America: A State of Political Roadblocks

I will preface this blog post by saying that, while I consider myself a Democrat (mostly due to my Keynesian view of economics), I generally abstain from promoting one political thought over another. It is my guiding political view that, during troubled economic times such as these, the country should look for proper leadership, regardless of political lines.

As the State of the Union was last night, I thought it would be proper to discuss some of the economic issues that were debated and examined by both political parties. One particularly hot bed issue that came up Tuesday night was the debate over taxes and tax reform. In the multitude of articles that came out before and after the address, two things became immediately clear: Republicans and Democrats disagree on what to do about taxes (shocker) and there seems to be almost no hope of getting a tax deal done.

The address, like this debate, will start on the Democratic side. In a front page article by the Wall Street Journal, Carol E. Lee, John D. McKinnon, and Kristina Peterson outline the President's initial proposal for tax changes. The authors highlight the talking points of the proposal, starting with a $320 billion tax hike over the next 10 years centered on high-income Americans, which would then go to pay for a $235 billion tax break for "mostly moderate-income workers". They then followed the talking points with a quote from an administration official:

"If Republicans, who now speak of poverty and income inequality with some regularity, want to defend a tax loophole of trust funds of the wealthiest of Americans, then we look forward to hearing that argument," a senior administration official said, referring to the proposal to tax additional inherited assets. "We're going to make the counter on Tuesday night. We are calling it middle-class economics."

Before the Republican Party even had a chance to respond, it seems as though the political strategy game is already being played. This official, and potentially other Democrats, seem to be salivating over the prospect of having trapped Republicans into this political corner.

On the Republican side, most of the ideas that were pushed for by President Obama were largely dismissed. Scott Neuman gathered statements and quotes in response to the address in his article Republican Leaders Dismiss Obama's Tax Proposal As 'Not Serious'. Neuman sites a spokesman for former Republican Vice Presidential candidate Paul Ryan:

"This is not a serious proposal," said Ryan spokesman Brendan Buck in a public statement. "We lift families up and grow the economy with a simpler, flatter tax code, not big tax increases to pay for more Washington spending."

While it is still early to determine what this "simpler, flatter tax code" will exactly entail, previous tax proposals have indicated that Republicans often advocate for tax breaks and a cutback in spending, which stands directly opposed to the President's plan.

Not even a day after the President's address and we are already starting to see a roadblock form on the tax issue. Economically speaking both plans have merit. Increasing taxes on those who are seen as able to "afford" it to fuel spending programs creates expansionary fiscal policy. On the other hand, continuation of tax breaks and a simpler tax code will likely stimulate consumption of goods, again expansionary. What is clearly not expansionary (or in any way economically helpful) is the political bickering that will likely last well down the road.

And while my ideals will typically agree with the President's tax plan, I am willing to advocate for a Republican plan for the sake of economic advancement. If the debate rages too long into the year, the US may miss an opportunity to take important economic steps toward recovery and, worse yet, deepen the political gridlock that exists in Congress. I concede my economic ideals to being in the minority in Congress, as both houses were recently voted into Republican control by the American public. However, that is not to say that the President should be bullied into accepting a plan that he does not believe in (as he too was elected via a public vote). It is to say that strong leadership from both the President and Republican Congress should make sure that a tax deal, albeit strongly right leaning, gets done.