Fairness, not the Economic Growth, Drives Obama Agenda

           The chart above (published by the Congressional Budget Office (CBO) after President Obama was re-elected earlier this month) demonstrates what the Romney campaign tried to explain to the voters. No matter how bad the economy was when Obama took office, the recovery since the recession ended has proceeded at a pace below that usually experienced after prior recessions. Obama was re-elected even though the unemployment rate is still close to 8% and even worse for minorities who voted in large majorities for Obama: the unemployment rate for Blacks has increased from 12.7% to 14.1% (almost twice the unemployment rate of whites) since Obama was inaugurated in 2009 and, although the unemployment rate for Hispanics has decreased slightly since 2009, at a rate of 9.7%, it still exceeds the national rate of 7.9%.
           During a recession in 1992, Bill Clinton ran a successful campaign to defeat an incumbent President by focusing on the poor economy. Never has a President been re-elected with an unemployment rate as high as it is currently nor with such a slow economic recovery.
           Pundits are analyzing the election results based on standard  measures of the past, but it appears that Obama may have changed the usual way to influence a majority of voters. His tenure in office and his campaign have been more focused on "fairness" rather than economic growth that can lead to a better life for hard working Americans and improved conditions for governments at all levels to balance their budgets.  And apparently a majority of voters have accepted that concept as an appropriate driving force to guide national policy decisions.
           This new guiding principle of decision-making is clearly seen in the on-going attempts to solve the fiscal cliff of reduced spending and tax increases that will automatically take effect on January 1, 2013 if Congress and the President cannot agree on another solution to the US budget deficit.
            The President wants to allow the scheduled tax increases for those families making over $250,000 a year to go into effect while extending the current rates for those in lower income brackets. This does not fix the budget problem.
               "President Obama’s proposed tax hike would raise roughly $65 billion in 2013. At the same time, the president proposes to increase spending next year by $202 billion. The tax hike would pay for only 32 percent of the proposed new spending. ... That means that not a penny of Obama’s proposed tax increase would, in fact, go toward reducing the budget deficit, let alone paying down the debt. Rather, every cent of the tax hike would go toward paying for increased federal spending." http://www.nationalreview.com/articles/308439/obama-tax-rich-michael-tanner#
               Since the annual budget deficit has been at least $1 trillion each year Obama has been in office, a reduction of $65 billion would amount to about 6.5% of the total deficit. Some analysts say that Obama's proposal actually includes additional provisions affecting high income taxpayers that would bring the total revenue enhanced by the White House proposal to $86 billion. That would still only reduce the deficit by about 8.5%.
                It is, therefore, clear that allowing tax rates on the highest income earners to rise back up to the Clinton era rates will not solve the deficit problem. In his first remarks in the White House after election day, Obama said:  "If we’re serious about reducing the deficit, we have to combine spending cuts with revenue -- and that means asking the wealthiest Americans to pay a little more in taxes."
               The President's remarks recognize that spending cuts are needed for an effective solution to the US government's deficit spending problem and that the problem will not be resolved by his proposed tax increases alone. That means that to eliminate the rest of the annual $1 trillion deficit more than 90% of the deficit gap will have to be closed with spending cuts. Yet the rhetoric among Democratic members of Congress and the White House since the election has been solely fixed on raising tax rates on the wealthiest Americans.
                The continuing focus on taxing the rich rather than addressing the whole problem by sitting down to negotiate a comprehensive solution that both sides can agree to is consistent with Obama's governing philosophy that has contributed to the gridlock in Washington and the slow economic recovery demonstrated in the graph above. He would rather continue campaigning against high income earners than exercise some leadership in crafting comprehensive solutions to the nation's most serious fiscal problems.
                  Even the Washington Post (one of many mainstream media outlets to endorse Obama's re-election) has noticed the failure of the victorious Democratic Party and its leader in the White House to engage in sincere negotiations to find common ground:
                   "Elections do have consequences, and Mr. Obama ran on a clear platform of increasing taxes on the wealthy. But he was clear on something else, too: Deficit reduction must be “balanced,” including spending cuts as well as tax increases. Since 60 percent of the federal budget goes to entitlement programs such as Medicare, Medicaid and Social Security, there’s no way to achieve balance without slowing the rate of increase of those programs....
               Mr. Obama has understood this since at least 2009, when he told The Post’s editorial board that he would tackle entitlement reform.
             'What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further,” he said then. “We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else’s.'
                 Four years later, has the moment arrived? Since his reelection, Mr. Obama has fueled a campaign-style effort to pressure Republicans to give ground on taxes. That’s fine, but it won’t be enough."               
                 The President's continuous campaign for higher taxes on so-called "millionaires and billionaires", without any serious proposals to cut spending, is consistent with his long term political goal of reducing income inequality in America, as described in a Washington Post op-ed last Sunday:
                  "[B]eneath his tactical maneuvering lies a consistent and unifying principle: to use the powers of his office to shrink the growing gap between the wealthiest Americans and everyone else.... Viewed through this lens, the imminent debate over the “fiscal cliff” is not simply a war over taxes, spending and how to tame the nation’s mushrooming debt. As Obama did in legislative fights during his first term, he also will be striving to reduce a three-decades-long wave of rising income inequality that has meant that fewer Americans have prospered while more struggle to get by."
                  Since the President is more concerned with reducing the wealth of the high earners of the US than with balancing the budget, there is a real danger of either going over the fiscal cliff or reaching a short term solution that just kicks the can down the road again. Either result would likely worsen our sluggish economic recovery. A report released last month by the National Association of Manufacturers predicted that the damage to the economy would deepen considerably if Washington fails to avoid the cliff, "destroying nearly 6 million jobs through 2014 and sending the unemployment rate soaring to near 12 percent."
                  Moody's Analytics, Tax Policy Center has also warned that going over the fiscal cliff could lead to another recession, driving GDP down 3.53% in 2013. The chart below illustrates Moody's analysis.
                  Obama needs to address the nation's fiscal health in a comprehensive way to find common ground rather than playing politics - that divides members of Congress along party lines impeding those who are trying to find bi-partisan solutions. Obama's constant attacks on the financially successful class of Americans also creates uncertainty among business leaders who could help increase employment, improve economic activity and enhance the prospects for prosperity among more Americans who have suffered through the worse economic recovery in 70 years. 
                  If Obama fails to exercise leadership in pursuit of the nation's public interest (rather than his narrow interest of punishing the country's top earners to close the income inequality gap), the prospects demonstrated in the Moody's chart below could become reality.
 
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Elections Have Consequences

It has been less than a week since Barack Obama was re-elected President of the United States and the consequences of that decision by the voters are already sending shock-waves through our still sluggish economy.

1. STOCK MARKET HAS PLUNGED: Since election day, the Dow Jones Industrial Average has dropped over 400 points. It dropped over 300 points just on the day after election day. The major reason seems to be that financial markets realize that the so-called "fiscal cliff" (which includes automatic tax increases and budget cuts) will occur at the end of the year unless addressed by Congress and the President soon, and that, after months of expensive campaigning, the voters basically left the government in Washington just as it was before the campaigns began. We still have a Democratic controlled Senate, a Republican controlled House and the same President - none of which could resolve the fiscal cliff before the election.

2. PARTISAN ATTACKS CONTINUE: Although House Speaker John Boehner offered right after the election to discuss revenue enhancements (in the form of eliminating certain deductions for high income taxpayers) as part of a legislative deal to avoid the fiscal cliff, two days later President Obama (in his first public announcement since the election) said:

"But as I’ve said before, we can’t just cut our way to prosperity.  If we’re serious about reducing the deficit, we have to combine spending cuts with revenue -- and that means asking the wealthiest Americans to pay a little more in taxes..... I’m open to compromise.  I’m open to new ideas.  I’m committed to solving our fiscal challenges.  But I refuse to accept any approach that isn’t balanced." 

Since the Republican Speaker already expressed his willingness to discuss increased revenue why does the President have to keep attacking an approach limited to budget cuts? Such partisan attacks do not encourage cooperative working relations with Congressional leaders of the other party that could lead to compromise.

President Obama would benefit in his attempts to reach consensus by following the example set by Abraham Lincoln, a President who won re-election in 1864 while the country was still fighting a bloody Civil War. As bad as our current fiscal and economic problems are today, they pale in comparison to the violent clashes that grew out of political differences in the mid-nineteenth century. After winning re-election in 1864, Lincoln said:

"Now that the election is over, may not all, having a common interest, reunite in a common effort, to save our common country?" - November 10, 1864

Does not Barack Obama think that Republicans, as well as Democrats, have a "common interest" in resolving our country's problems?


3.  COMPANIES ARE ANNOUNCING LAYOFFS DUE TO OBAMACARE TAXES AND COSTS SOON TO GO INTO EFFECT: The health care law commonly called Obamacare imposes new taxes and penalties effective in 2013 on certain employers and companies. Among the most troublesome taxes are new taxes on medical devices. In January, medical device manufacturers in the U.S. will be asked to pay a 2.3 percent tax on medical devices. Consequently, now that Obamacare will remain the law of the land, many medical device manufacturers have announced (some since election day) lay-offs and plans to move certain facilities out of the US:


Welch Allyn, a company that manufactures medical diagnostic equipment in central New York, announced in September that they would be laying off 275 employees (about 10% of their workforce) over the next three years.  One of the major reasons discussed for the layoffs was the Medical Device Tax mandated by the new healthcare law.

Stryker, one of the biggest medical device manufacturers in the world, will close their facility in Orchard Park, New York, eliminating 96 jobs in December. In addition, they plan to slash 5% of their global workforce - an estimated 1,170 positions.

 Boston Scientific announced last year that the company would be cutting anywhere between 1,200 and 1,400 jobs, while simultaneously shifting investments and workers overseas - to China.

 Medtronic, another medical device maker, warned that Obamacare taxes could result in a reduction of  1,000 jobs. That plan became reality when the company cut 500 positions over the summer, with another 500 set for the end of 2013.
 [Information above taken from FreedomWorks website at  http://www.freedomworks.org/blog/grusbf5/good-morning-america-heres-those-layoffs-you-voted]

"Other medical manufacturers will follow: Smith & Nephew, with 770 layoffs; Abbott Labs, 700; Covidien, 595; Kinetic Concepts, 427; St. Jude Medical, 300;.. and Hill Rom, 200.

[Read more: http://www.vcstar.com/news/2012/oct/27/shirley-medical-device-tax-will-impact-jobs-and/#ixzz2BxZOFF9H - vcstar.com]

But medical device manufacturers are not only companies laying off employees due to the costs of Obamacare. Dana Holding Corp., an auto parts manufacturer, warned their employees of potential layoffs, citing "$24 million over the next six years in additional U.S. health care expenses".

4. COMPANIES ARE REDUCING HOURS OF PART_TIME WORKERS TO AVOID OBAMACARE COSTS: Under the Affordable Care Act (AKA Obamacare) "any business must provide health insurance if it employs 50 or more full-time employees - but only to full-time employees. Businesses are exempt from providing health insurance to part-time employees." Employers that fail to provide health insurance to part-time workers will have to pay a $2,000 penalty per employee after the first 30.

Since Obamacare defines part-time employees as those who work at least 30 hours a week, many companies are considering reducing hours for part-time workers (who were defined under existing labor laws as those who work at least 35 hours a week) to less than 30 hours per week.

"Papa John's founder and CEO John Schnatter said the president's signature health-care reform law would increase his business costs and possibly result in employees' hours being cut." At the company's shareholders meeting in August, Schnatter said that Obamacare "would result in a 10- to 14-cent increase for customers buying a pizza." 

 "Darden Restaurants -- owners of about 2,000 outlets including the Red Lobster and Olive Garden chains -- is studying ways to shift more employees under the 30-hour ceiling. About three-quarters of its 185,000 workers are already under, says spokesman Rich Jeffers. The question is "can we go higher and still deliver a great [eating] experience." The financial stakes are sizable. Suppose Darden moves 1,000 servers under 30 hours and avoids paying $5,000 insurance for each. The annual savings: $5 million....Many companies, especially in the fast-food, retailing and hotel industries, will explore similar changes." 

5. CIA DIRECTOR PETRAEUS RESIGNED.  On Friday following Obama's re-election, it was announced that CIA Director David Petraeus resigned due to an extra-marital affair discovered by the FBI during an inquiry into e-mails sent by Petraeus biographer Paula Broadwell. While the resignation is solely due to the former Director's personal conduct, the loss of Petraeus as the head of the CIA just before new Congressional hearings are scheduled into the attack on the US Consulate in Benghazi, Libya is unfortunate. Petraeus personally briefed Congressional leaders on the attack within days of the event on September 11, 2012, and it was at that briefing that first CIA reference to the attack being the result of a protest over an anti-Muslim video was presented. Prior to that briefing, CIA officials on the ground reported no protest and described the attack as a coordinated terrorist assault on the US facility and personnel.

Following Petraeus' first briefing to Congressional leaders, the Obama Administration repeated the storyline that the attack followed a protest for a couple of weeks at daily White House press briefings. Most significantly, the US Ambassador to the UN, Susan Rice, repeated this description on every Sunday morning talk show on the Sunday following the attack.

While the CIA Director was scheduled to testify at Congressional hearings next week, Petraeus will now be replaced by the new Acting Director. Petraeus may eventually testify personally even as a civilian, but it does not appear that he will do so next week.

This development adds more questions to the list of those that already exist regarding the lack of security at the Benghazi consulate, the lack of adequate military reinforcements to help protect US personnel under attack, the failure to secure the site after the attack, why it took the FBI sent to investigate the incident several weeks to get to the consulate and, of course, why the Administration insisted on giving an inaccurate description of the events in Benghazi to the American public for so long.

With so many new developments and revelations already occurring within days of Obama's re-election, it appears that the rocky performance we have experienced in the past due to Obama's broken promises of transparency and post-partisanship will continue FORWARD just as before.

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