Within the next week or two, President Obama is going to unveil a new package of tax cut and spending proposals to try to revive economic growth – or at least Democratic election prospects.
Don’t expect much. If the White House really had big plans, President Obama would have already announced them instead of vaguely saying last Monday that his staff was looking at “additional measures.’’
The big problem, of course, is that Democrats have almost no chance of actually passing any substantive measures before the November mid-terms or even during a lame-duck session right afterward.
Senate Republicans can block almost anything, and they have absolutely no incentive to cooperate. Just look at the agony Democrats went through to pass an extension of unemployment benefits. The last thing Republicans want to do now is give Democrats something they can bring home to voters. And Republicans know they will have much more leverage after they gain seats in the mid-terms.
But it’s not clear how much the president really has in mind anyway. Several White House officials pointedly warned this week that “there are no silver bullets” (see Christina Romer, outgoing chairwoman of the Council of Economic Advisers, and political adviser David Axelrod).
The Washington Post reported today that Obama is weighing business tax cuts that could total “hundreds of billions of dollars.” But the Post mentioned only two specifics: some kind of payroll tax holiday to encourage more hiring and a renewal of expiring tax breaks like the research and development tax credit.
Since the R&D credit has been on a list of routine “extenders’’ all year, White House officials must be scraping the bottom of the barrel for ideas. And while “hundreds of billions’’ might sound like a lot of money, it’s important to remember that about $70 billion (yes, billion) will almost certainly have to go toward another one-year patch of the Alternative Minimum Tax. The AMT, a parallel tax originally aimed at rich people, will clobber almost 30 million taxpayers with a hefty tax increase just a few months from now if Congress doesn’t act. But preventing that tax increase doesn’t provide any extra stimulus.
The president may well propose a slew of sexier tax incentives to spur investment in green energy, technology and manufacturing. House and Senate Democrats have been pushing a wish-list of such proposals, some new and some not, without any luck so far. For a sampling, see the “Domestic Manufacturing and Energy Jobs Act” by Rep. Sandy Levin, chairman of the House Ways and Means Committee.
But again, the Republicans aren’t going to play ball for the remainder of this year – if ever. The president and Democratic leaders in Congress spent months trying to pass a bill that would extend unemployment benefits, prevent 100,000 teachers from being laid off and shore up ravaged state Medicaid programs. They had to drop scores of incentives to spur the economy, and scale back the basic measures to win two Senate Republican votes.
Meanwhile, Democrats have found themselves trapped. They face a political backlash from Tea Partiers and more mainstream voters about sky-high deficits. And they are being punished for not doing enough to revive the economy. They are damned if they do and damned if they don’t.
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