For the past few months, the country has been wrapped up in the never-ending Republican debates and the seesaw popularity of the GOP candidates. And it’s been quite a ride so far!
A few months ago, Herman Cain was (remarkably) the front-runner, Rick Perry was sent to the back of the class, and Mitt Romney’s popularity was climbing, although his party was grumbling about it.
A few weeks later, Cain was out, Michelle Bachman was hanging on by her fingernail, and Rick Santorum was lurking behind Ron Paul. Then, Bachman dropped out, John Huntsman embarked on a bus tour, Santorum made a point, Newt Gingrich yelled at the press, and Romney’s already sweaty grip started to slip. And this week, with Romney and Gingrich nose-to-nose, and the Florida primaries just days away, President Obama had the nerve to make the State of the Union Address!
Oh, that’s right! While we were busy watching the debates, and the parties getting ready for an election year, we forgot that someone still needs to run the country! Not that the President’s address the other night proved that anyone is at the helm of this ship. The morning after the speech, Obama took off on a multi-state road trip, presumably to begin/continue his own campaign for President.
Yet the fact remains that before this November’s election, there is much work to be done. The US economy, while slightly improving, continues to struggle forward at a sluggish pace. Unemployment, at 8.5%, is still alarmingly high and continues to be a major drag on the economy. And the market, eerily quiet since the beginning of the year, is not expected to rally anytime soon. Add to that the gloom and imminent recession in Europe, and many economists are expecting this year to be almost as challenging as 2011.
In addition to the pesky economic situation, Congress at some point needs to turn its attention to tax rates because, if nothing is done by the end of the year, the remaining provisions in the Tax Bill of 2010 will expire. This means that income, investment and estate and gift tax rates will go up on January 1, 2013. The bad news is that, with the contentiousness we’ve seen in Congress over the past few years and the fact that Presidential campaigns are already underway, there’s not much optimism that Congress will address tax rates until at least after the election.
The President, in his speech on Tuesday, laid out a roadmap of action he sees necessary to get the economy back on track, but it was also considered by many to be a giant campaign speech. Many commentators claimed that the President took on a “populist” tone in his speech, trying to show the great divide between classes in this country. Yet while the speech did cover some areas that were expected (income tax rates, education), the President was not as forceful and specific about certain policies he had vehemently supported in the past (i.e. elimination of Bush tax cuts for families who make $250,000 or more).
Here are the main points that the President covered in his address:
— Corporate tax rates and tax breaks/incentives
President Obama wants to eliminate tax breaks for US companies that move their businesses overseas, and provide incentives for businesses that remain in or return to the US. He wants every American company to pay a minimum tax even if their operations are located overseas, and to provide tax breaks for specific businesses like high-tech manufacturing.
— Individual tax rates
In his speech, the President demonstrated his support of the “Buffett Rule.” This provision was named after Warren Buffett, the CEO of Berkshire Hathaway, who recently wrote an Op-Ed stating that although he is a billionaire, his effective tax rate is lower than that of his secretary (who presumably makes a heck of a lot less than he does). The President, who invited Buffett’s secretary to sit next to the First Lady during his speech on Tuesday, maintained that the Buffett Rule should be instituted, which would require people who make over $1 million per year to pay a minimum of 30% tax rate and limit certain deductions.
— The creation of two new government agencies
The President outlined plans for a Trade Enforcement Unit that would investigate fraud, unfair trade practices and counterfeit actions in China; and a unit that would review agencies and individuals who promoted and approved the use of bad mortgages.
— Mortgage relief
He wants to provide funding and alleviate hardship to mortgage holders who have kept up with payments but want to refinance their debt.
— Education and Jobs
He discussed new incentives for education, job training programs and to limit government funding to universities that don’t work to keep tuition down.
— Development of land for natural gas extraction (!!!!!)
— Immigration reform and more….
While the President laid out his “wish list,” which was criticized as being too divisive and vague, he has yet to lay it out in his Budget for 2013, which was supposed to be submitted to Congress last week. However, once we take a gander at the budget—in which the President will spell out his stance on tax increases, corporate tax rates, entitlements, defense, spending on government agencies and infrastructure—that’s when the gloves will really come off.