With only a few weeks until President Obama delivers a plan to jumpstart a moribund economy while curtailing the long-term debt, experts say the President has two choices: Either go “big and bold” with a plan almost certain to outrage Republicans but galvanize his political base, or take more incremental steps to seek common ground.
Obama has promised to spell out a series of ideas in a major address shortly after Labor Day, once he and Congress return from the August recess. The political stakes couldn’t be higher for the President heading into a tough election season, with the economy in a near stall, unemployment stuck at 9.1 percent, a downgraded U.S. credit rating, the markets seemingly in the throes of a nervous breakdown, and Obama’s job approval rating at a near-record low of 40 percent.
“Between now and the election, the President is not going to have a lot more potentially high-impact moments,” said William Galston, a former adviser to President Bill Clinton and a senior fellow at the Brookings Institution. “Everyone wants to see an affirmative boost and not simply a continuation of a rescue approach that keeps swimmers nostrils’ above the water lines, but only marginally.”
New or expanded hiring tax incentives or payroll tax holidays already touted by the President won’t substantially boost the economy in the long term and will detract from larger-ticket economic engines like tax and entitlement reform, said Doug Holtz-Eakin, a former Congressional Budget Office director. “These things are only temporary, and are going to have trivial impacts overall on the scale of the recovery,” he said.
David Axelrod, Obama’s campaign strategist, said over the weekend that the President’s jobs proposal won’t all be new ideas. “Some will be new,” he told ABC News on Sunday. “Some we’ve already talked about.”
‘Make a Difference and Change the Mood’
But to make a real economic difference, the President needs to move beyond his proposals to extend the payroll tax cut and unemployment insurance and lay out at least one or two significant policy proposals in his speech, experts say. “If I were the President, rather than focusing on a handful of little items, I would be focusing on one or two things that could really make a difference and change the national mood,” Galston said.
Introducing a major mortgage relief initiative, Galston predicts, would be the most-likely policy game-changer. “There have been suggestions here and there that the White House is trying to work out something large and compelling in the area of mortgages and mortgage adjustment,” he said.
the corporate tax rate and adopt a
territorial system for overseas
corporations to remain competitive.
Holtz-Eakin contends that fast-tracking reforms to the tax code could create more lasting incentives for businesses to hire. The federal government will need to lower the corporate tax rate and adopt a territorial tax system for overseas corporations to remain competitive, he said.
“So why not accelerate provisions that we know would be in tax reform but have economic benefits now?” he said. Moreover, beginning work on reforms of Social Security, Medicare and other entitlements could also reap economic benefits for the U.S., he added.
As he and his family spend a 10-day vacation on Martha’s Vineyard, Obama has been bombarded with advice from friends and foes alike on the next critical round of budget and tax negotiations with the Republicans. “President Obama has only one option as he ponders a world economy teetering on the edge: He needs to go big, go long and go global,” wrote liberal columnist E.J. Dionne, Jr., on Monday.
A ‘Dare’ to Spur Economic Growth
During the past two budget crises, when Republicans threatened to shut down the government and force a default on U.S. debt, the President chose conciliation over brinksmanship; in both cases GOP leaders extracted most of what they were seeking. Now, with the two sides heading into a third round of wrangling over long term spending and tax policy, House Majority Leader Eric Cantor, R-Va., and other congressional Republican and Tea Party leaders are virtually daring him to suggest anything more than a heavy dose of cuts in government spending and entitlement programs and reductions in red tape, to help bring down the $1.5 trillion budget deficit and spur economic growth.