PERSPECTIVE: A humbled President, a looming tax debate, and an ominous road ahead: What the 2010 Midterms mean for America and President Obama

Holly Dayton

By Cody Pomeranz ’11, Co-Editor-in-Chief

“I am very eager to sit down with members of both parties and figure out how we can move forward together,” President Obama told the press in his sobering post-election remarks. Compromise, however, is the last thing Republicans have on their minds. In fact, Republican Senate Minority Leader Mitch McConnell unequivocally declared that his single most important priority was to deny President Obama a second term. With a Republican takeover of the House and gains in the Senate, heated debates over issues like the Bush tax cuts will most certainly exacerbate.

However, in terms of the President’s prospects for reelection, losing the House does not presage a 2012 presidential election loss. In fact, history tells a different story. President’s Truman, Eisenhower, and Clinton all suffered similar midterm losses, and all were reelected to a second term. Truman adroitly campaigned against the infamous “Do Nothing Congress” to defeat Thomas Dewey in 1948. Eisenhower, in fact, lost both houses of Congress, only to be granted another four years. Perhaps the most popular comparison to President Obama’s current political quagmire is President Bill Clinton’s major loss in 1994. For Clinton, the loss actually proved beneficial, forcing him to shift his policies to the center and creating a booming economy, resulting in surpluses that would immediately disappear under his successor.  Nevertheless, Obama’s agenda, for better or for worse, is at great risk if not already dead.

Whether you’re Republican or Democrat, the massive Republican sweep earlier this month comes with some very steep downsides, particularly pertaining to the Bush tax cuts. These cuts, passed in 2001 and 2003 by then-President George W. Bush, have been the subject of intense debate. First off, the cuts were never paid for. President Bush claimed the cuts would “pay for themselves,” but the lost revenue accounts for 2% of the total GDP.  Secondly, the policy gave huge cuts to the top 1% while doing little to stimulate the middle class, resulting in one of the largest income gaps in history. However, the most ominous aspect of the cuts is the cost of extending them. Democrats argue that the cuts should be extended for all Americans except the top 2% of earners (the current rate for them is 35%. If the cuts expire for the rich, the rate will jump to 39.6%, as they were under Clinton). Republicans want the cuts extended for everyone. An across-the-board extension would add almost 4 trillion dollars to the debt, a greater cost than any program President Obama has implemented (stimulus, bailouts, healthcare, war escalation, etc.). An extension for everyone but the top 2% would cost 3 trillion dollars. Regardless of which side you’re on, the current stalemate between the executive and legislative branches in the Washington is not good for any constituency. Here’s why: unless one of the parties budges on their position or a compromise is reached, no legislation on the tax cuts will be passed. Thus, the cuts for ALL Americans will expire.  In other words, we’re all screwed, no matter what income bracket we’re in.  Unfortunately, this seems to be the road we’re headed down. Republicans won’t budge on the rich. They believe that allowing the tax rates for the rich to return to the previous rates under Clinton would hurt job growth, specifically small businesses. Democrats argue the opposite, referring to the fact that 98% of small businesses would not be affected by the tax hike. While both parties agree that the cuts should be extended for the middle class, the debate over the extension for the top 2% is bound to inhibit any progress. By the time the Republicans assume office in January, everyone’s taxes will be higher. It is my hope rather than my prediction that the two parties will come to an agreement. If such a miracle happens, it would likely come in the form of an extension of all tax cuts for the next two years, as former Obama OMB Director Peter Orzag has suggested.

So what does all this mean for the rest of President Obama’s agenda? Well, his energy initiatives will most certainly take a hit. As for healthcare, the Republicans will not have enough votes to repeal. Where Obama’s policy will meet serious obstacles is at the state level. Republicans garnered major gubernatorial victories, and those governors are intent on preventing a chunk of the new laws from being implemented. On social issues, the Republican sweep is a major setback for the gay community. If President Obama cannot repeal “Don’t Ask, Don’t Tell,” arguably one of the most ludicrous policies in history, the military will continue to discharge perfectly capable soldiers for years to come at the cost and security of the taxpayers. Economically, there will be no chance for a second stimulus, despite the desperate need for a larger infusion of money into the economy to soak up the decline in aggregate demand due to idle credit flow.

From a historical standpoint, President Obama is likely to get reelected. But he may have to take a lesson from President Clinton and compromise on some of his policies. Whether this will help or hurt the country is to be determined. One thing, however, is for certain: if progress in Washington is stagnant, the landscape looks bleak for all Americans, red or blue.

Photo courtesy of  http://www.guardian.co.uk/world/gallery/2009/apr/29/obama-administration-barack-obama