A little help from his friends
Obama turns to Bill Clinton to help sell the government's imperfect tax deal
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by L. IAN MacDONALD
The Gazette, Wednesday, December 15, 2010
If you can imagine Stephen Harper showing up unannounced with Brian Mulroney and staging an impromptu news conference in the lobby of the House of Commons, that's pretty much a parallel to what happened in the White House press theatre, where Barack Obama suddenly materialized with Bill Clinton after a meeting in the Oval Office.
Well, first you'd have to imagine that Harper and Mulroney were speaking on a regular basis, which they're not, but that's another story. Then Harper would excuse himself after a few minutes, saying he was late for an event with Laureen, and didn't want to keep her waiting, ceding the lectern to his predecessor, who would go on and on about supporting the government's proposed tax cuts.
But that's exactly what happened in the West Wing of the White House last Friday, when the 44th U.S. president spontaneously turned over the bully pulpit to the 42nd president. Literally. So unexpected was their appearance, reported the next day, that they found the press room locked and the lights turned off. Obama's press secretary, Robert Gibbs, had the lights turned up and rounded up the usual media suspects.
Obama then excused himself, saying "I've been keeping the first lady waiting for about half an hour, so I'm going to take off," assuring reporters, "you're in good hands."
Then in a weird back-to-the future moment, Clinton riffed on Obama's tax deal with the Republicans and while he was at it, endorsed Obama's Strategic Arms Reduction Treaty with the Russians.
Obama could use the help on his tax deal in his own party, which hates that he has broken a campaign promise to rescind the George W. Bush era tax cuts for the wealthy -those Americans earning more than $250,000 a year.
Saying he was being pragmatic rather than purist, Obama acknowledged that he was playing the hand he was dealt. Any deal would have to include extending the Bush tax cuts.
But in the process, Obama also extracted what amounts to a second stimulus package from the Republicans. The Congressional Budget Office puts the total cost of the deal at a staggering $858 billion over 10 years -$802 billion in fiscal measures and $56 billion in a two-year extension of unemployment benefits that were set to expire at year's end.
In the current fiscal year alone, the tax and stimulus package will add another $374 billion to the U.S. deficit, and a further $422 billion in 2012.
This is a staggering number -imagine Ottawa piling another $80 billion onto the deficit over the next two years and that's where we would be coming out. However, that's not our situation. The Canadian deficit of $56 billion is three per cent of GDP, with a return to fiscal balance forecast by 2015 at the latest, and a manageable debt-to-GDP ratio forecast at 32 per cent. The current U.S. deficit of $1.4 trillion is 10 per cent of GDP. Assuming no other savings, the Obama tax cuts and stimulus will take the U.S. deficit that much higher.
And the U.S. debt, now closing in on $14 trillion, is currently forecast to exceed 100 per cent of GDP in 2012. It might get there sooner. In the meantime, Obama and the Congress will have to renegotiate the legislated $14.3 trillion limit to the debt ceiling.
Speaking of Bill Clinton, he was the last U.S. president to have balanced the books and produced surpluses, and was actually paying down debt. When Dubya took office in 2001, the U.S. debt was less than $6 trillion and declining. It has now more than doubled in the last decade, thanks largely to the Bush tax cuts, one and now two Obama stimulus bills, to say nothing of the cost of fighting wars on two fronts, Iraq and Afghanistan.
The two-year extension of the Bush tax cuts will add about $80 billion a year to the deficit. But a temporary cut to the payroll tax on social security will cost $112 billion alone. That's a highly stimulative measure, meant to be spent, not saved. A two-year adjustment to the Alternative Minimum Tax, the Times reported yesterday, "would insulate couples with income up to $72,450 in 2010, and $74,450 in 2011, at a cost of $137 billion." It is what it is: a middle-class tax cut. The title of the bill says it all: "The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010."
The bill that passed the U.S. Senate on Monday was also porked up, with things like $3 billion in grants over 10 years for developers of renewable energy such as wind and solar power.
That's just the Senate version. By the time the House of Representatives gets done, it will probably have a bridge to nowhere.