Obama's Desperate Times and Desperate Measures

obamafrustObama’s Desperate Times and Desperate Measures

Heritage Foundation

Faced with predictions of staggering losses for his party in November’s midterm elections, President Barack Obama today appeared on ABC’s “Good Morning America” and said, “If the election is a referendum on ‘are people satisfied about the economy as it currently is,’ then we’re not going to do well, because I think everybody feels like this economy needs to do better than it’s been doing.” The prospect of that referendum is casting a long shadow over Washington as the President and candidates alike wrestle with America’s frustration over a still-stagnant economy, despite $814 billion in stimulus spending.

So what’s President Obama’s solution? Kick into campaign mode and turn to even more destined-to-fail stimulus gimmicks, loaded with increased government spending and higher taxes.

Yesterday, President Obama chose Cleveland, Ohio, (a state with 10.4% unemployment) to deliver a blistering, campaign-style speech lambasting Republicans and laying out the details of his latest effort to jumpstart the economy. His plan includes $50 billion in spending on infrastructure that, he said, “would start putting Americans to work right away.” Despite Obama’s confidence, The Washington Post reports that the President’s plan got a cool reception from lawmakers, economists and business groups alike. One high-profile dissenter was politically vulnerable Sen. Michael Bennet (D-Colo.), who said yesterday, “I will not support additional spending in a second stimulus package.”

There’s good reason to steer clear of the Son of Stimulus. This week, a White House aide threw cold water on the President’s confident job-creating promise, telling The Washington Post’s Dana Milbank that the administration doesn’t have an estimate for how many jobs the new stimulus would create and that the best-case scenario for the timing of those new jobs would be “over the course of 2011.”

And then there’s recent history.

The Heritage Foundation’s Ronald Utt, Ph.D., notes that the first Obama stimulus, which included $48.1 billion for infrastructure, “did little to spur the recovery and nothing to create new jobs,” leaving us only with massive deficits. Those transportation dollars, in particular, were disbursed in a plodding, bureaucratic way, and much of it hasn’t even been spent. Given the historical failure of transportation spending to create jobs, why shell out even more dollars? Follow the money, Utt says:

The President’s new spending plan should be seen as an effort to shore up support within a key constituency: organized labor. First revealed at a Wisconsin labor union picnic on Labor Day, the $50 billion in infrastructure spending represents tens of billions of dollars in high, federally mandated, Davis-Bacon wages for unionized construction workers.

More government spending to placate Big Labor is not the solution to America’s economic woes, but something else can be done. Heritage’s J.D. Foster, Ph.D., says that before the November elections, Congress should act to rein in spending and prevent tax hikes, starting with extending the 2001 and 2003 tax relief for all taxpayers (a move that President Obama has resisted). Doing so, Foster advises, will “give the economy a needed boost in 2011.”

Families and businesses are anticipating a huge tax hike come January 1, 2011, when the 2001 and 2003 tax cuts expire. The tax hike is bad enough, but given the state of the economy, what this tax hike says about Washington’s priorities is draining America’s confidence in its government. There is no argument for raising taxes on a weak economy, and Americans know it.

Those tax hikes are part of President Obama’s election year class-warfare strategy, designed to strike a populist tone at the expense of helping the economy. The President has said he can hit those making more than $250,000 with a tax hike because they represent only a small percentage of the population and “are already millionaires.” The truth is, the Obama tax hikes will directly harm the most successful sector in America: small businesses, which employ 25% of the American work force. And that will hurt job growth.

On top of President Obama’s impending 2011 tax increases, there’s word that the White House may raise tax rates on America’s manufacturers to pay for the new infrastructure spending. That’s another bad move for a country coming out of a recession. Another of his proposals is to make the Research and Experimentation tax credit permanent. While that’s great for the long-run, keeping current policy doesn’t do much for stimulus. And then there’s the President’s proposal to allow businesses to deduct their investment costs immediately, which will likely only have a modest impact, unless it’s extended for many years and coupled with a lower corporate income tax rate.

Better solutions? Foster suggests holding back the unspent stimulus dollars and freezing total spending at 2010 levels. (Even the President’s first director at the Office of Management and Budget, Peter Orszag, has seen the light and called for extending the tax cuts for two years.)

On “Good Morning America,” the President noted, “My challenge, and the challenge of every Democratic candidate who’s out there is just making sure the people understand there’s a choice here.” The President and Congress indeed have a choice between now and the election: more spending and higher taxes, or reining in government and giving taxpayers a break. It shouldn’t be such a challenge to make the right choice, cut spending and extend the tax cuts for the good of the country.

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Tom Tillison


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