These Four Obama Ideas From the State of the Union Have a Chance in Hell

21 Jan 2015 | Author: | No comments yet »

Analysis: Obama Seizes on Recovery, Bets on Staying Power.

President Barack Obama’s State of the Union address marked a sweet spot in his presidency when economic signs and his own personal approval are on the rise. The president circled back to the themes of change and unity that he campaigned on during his first presidential race as he defended the promises he made then and policies he believes have, and will, deliver. “My only agenda for the next two years is the same as the one I’ve had since the day I swore an oath on the steps of this Capitol: to do what I believe is best for America,” he said.President Barack Obama said the United States, not China, should write the rules on trade, urging Congress once again to give him the power to negotiate international trade agreements with partners in Asia and Europe.Washington: As a first step for politicians looking to address rising inequality in America, overhauling how capital gains are taxed would seem like a good place to start. A glance last night across the ashen Republican faces in a Congress controlled by Mr Obama’s rivals leaves little doubt that the progressive goals he set out last night have little chance of passing.

Similarly to the UK, the US tax code favours income generated from rising asset values, such as an increase in share prices, over income generated from work, such as wages and salary. Tuesday’s speech capped a remarkably activist 11 weeks since Obama suffered the humiliation of Democratic losses that gave Republicans control of both chambers of Congress. The bid to get Congress to grant Mr Obama fast-track authority comes as the administration seeks to complete trade deals with the European Union under the Transatlantic Trade and Investment Partnership (TTIP), and with a group of 11 Asian and Latin American countries as part of the Trans-Pacific Partnership (TPP).

It’s about being true to the world.” — Kenya Barris, creator of ABC’s “black-ish,” on the lack of diversity in television shows he watched growing up. Americans pay a top rate of 23.8 per cent tax on their investment income — significantly lower than the top rate of tax on income from employment, which now stands at 39.6 per cent. President Obama hit back at his critics, noting how “the pundits” have said his presidency hasn’t delivered on his promise of unity, that politics appears more guided than ever and that his vision was misguided.

But there are some issues the president identified that Republicans have said they could work with him on: authorizing military force in Iraq and Syria, new cybersecurity legislation, tax reform; and approving new free trade agreements. This gap in how different kinds of income are taxed overwhelmingly benefits the wealthiest US households, which are much more likely to hold investments that grow in value over time. By declaring the end of an era of foreign wars and financial crisis and the beginning of “a new chapter,” a confident Mr Obama claimed credit for the wind-down of unpopular conflicts and the economic crisis.

The president also ruled out a few areas of negotiation: He said that attempts to roll back Obamacare, or reduce regulations on Wall Street or new sanctions against Iran would earn his veto. The Congressional Budget Office estimated in 2013 that 93 per cent of the benefits from the preferential tax treatment of capital gains flowed to the richest 20 per cent of Americans, and a full 68 per cent of the benefits went to the top 1 per cent. And while he offered a nod to bipartisanship on issues such as trade, he pushed a traditional Democratic economic agenda of tax increases for the rich, expanded paid leave for workers and increased aid for education.

Mr Obama made no reference to the election hammering that Democrats took in November’s midterm elections and mostly ignored the political reality that he must broker deals with his opponents. Senate Finance Committee Chairman Orrin Hatch said giving Mr Obama this fast-track authority is essential for any ambitious trade agreement to succeed. The policies that President Obama proposed to address the issue are nowhere near the policies that many European countries offer, but they would mark a significant change.

Senior Republicans have already slammed the plan as dead on arrival, and the president knows that the proposals are unlikely to gain traction in a GOP-controlled Congress that believes tax increases would stall business investment and crimp growth. “Raising taxes on people that are successful is not going to make people that are struggling more successful,” said Florida senator Marco Rubio, a possible Republican presidential candidate for 2016. By laying credit at the doorstep of his own administration, Obama is looking to gain leverage over Republicans and weaken their resolve to undo his go-it-alone initiatives on immigration, climate change and Cuba. Speaking to the US Chamber of Commerce, the Republican senator for Utah said he plans to “move carefully but quickly to introduce and mark up” a TPA bill.

However, with the US economy now recovering more strongly than most other large, developed economies, Obama believes he has a chance to at least partly recast the national debate on tax. The speech can be seen as Mr Obama’s attempt to consolidate a legacy as an agent of change, or at least at attempted change in the face of obstructionist Republicans. While Democratic lawmakers still believe such trade deals could cost American jobs, getting the TPA passed would be a huge win for the Obama administration and the time might be ripe with a Republican Congress in place. For decades, that debate has centred on whether lowering taxes helps to stimulate economic growth, as most Republicans contend, or whether the tax system should be used as a means of transferring wealth from the rich to the less affluent and the poor, mainly in the form of social programmes.

This may confirm his lame-duck status in the final two years of his presidency but it will energise the Democratic base by framing the political debate around middle-class policies and uncompromising Republicans in the run-up to the next presidential election in 2016. The president said the government would provide $2.2 billion to reimburse states for paid family leave programs, and called for Congress to pass a bill that would enable workers to earn seven paid sick days.

Mr Obama’s speech felt in parts like a farewell address defending his track record and long-held policy positions that he has no interest in compromising and which Republicans have no interest in passing. Free from the constraints of election politics and a weak economy, Mr Obama at times gave the sense of a president with nothing to lose, goading Republicans for opposing a raise in the minimum wage. “To everyone in this Congress who still refuses to raise the minimum wage, I say this: if you truly believe you could work full-time and support a family on less than $15,000 a year, go try it,” he said. The president went further, threatening to veto Republicans if they tried to unwind his healthcare law, Wall Street rules or immigration actions or threatened nuclear talks with Iran by introducing sanctions.

In the new Congress, key Republicans have called on the president to propose legislation as a framework for negotiations, arguing that previous bills were created in that way. The president agreed to their request Tuesday evening, telling assembled lawmakers: “I call on this Congress to show the world that we are united in this mission by passing a resolution to authorize the use of force against [ISIS].” The devil is in the details: Should Congress authorize force targeted just at ISIS or broaden it to include other terrorist groups?

Officials in Obama’s administration believe that figure would rise further still if more people were aware of policies such as the so-called “stepped up basis” loophole, which allows wealthy families to transfer capital gains income tax free between generations. Instead, heirs benefit from a provision that gives them a starting value in the asset for tax purposes that is “stepped up” to its value at the time of inheritance, rather than its value at the time it was purchased.

The CBO estimates that by not levying capital gains tax on assets transferred at death, the government will miss out on $644 billion (Dh2.4 trillion) of tax revenues between 2014 and 2023. A Washington Post-ABC News poll released Tuesday showed Obama with an approval rating of 50 percent, the poll’s highest rating for the president in more than 18 months. With Republicans attacking the plans as partisan class warfare, most Americans will have to make a judgement on something they have never been rich enough to benefit from. But the Post-ABC poll shows that Obama’s better standing is largely the result of support coalescing among the groups that backed his presidential campaigns in the first place — Democrats, moderates, Hispanics and younger people. So have issues that Obama has pushed that appeal to those groups, including his executive action to shield more than 4 million immigrants from deportation and his call for free community college for all.

John McCain (R-AZ), the top Republican on the Senate Armed Services Committee, told reporters earlier this month that while members had really hoped for cybersecurity reform, little progress has been made on a bill. “Previous attempts by Republicans to pass such a bill ended in failure—in part due to the president’s unwillingness to sign legislation proposed by the House GOP,” said House Intelligence Committee Chairman Devin Nunes on Tuesday evening. The president is seeking “trade promotion authority,” or the ability to negotiate trade deals that Congress can either approve or reject but not change. Still, they have held out some hope of getting tax reform done this year—if the president’s messages of tax hikes for the wealthy is merely a starting point for negotiations rather than his end goal. “There’s great interest, among out members, on tax reform,” Sen. John Thune (R-SD), chairman of the Senate Republican Conference, said last week at the Republican congressional retreat. “We think it could unleash a tremendous among of economic growth and economic activity…It [depends] on whether the White House wants to engage in it, really lean into it, really put their shoulder into it.”

Republicans began the year by seeking to undo Obama’s immigration initiative, weaken provisions in the 2010 financial regulations law, and force approval of the Keystone XL oil pipeline from Canada.

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