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.
But his unshakeable belief, against all reality, that we're moving "forward," going "in the right direction," or "making progress" do not hold water. It's as if he continues to live in a parallel universe of his own imagination.
Median household income, after adjusting for inflation, has been falling in each year of his presidency. Poverty is now at the highest level in decades. The jobless rate went up last month, not down, and it's expected to go up again this month. The Federal Reserve said job growth, as well as economic growth, will remain weak under his present policies.
The problems that Obama listed Wednesday in his news conference and that will make up his agenda for the next four years are the same problems he has unsuccessfully dealt with in the last four years:
An anemic, sluggish economy that's slowed to a 1.7 percent crawl; weak job creation and high unemployment skirting 8 percent; poor, educational testing scores; costly energy prices that are taxing the people whose lives he wants to improve; and an unbroken line of unprecedented, annual $1 trillion-plus deficits that threaten to engulf our country and bury every American under a mountain of crushing debt.
The U.S. Treasury Department reported Tuesday that the Obama administration began the 2013 fiscal year last month with a $120 billion deficit, saying he was on a path to his fifth consecutive trillion dollar-plus deficit.
Obama's arguments in behalf of raising income taxes on upper income Americans, employers and investors are couched in the language of class warfare: That those who earn more should bear the increased burden and pay their "fair share," not lower to middle income people. It's a very clever but ultimately dishonest argument.
The people who will be directly or indirectly hit hardest by his proposed tax increases -- in terms of jobs, incomes and economic opportunity -- will be the middle class who have suffered the most from a weakening economy.
An analysis of Obama's tax proposals by the respected accounting firm Ernst & Young said that raising the top tax rates will destroy 700,000 American jobs. "That's because many of those hit by this tax increase are small-business owners -- the very people who are the key to job creation in America," Boehner explained.
Throughout his re-election campaign, Obama repeatedly attacked the Bush tax cuts, blaming them for the economic meltdown stemming from the sub-prime home mortgage collapse, and tied them to Mitt Romney's proposals to cut taxes, saying they were the same policies that "got us into the mess last time."
Many factors led to the housing bubble and recession, but it's a stretch to blame George W. Bush's across-the-board tax cuts or future tax cuts that allow people to keep more of their own money.
Washington Post Fact Checker Glenn Kessler awarded Obama a near failing grade of "Three Pinocchios" for his preposterous claim.
During his press conference, Obama pointedly noted that voters sided with his proposals to raise taxes, though he conveniently ignored that nearly half the voters sided with Romney's five-point plan to boost economic growth and job creation through tax reform that would offset lower rates needed to spur growth.
Obama did say he would not draw "red lines" around his proposal to raise the top tax rate from 35 percent to nearly 40 percent, and he may be willing to agree with a higher rate somewhere below that, some Democrats say.
But the bleak reality we face is a job-starved, income-declining, debt-ridden, over-taxed economy, and Obama's is still proposing the economic equivalent of 18th Century bleeding.
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