WASHINGTON -- President Obama's latest cooked-up economic plan calls for spending more than $50 billion on public works projects, raising taxes on small businesses, and a dubious package of tax credits that even his advisers say will not create new jobs anytime soon.
Did I mention that to pay for the tax credits, he intends to close a bunch of so-called business tax loopholes -- a political process that I think will let Obama and his party in Congress pick the winners and losers in our economy?
The ink was barely dry on his latest plan, which he delivered in a stinging political speech before a Democratic rally in Cleveland, when one of his former advisers was attacking the idea of raising taxes in the midst of a recession. Joining a growing number of House and Senate Democrats who oppose raising taxes during a weakened economy is recently departed White House budget director Peter Orszag, who criticized Obama's plan to raise the two top income-tax rates at the end of December.
In an op-ed column in The New York Times, Orszag said Obama should keep all of the individual tax rates enacted under President George W. Bush for the next two years to give the economy a chance to fully recover.
"No one wants to make an already stagnating jobs market worse over the next year or two, which is exactly what would happen if the cuts expire as planned," Orszag wrote.
Obama's tax hike would hit small businesses the hardest because many of them pay taxes under the individual-income tax code. But it would also strike hard at investors at a time when the economy needs all the private investments it can get.
Small companies, just struggling to survive, aren't hiring now. If Obama raises their taxes, they will have to lay off more workers. Allowing those top tax rates to revert back to their previous levels under President Clinton would push the highest tax rate to nearly 40 percent. The estate tax would jump to 55 percent. The capital gains tax could rise to 25 percent.
Obama argues that the government can't afford the cost of the tax cuts, but that argument doesn't hold water. Much of the $1.3 trillion budget deficit is the result of weak tax revenues from an economy that's growing by a little more than 1 percent in the second quarter.
With the right pro-growth tax-cut incentives, this economy could be growing at from 4 to 5 percent or more, but under Obama's policy of central economic planning from Washington, this economy is just treading water.
But it wasn't just Obama's budget director who was criticizing his new economic plan. Sen. Michael Bennet, D-Colo., who is facing a tough election in November, broke with Obama on his $50 billion infrastructure spending binge. And House Democratic insiders say others in the party are opposed, too.
"I will not support additional spending in a second stimulus package," Bennet said in a statement. "Any new transportation initiatives can be funded through the Recovery Act, which still contains unused funds ... We must make hard choices to significantly reduce the deficit." This from the senator who voted for Obama's initial $800 billion stimulus bill and whose election is now in jeopardy.
There were even deeper problems with Obama's tax credits for businesses to encourage them to hire workers. Business leaders said that even with the tax credit, they couldn't afford to hire more employees until the economy picks up. The U.S. Chamber of Commerce is justifiably suspicious about the sticky web of strings that appear to rule in certain businesses but rule out others, including those who did any of their business abroad.
"We will not support an approach where the government picks winners and losers, providing tax credits and incentives to politically favored industries and groups while sticking others with the bill," said Chamber chief lobbyist Bruce Josten.
The 100 percent tax write-off for businesses that purchase new equipment is strongly supported by business but the jobs payoff will not be felt anytime soon, several Democrats said.
"Substantively, there is nothing they could do between now and Election Day that would have any measurable effect on the economy. Nothing," Bill Galston, chief domestic policy adviser in the Clinton White House, told The Washington Post.
And that begs the question, why wait until seven weeks before the midterm election to unveil a new set of economic proposals to jump-start an economy that the president admits will take a lot longer to recover than he had expected?
The real answer: Because this isn't a serious, substantive plan. It is a few half-baked ideas thrown together in the last week to give him ammunition in what turned out to be a partisan political attack on the Republicans and House GOP Leader John Boehner -- the first of many in the weeks to come.
He promised to change the political tone in Washington and fix the economy. His defensive campaign speech in recession-weary Ohio proved he has done neither.
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