“The imperial Presidency will not make this determination,” Lou Dobbs says about Barack Obama’s proposal to let the Bush tax rates expire for the top income-tax bracket, “because he has an election [where] he will stand accountable to the American people — and the Republicans who control the House of Representative and his own party are in disagreement with him.” In other words, Dobbs thinks that yesterday’s statement is nothing more than cheap politics, and with an unhealthy serving of desperation:
Lou Dobbs weighed in on Obama’s latest news on today’s America Live, saying, “For this president to even stand up here, by himself, and say he’s going to raise taxes, first of all ignores the fact that this is a Republican led Congress that is adamantly against raising taxes to their credit and secondly, it ignores the fact that his own party is not participating in this call for taxes.”
He added, “This is a desperate president that finds himself locked up in a, basically, dead heat in battleground states all over the country … he doesn’t know what to do.”
Dobbs said that if President Obama defines rich as $250K in this country, then he has a ‘very sorry understanding of what wealth is in this country.’ He doesn’t think Obama will stand on this issue because he foresees the Democrats and Republicans resisting him.
Dobbs has at least one thing correct in this segment: this will not go anywhere until after the election. The GOP-controlled House will not agree to this at all, and Senate Democrats balked at it last year. If Obama wins in November, that might change in the Senate during the rump session that takes place before the end of the year, but it’s not likely to change in the House. This is nothing more than a cheap distraction from a bad jobs report. As I argue in my column for The Week today, the push now to hike taxes on the investor class means he’ll have to come up with more distractions for later bad jobs reports, too:
This was a big issue in the 2010 midterm elections. Obama and Congressional Democrats insisted on keeping the sunset rule in place, hoping to force Republicans into raising taxes on the upper bracket by keeping the middle-class rates as a bargaining chip. The strategy flopped, however, as Democrats lost 63 House seats in the midterms. Stung by the historic rebuke, Obama and Democrats agreed to a two-year extension shortly after the midterms, averting a massive tax hike.
And a tax hike is exactly what would have taken place. All four of the middle-income brackets charged 3 percentage points more before the EGTRRA and JGTRRA fully took effect in the 2003 tax year. Middle-class families got a real tax cut at that time — plus the ability to plan for the future as the rates were locked in at least until 2010. That helped unlock consumer spending in 2003 and 2004, leading to an economic boost and job-creation bonanza. Americans who see the rates increase at the end of this year will call that a tax hike — and will have less money to spend as a result.
The cut is now almost a decade old for most Americans. However, Obama seems to have difficulty realizing this. In his speech yesterday, he wants to take credit for extending tax cuts — and only for another year…
Finally, this comes on the heels of a bad jobs report for June, the third straight flop for Obama on jobs and the economy. Obama obviously wants to change the subject from the worst post-WWII U.S. recovery, which has produced an embarrassing 65,200-jobs-per-month average over its 37 months, to conduct more class warfare and promote Obama’s soak-the-rich populism. However, pushing for tax hikes in the middle of an economic downturn will almost certainly backfire as investors take more steps to shelter income and capital rather than put it to use in job-creating activities and investments. Not only is this latest attempt at a distraction unlikely to last past the next bad jobs report, it’s all but certain to guarantee more of them.
Raising taxes is a bad policy, but Obama thinks it makes for good politics. He might be right in the short run, but he’s been stumping for the class-warfare approach for almost a year now, and it’s not moving the needle at all for him. With the job market starting to move toward contraction, Obama should be looking for ways to get capital into the game, but instead his hostility will have capital seeking shelter — and the jobs market will move further toward contraction as a result.