  Almost never do I get everything I want, and at the end of the day I must assess whether the package that has been negotiated is worth the cost.  My criticism of President Obama is not that he compromises.  Unfortunately, his style is to compromise with himself before he starts talking with the Republicans.  He seems far more concerned about getting Republican support than he does about getting the legislation that is closest to what he wants.

Part of the problem is that there is no transparency about what he really wants.  He needs to start any negotiation by being very clear about what he wants the final legislation to look like.  If the Republicans don't like that they can propose changes.  Then a negotiation can begin.  During the negotiation, President Obama should put the full pressure of the White House and the bully pulpit behind his position.  He has never done that. 

In the health care debate other than laying out some broad principles, President Obama never laid out in detail what he thought the legislation should look like and then campaigned for that legislation.  In the recent Bush tax cut debacle, President Obama signaled very early on that he would compromise.  He had a clear position, the polls showed that a majority of the people supported his position, yet he never put the pressure on the Republicans to force them to accept what he and the American people wanted. 

If you are the President of the United States, you have legislation that you say you badly want, the legislation makes perfect policy sense, it is legislation that you campaigned on, it is legislation that many members of your party campaigned on, your party has big majorities in both the House and the Senate, the American people overwhelmingly support it, you are a great public speaker, and you are unable to get that legislation passed; that loss must be considered a stupendous failure of your leadership abilities.

In his press conference, President Obama claimed that he would fight any further extension of the tax cuts for the wealthiest 2% of Americans, but he never could explain why he felt the outcome would be any different than it was this time around.  He said he would fight for no tax cuts for the rich, but if he fights the way he did this time, the result will be the same.

It turns out that President Obama is a terrible negotiator and a terrible leader.  He has two choices.  He can change is style and fight and negotiate the way that a seasoned negotiator would and use his great speaking skills and the power of the Presidency to get most of what he wants.  His other choice is to withdraw from the 2012 Presidential race.  If he does that he can focus on doing what he believes needs to be done without worrying about re-election.  He might be able to save himself a good place in the history books.

Thanks for reading and please comment,
The Unabashed Liberal

No Extension Better than Bad Extension

Dear Friends,

It looks like President Obama has caved in on the extension of the Bush tax cuts, and it is unclear what if anything he got in return.  Generally speaking when you do not fight for what you believe in, you put yourself at a huge disadvantage and you then have no bargaining power.  Unfortunately that is President Obama's approach.  We will have to wait to see the terrible details of whatever has been agreed to.  Then we can just hope that there are enough Democrats who just say no to the deal so that it will fall through.

Common wisdom is that it would be a disaster to have all the Bush tax cuts expire.  As with most common wisdom, it is wrong.  Please read Paul Krugman's column in The New York Times today (here).  Mr. Krugman argues that while it is not great to increase the taxes on the middle class in a weak economy, it is better to do that than to continue the tax breaks for the rich which will truly bankrupt the country and require significant reductions in Medicare and Social Security in the future.  Don't be fooled by the fact that the extension is temporary.  The Republicans will know that the Democrats will cave in and the temporary extensions will continue until the Republicans can make them permanent.

But while raising taxes when unemployment is high is a bad thing, there are worse things. And a cold, hard look at the consequences of giving in to the G.O.P. now suggests that saying no, and letting the Bush tax cuts expire on schedule, is the lesser of two evils.
Bear in mind that Republicans want to make those tax cuts permanent. They might agree to a two- or three-year extension — but only because they believe that this would set up the conditions for a permanent extension later. And they may well be right: if tax-cut blackmail works now, why shouldn’t it work again later?
America, however, cannot afford to make those cuts permanent. We’re talking about almost $4 trillion in lost revenue just over the next decade; over the next 75 years, the revenue loss would be more than three times the entire projected Social Security shortfall. So giving in to Republican demands would mean risking a major fiscal crisis — a crisis that could be resolved only by making savage cuts in federal spending.

Mr. Krugman goes on to refute the claim that the failure to extend the Bush tax breaks would be a disaster for the unemployment rate.

A few months ago, the Congressional Budget Office released a report on the impact of various tax options. A two-year extension of the Bush tax cuts, it estimated, would lower the unemployment rate next year by between 0.1 and 0.3 percentage points compared with what it would be if the tax cuts were allowed to expire; the effect would be about twice as large in 2012. Those are significant numbers, but not huge — certainly not enough to justify the apocalyptic rhetoric one often hears about what will happen if the tax cuts are allowed to end on schedule.

He finishes with some good advice for President Obama, and I would add for the Democrats in the House and Senate who may have to adopt the Republican approach to governing by blocking the extension for all.

So Mr. Obama should draw a line in the sand, right here, right now. If Republicans hold out, and taxes go up, he should tell the nation the truth, and denounce the blackmail attempt for what it is.
Yes, letting taxes go up would be politically risky. But giving in would be risky, too — especially for a president whom voters are starting to write off as a man too timid to take a stand. Now is the time for him to prove them wrong.

In case the number of dollars we are talking about for these tax cuts is mind boggling to you, the "By the Numbers" column in The New York Times yesterday might help.  Here it is:

What Else Would $60 Billion Buy?

By DAVID LEONHARDT

$60 Billion: The approximate amount that extending the Bush tax cuts on income above $250,000 a year — which Congress seems on the verge of doing — will cost a year, in inflation-adjusted terms. On average, the affluent households that benefit from these cuts will save $25,000 annually. What else might that $60 billion a year buy?
•As much deficit reduction as the elimination of earmarks, President Obama’s proposed federal pay freeze, a 10 percent cut in the federal work force and a 50 percent cut in foreign aid — combined.
•A tripling of federal funding for medical research.
•Universal preschool for 3- and 4-year-olds, with relatively small class sizes.
•A much larger troop surge in Afghanistan, raising spending by 60 percent from current levels.
•A national infrastructure program to repair and upgrade roads, bridges, mass transit, water systems and levees.
•A 15 percent cut in corporate taxes.
•Twice as much money for clean-energy research as suggested by a recent bipartisan plan.
•Free college, including room and board, for about half of all full-time students, at both four- and two-year colleges.
•A $500 tax cut for all households.

Thanks for reading and please comment,
The Unabashed Liberal

When is it time to look for a new candidate for 2012?

Dear Friends,

In The New York Times this morning both Frank Rich and Maureen Dowd wrote articles expressing, better than I have, that the main problem with President Obama is his failure to actively support anything.  Here are a few quotes from Frank Rich's column:

But the real problem is that he’s so indistinct no one across the entire political spectrum knows who he is. A chief executive who repeatedly presents himself as a conciliator, forever searching for the “good side” of all adversaries and convening summits, in the end comes across as weightless, if not AWOL. 

Mr. Rich then goes on to explain the popularity of New Jersey Governor Chris Christie who has a 51% approval rating.

But the core of Christie’s appeal at home is that he explains passionately held views in concrete, plain-spoken detail. Voters know what he stands for and sometimes respect him for his forthrightness even when they reject the stands themselves...G.O.P. propagandists notwithstanding, Christie’s appeal does not prove that New Jersey (and therefore the country) has “turned to the right.” It does prove that people want a leader with a strong voice, even if only to argue with it.

Mr. Rich concludes with a sobering thought.

Everyone will have caught on by 2012, but that will be too late for many jobless Americans, let alone for Obama. As the economics commentator Jeff Madrick wrote in The Huffington Post, the unemployment rate has been above 7 percent only four times in a presidential election year since World War II — and in three of the four the incumbent lost (Ford, Carter, the first Bush). Reagan did win in 1984 with an unemployment rate of 7.2 percent, but the rate was falling rapidly (from a high of 10.8 two years earlier), and Reagan was as clear-cut in his leadership as Christie (only nicer).

Maureen Dowd in her column while discussing Don't Ask Don't Tell made the following statement which could be applied to President Obama's entire presidency so far.

Once again, the Democrats waited too long to close the deal, the president showed no leadership, and a campaign promise that was seen as a fait accompli now seems a casualty.

I am not quite ready to start looking for another candidate for President in 2012, but I am getting very close.  We need to start talking openly about the possibility.

Thanks for reading and please comment,
The Unabashed Liberal