In last year’s State of the Union address, President Obama laid out a bold agenda and admitted to a politically divided Congress, “We will move forward together, or not at all.” On taxes and federal deficits (and too many other issues), time has shown the latter to be true.
The President concocted a recipe for economic growth in his address, one that included lower corporate taxes, a simpler individual tax code, and deficit reduction, policies that could muster some bipartisan support. What happened?
As Keith Hennessey concluded in a blog post today, “The President’s primary economic problem definition has varied widely over time, and his deficit message has changed even more.”
To augment our mediocre economic growth, the president proposed a payroll tax cut that moved the steady stream of revenue for the Social Security Trust Fund into a dangerous political arena, Congress. President Obama lost his urgent sense of bipartisanship and inclination for tough political reforms and replaced them with near-sighted advocacy of the payroll tax cut and the dead on arrival American Jobs Act.
The President decried high corporate tax rates, a code riddled with special deductions and exemptions, saying, “It makes no sense, and it has to change.” On personal income taxes, he said, “The best thing we could do on taxes for all Americans is simplify the individual tax code.” Yet, the Washington Post reported today in its accounting of the 2011 State of the Union, “No progress was made in reducing corporate tax rates or simplifying the tax system.” His message on a simplified code turned into a tirade on how the wealthy need to pay their fair share.
Despite the bravado, the president could not produce. Every opportunity to enact meaningful tax reform, tax reform that would help to spur economic growth and not stifle our recovery, was lost. The grand bargain the more optimistic among us thought feasible only a few months ago with the super committee now seems entirely unrealistic. Congress couldn’t agree and the President didn’t lead.
Despite some expressed common ground, our country is no closer to having a pro-growth tax system for individuals or corporations than it was a year ago. In fact, the likelihood of reform seems even less plausible.
“Every day, families sacrifice to live within their means. They deserve a government that does the same.”
“If we make the hard choices now to rein in our deficits, we can make the investments we need to win the future.”
What happened to that message of fiscal responsibility? Despite the rhetoric on reducing deficits and acting within our means, the level of all federal debt has caught up with the GDP of the United States, now equaling more than 100 percent of GDP.
And tomorrow night, the President is going to kick off his reelection campaign.
Some have speculated that the President will use this opportunity to draw comparisons between the parties and abandon the hopeful bipartisanship that characterized last year’s State of the Union, following a year of stalled efforts, legislative gridlock, and slow economic growth. Regardless of what he says tomorrow night, it seems conclusively clear that we will be waiting another year for comprehensive reform.
But can we really afford to wait?