As both political parties scramble to reposition themselves on the economic issues that will dominate the 2012 election, an increasingly combative President Obama today demanded that lawmakers either approve his job-creation package and deficit reduction strategy or offer better ideas.
During a nationally televised news conference, Obama said that without passage of his $447 billion package of tax cuts and credits and public works spending, there will be fewer jobs and little growth in the economy – a problem that could be seriously exacerbated if the European sovereign debt crisis spreads. The administration also warned today that a stalemate over deficit reduction and reform of the federal tax code could leave many Americans facing an even higher tax bill next year.
“If Congress does something, then I can’t run against a do-nothing Congress,” Obama told reporters, quickly adding that if Republicans prevent action on his proposals in the House and the Senate, then “the American people will run them out of town.”
“Any senator out there who’s thinking about voting against this jobs bill when it comes up for a vote needs to explain exactly why they would oppose something we know would improve our economic situation at such an urgent time,” Obama declared, using his appearance to punctuate another week of campaigning throughout the country on behalf of his jobs plan and economic policies.
Washington economic policy-making has become even more of a circus, with the president essentially abandoning direct negations with the Republicans, Congress wrestling with what to do with Obama’s job and economic recovery proposals, and the “Super Committee” deliberating behind closed doors. Rather than seeking direct talks with Republicans over his latest plan for creating up to 2 million new jobs in the coming years, Obama has resorted to a Harry Truman type strategy of running against Congress and taking his plan to the American people.
Earlier today, House Speaker John Boehner, R-Ohio, chastised Obama for having “given up on the country” by deciding to “campaign full time.”
Boehner and House Majority Leader Eric Cantor, R-Va., both strongly oppose paying for a jobs plan by raising taxes – either with the president’s original idea for boosting taxes on families earning more than $250,000 a year or an alternative proposed yesterday by Senate Majority Leader Harry Reid, D-Nev., to slap a 5.6 percent surcharge on incomes of more than $1 million a year.
Speaking at a conference sponsored by the Atlantic publishing company and the Aspen Institute, Boehner said: “The American people are concerned about our country, and the concern I have seen over the last year frankly has turned into what I would describe as fear, and when they watch Washington, they don’t see the kind of answers that they expect.”
While many have predicted that the 12-member Super Committee will be unable to reach a consensus on long-term deficit reduction by Nov. 23 because of the GOP’s refusal to consider a mix of spending cuts and tax increases, as the president has insisted, Boehner offered the most upbeat assessment of the outcome.
“I am fully committed to insuring that the so called Super Committee comes to an outcome in a successful outcome,” he said. “I’ve made it clear to Republican members of the Super Committee that I expect there will be an outcome – that there has to be an outcome.”
Boehner refused to say whether this means the Republicans would relent and go along with some tax increases to help reduce the $1.3 trillion annual deficit. “I’m not going to predict what they will or won’t do, but there has to be an outcome,” he said.
Beyond the political framing that seeks to portray “do nothing” Republicans as refusing to act in the face of a faltering economy, Administration officials are clearly concerned that the economy could slow substantially or even plunge into recession next year if Congress doesn’t act to enact at least part of the president’s jobs bill.
The payroll tax breaks enacted over the past year are due to expire after the first of the year. So are a range of business tax breaks that have encouraged a surge in capital investment, which could be setting the stage for a strong burst of job growth. Corporate investment has been growing at three times the rate of the economy in the past year, Treasury Secretary Tim Geithner told the Senate Banking Committee today, but that won’t lead businesses to resume hiring unless consumer demand revives, which is in jeopardy if the jobs bill goes down to defeat.
“If Congress doesn’t act on the jobs act, every American will see their taxes go up $1,000 next year, and business taxes will go up,” Geithner said. “There are things we have to do in the short term to make sure the economy is not weakened by the inaction of Congress.”
Geithner also expressed optimism that the U.S. can weather the other major headwind facing the economy: the European debt crisis. A recent Congressional Research Service report cited by Sen. Mark Kirk, R-Ill., revealed that U.S. financial institutions face a combined $641 billion in direct and indirect losses if Greece, Italy, Ireland, Portugal, and Spain default. “Are we seeing a potential Lehman Brothers situation?” Kirk asked.
“Absolutely not,” Geithner responded. “The direct exposure of U.S. financial companies to the European situation is very modest. Our institutions are in a much stronger position” in terms of capital, leverage, and cash-on-hand compared with 2008, where the global financial system seized up in the wake of the collapse of a major U.S. investment bank.
“Europe as a whole is big, and if growth is weaker, that is going to matter for us,” Geithner continued. “But the costs of resolving this are not large relative to the resources of Europe. And they have committed at the highest level…to hold this system together.”