WASHINGTON - If you thought the presidential election would lead to an early break in the fiscal gridlock that now divides our government, think again.
President Obama's post-election press conference on Wednesday signaled he is digging in for a lengthy political battle to raise tax rates amid new evidence the economy is still very weak and will likely remain so for the foreseeable future if not throughout his second term.
If anything, he's taking a tougher tone with Republicans in Congress as he prepares for negotiations with House Speaker John Boehner and other House and Senate leaders on Friday. Despite Boehner's olive branch offer that he's open to new tax revenues, Obama's making no specific counter concessions of his own.
He reminded Republican leaders that he had received a "mandate" from the voters for his plan to raise taxes on higher income Americans, that "elections matter," and that he's not going to back away from the higher tax rates he's been fighting for over for the last four years.
That attitude sent tremors throughout the economy and its financial markets that he intends to play hardball this time in another attempt to raise tax rates on the top two income brackets, investors and small businesses.
"Investors are looking at the world in the wake of President Obama's reelection victory. And they don't like what they see," Washington Post economic writer Neil Irwin wrote earlier this week. Wall Street agreed.
The stock markets had already plunged since Election Day and tumbled deeper during and after Obama's press conference. The Dow Jones Industrial Average fell more than 1,000 points since Nov. 7 and the sell-off continued through Wednesday with the Dow falling to a three-month low.
America runs on capital investment but Obama wants to hike George W. Bush's 15 percent capital gains and stock dividend tax rate to over 20 percent.
That would hit ordinary middle class retirees who live off their dividends, but it would also kill capital formation and venture risk-taking needed for business expansion and that worsen the deficits, economists say.
Obama insists he wants to grow the economy, but also protect the middle class, too, from having to shoulder the burden of higher taxes needed to pay off the mounting, unprecedented $5 trillion debt he has piled up in his first term.
He reluctantly agreed to extend the Bush tax cuts at the end of 2010 because the economy was too weak. But now he says things are getting better and the economy will be able to withstand higher taxes.