With unemployment still hovering over 9 percent, Americans have been incredibly frustrated with the pace of the U.S. economic recovery. President Barack Obama has taken significant hits to his popularity due to the lackluster economy, as he tries to put forward a plan to create jobs heading into his re-election campaign. His jobs speech on Thursday, Sept. 8 will attempt to put forward a concrete plan to help get America back to work.
On the other side of the political spectrum, the Republican presidential nomination race is beginning to garner attention. The candidates have consistently been on the offense, and have hammered the incumbent on his sub-par economic record.
Obama and GOP contenders offer two very different plans to help boost the U.S. economy. The following is a compare-and-contrast between the president's and Republican challengers' visions, along with which plan parts have the best chance of becoming law.
Obama's jobs' speech likely will not include any major announcements, but will instead focus on piece-meal initiatives the White House hopes will attract bipartisan support. For example, White House officials have been considering allowing homeowners to refinance at today's lower mortgage rates. Furthermore, Obama may call for more investment in green jobs.
It is widely believed that a key part of Obama's speech will call for an extension of the temporary payroll tax cut, as the president has consistently said that it will boost the economy by giving families a little more money to spend. Last year, the White House and Congress agreed to a temporary payroll tax cut, with only 4.2 percent of a paycheck allocated toward Social Security (up to $106,800 annually) instead of the usual 6.2 percent. The president may also call for an extention of the employee rate to employers, who currently chip in another 6.2 percent
Throughout his presidency, Obama has pushed for a tax increase on individuals making over $200,000 a year and for families making over $250,000, but the proposal has not gained momentum. Obama argues that the wealthy have not sacrificed their fair share in this economy, while the lower-, working- and middle-classes have suffered a great deal. Obama supporters believe that continuing tax cuts for the wealthy will not benefit the economy much because the affluent most likely will save the money rather than spend it.
To deal with our country's debt, Obama has agreed to a large swath of spending cuts, to the ire of the liberal wing of his party. In the U.S. debt deal signed a few weeks ago, Congress, after reaching bipartisan agreement on the roughly $900 billion in debt reduction, appointed a super committee to identify about $1.5 trillion in additional budget savings before Thanksgiving. If a deal is not reached, automatic cuts go into effect in a wide variety of government programs.
Although the verdict is still out on whether these cuts will boost the economy years down the road, in the near-term, massive spending cuts and government layoffs -- fiscal austerirty -- probably won't yield too many jobs.
With the exception of Jon Huntsman, the Republican candidates have not announced formal job plans. To-date, the differences between the Republican candidates for president pertain more to style than substance, with the candidates focusing on three core issues: Cut taxes, cut spending, cut regulations. Let's break each down.
Taxes: A core piece of the Republican economic agenda has been to cut taxes or maintain low taxes. For example, Huntsman, who recently announced his jobs plan, called for eliminating taxes on capital gains and dividends, lowering the business tax rate and instituting a tax holiday. It is safe to say that other Republican candidate plans are not much different.
In terms of tax hikes on the wealthiest, Republicans say that would increase taxes on America's job creators, thus hindering economic growth. They have run with the theme that the U.S. Government has a spending problem (see below) and not a revenue problem.
However, the no new taxes mantra comes with a caveat. Although Republicans haven't touted their opposition to a payroll tax cut extension, they aren't supporting this tax cut like they are for tax cuts on dividends, capital gain, and estates. Republicans have quickly pointed out recent studies saying that nearly half of American's don't pay income tax. Some have called for these Americans to pay more, even if it's only a dollar, according to Michele Bachmann.
Spending: Spending cuts are not a new theme for Republicans. However, with the government running deficits over $1 trillion, the GOP has really hammered on the issue. Given that it is easier politically to argue for a tax cut rather than a spending cut, the GOP candidates have been rather elusive as of now on what they would cut.
Also, Texas Gov. Rick Perry recently made headlines with his statements on Social Security, calling it a Ponzi scheme. Perry has suggested that means-testing Social Security may be necessary. Does Warren Buffet need to get Social Security? Perry recently asked at a Republican gathering, according to thehill.com. Maybe not. Furthermore, some of the candidates have hinted at supporting a raise in the retirement age for Social Security.
Politically, the wise move for Republicans may be to announce the spending cuts once they are in office, rather than announce them while trying to get elected.
Regulation: The Affordable Health Care Act, which Republicans infamously call Obamacare, has been the number one target of the Republicans in terms of regulation. The Republican candidates argue that covering everyone will force premiums to go up, leading employers to lay off workers due to higher costs. All candidates (including Mitt Romney, who sponsored and signed into law a similar program in Massachusetts) have come out strongly in favor of 2010 health care act's repeal.
Republicans have gone after other regulations, including provisions in the Dodd-Frank financial reform law, rulings given by the National Labor Relations Board, and even minimum wage standards. A notable target of Republicans lately has been the Environmental Protection Agency (EPA), or what Bachmann has referred to as the Jobs Killing Agency. At a Republican Debate in August, Huntsman called for the ending of the EPA reign of terror. Perry has advocates placing a moratorium on environmental regulation, according to The New York Times.
Who Will Get Their Way?
It has become evident, as witnessed by last month's U.S. debt ceiling fight, that Republicans are not willing to bend on taxes even though Obama bent on spending. Therefore, if Obama wants higher taxes on the wealthy, he likely will have to wait until the 2001/2003 Bush tax cuts expire at the end of his term. The last time this issue came before Congress, Republicans essentially said no one gets a tax increase or everyone gets a tax increase, which put Democrats in a precarious position.
Also, since the payroll tax cut primarily benefits non-wealthy Americans the most, Republicans could also be portrayed as an favoring anti-Robin Hood policies, i.e. fighting for tax cuts for corporations and wealthy Americans, while not sticking up for tax cuts for everyone else. This may force them to cave-in to Obama on the payroll tax cut.
As a result of the U.S. debt debate, the Republicans have achieved their goal of enacting spending cuts, although they have said it is just a start. Although a sizable number of economists call for an additional round of spending stimulus to increase demand in the economy, that won't fly with Republicans, who even opposed the first stimulus package, passed during the depths of the recession, in the spring of 2009.
Also, cuts to Medicare and Social Security will be difficult politically given their popularity: the unpopularity and failure of U.S. Rep. Paul Ryan's, R-Wis., plan to overhaul Medicare serves as Exhibit A. Of course, given that these two programs are, by far, the largest in the federal budget, it is essentially impossible to balance the budget without cutting something from them. And that's especially true if Republicans won't suport a tax increase.
However, in the final analysis if the Republicans want to do away with Obamacare, the courts may be their best hope. Judges have issueed mixed rulings on the 2010 health care law, which centers on mandating coverage for nearly all Americans. Most legal scholars predict the case will eventually reach the U.S. Supreme Court, which has been more-kind to conservative positions over the last several years.
Of course, the GOP could try to repeal the law legislatively. But with 60 votes in the Senate needed to get anything done, due to the perpetual use of the filibuster, Republicans almost certainly will not get a clean repeal, without riders or refinements from Senate Democrats. Furthermore, although overall opinion of the health care legislation has been mixed, portions of the law are very popular with the American public, including allowing people under 26 to stay on their parent's health insurance and denying insurers from placing lifetime caps on coverage. Repealing those provisions may not go over so well with the majority of American voters.
Also, proposals that call for gutting the EPA probably are not going to happen in the near future, regardless of who is elected. However, given the Republicans' skepticism over global warming in general, it is fair to say that the controversy over EPA regulations will not go away soon. Finally, more than likely, the 2012 election -- and its ability to change Congressional and White House leadership -- will determine the clout of these agencies and also how much money is allocated to each.