President Barack Obama says he will not extend Bush-era tax cuts for the wealthy, which are scheduled to expire this year. However, he will extend the Bush tax cuts for the 98 percent of households that annually earn below $250,000 for couples or $200,000 for individuals. The White House says the tax cuts for the top 2 percent would add $700 billion to the deficit over the next ten years. Obama's announcement comes only two days after his proposals, which some call a "second stimulus," for $50 billion in infrastructure spending and $100 billion over ten years in business tax credits for research and development. Here's what pundits are saying about whether Obama's new economic initiatives will counterbalance two very negative forces for the White House: The poor economic situation and the forecasted electoral losses for Democrats.
About 'Enticing' Support From Populists, Businesses The New York Times' Jackie Calmes says these proposals are meant to "provide his party with an agenda for the home stretch of the midterm campaign — though one with a small chance of being enacted quickly or helping the economy before Election Day if it were." While the tax cuts are "populist" bait for anti-incumbent voters, the stimulus-like measures are meant to "entice support from big businesses and their Republican allies." Obama, by promising not to extend the cuts for the wealthy, "intends to cast the issue as a choice between supporting the middle class or giving breaks to the wealthy."
- Lobbying His Fellow Democrats The Washington Post's Lori Montgomery sees an effort to convince "wavering Democrats who have been swayed by arguments that the economy is too weak to raise anyone's taxes." Extending the cuts for the wealthy is "a position that has gained ground in recent weeks among moderates in both the House and Senate. But congressional sources said they were told to expect the president to try to stiffen Democratic spines in expectation of a showdown over income tax rates before the November midterm elections."
- Making Conservatives Look Bad Conservative blogger Allahpundit appraises, "This is his way of baiting the GOP into opposing him so that Democrats can go back to screaming about how Republicans are the 'party of the rich.' It ain’t much, but it’s a little something that might peel off a few populist independents before the midterms. The question is, what do the Blue Dogs do? Stick with the party and spare The One an awkward veto? Or defect in the Orszagian name of temporary tax cuts for everyone to provide a little extra stimulus? If the latter, they’ll spoil the whole partisan 'party of the rich' attack."
- Why Business R&D Tax Credits Would Undermine It All Economist Robert Reich explains, "The economy needs two whopping corporate tax cuts right now as much as someone with a serious heart condition needs Botox. The reason businesses aren’t investing in new plant and equipment has nothing to do with the cost of capital. It’s because they don’t need the additional capacity. There isn’t enough demand for their goods and services to justify it. Consumers aren’t buying because they’re trying to come out from under a huge debt load." Moreover, the research and development credits would worsen the situation by driving down employment in the long-term. "Big corporations are investing in automated equipment, robotics, numerically-controlled machine tools, and software. These investments are designed to boost profits by permanently replacing workers and cutting payrolls. The tax breaks Obama is proposing would make such investments all the more profitable."
- 'Election-Season' Nonsense Liberal blogger mistermix, seeing that Obama will keep most of the cuts, asks, "Since when is it a 'compromise' to give Republicans everything they want?" He writes, "If the new narrative is that everything Obama proposes after Labor Day merits the adjective 'election-season', where has the DC media been for the past 18 months? We’ve had a record level of obstruction from Republicans in hopes that they’d be able to kill or water down the Democrats’ legislative agenda. For the GOP, every day has been the day before election day, yet now we’re supposed to discount the next two months of the Obama administration’s proposals as 'election-season' politics."