Campaign 2012 is over…finally. Campaign catchphrases that elicit economic patriotism or tout a 5-point plan will soon fade, while memorable utterances, like “You didn’t build that” and the ubiquitous “47 percent” will live on in our minds, like commercial jingles. Now comes the hard part.
Most Americans still feel a sense of unease. The economy is growing, albeit at a snail’s pace. But the combined Economic Outlook Index fell to 66.0 in the third quarter, down from 89.1 in the second quarter. A reading below 50 signals economic contraction, so businesses have put off investments in new equipment and hiring of workers. Unemployment has dropped, but the average American still doesn’t feel his or her job is safe.
It’s like watching an NFL game that’s officiated by substitute referees: no one is quite clear about how to play the game. Regardless of who you were rooting for to win, the fact that someone won adds a measure of policy certainty that’s been lacking since election season began.
Time will tell how the dynamics of all the election results will fit together. As with every election, voters sent to Washington the men and women they think will solve the nation’s problems. Whether they do or not is another question.
What are President-elect Obama’s plans for the next four years?
Setting aside campaign rhetoric, platitudes and assorted debate zingers, what follows is a summary of policy proposals that have been set out by President-elect Obama over the past several months. After that, some thoughts on how the next Congress is likely to react to those proposals.
Federal spending/Deficit reduction. - President Obama’s proposals for dealing with the nation’s fiscal challenges have engendered some doubt among analysts as to whether his plans are realistic or would be effective. The convergence of $607 billion in expiring tax provisions and mandatory spending cuts—the so-called “fiscal cliff”—is certain to loom large on the agenda at the start of 2013. President Obama is already on record as proposing to cut federal spending by $4 trillion, including $1 trillion Congress has already agreed to in last year’s debt reduction agreement. Additional savings would be achieved by cutting $2.50 in spending for every $1 in additional revenue raised from high-income families, and by closing corporate loopholes. In addition he would commit half the money saved by ending the wars in Iraq and Afghanistan to reducing the federal deficit.
Education and employment. - On October 23, the Obama administration released a compilation of jobs-related proposals including: an investment in education by hiring 100,000 math and science teachers; a continued investment in energy and manufacturing, where he promises to create one million jobs through “a network of 15 to 20 manufacturing innovation institutes…to ensure that the next generation of products are invented and manufactured here.” In addition, he proposes two million jobs created through partnerships between businesses and community colleges. Finally, direct job creation would come from funds saved by ending the war in Afghanistan.
Energy. - President Obama’s plan calls for developing clean energy technologies that will allow the US to cut its exports in half by 2020. To do that, he would continue tax credits that support clean energy manufacturing, open up new land for exploration and development, and double fuel economy of autos to 54½ mpg by 2025. The president would also set a standard for utility companies to generate 80 percent of electricity from clean sources by 2035.
Taxes. - President Obama has consistently argued that those with incomes over $250,000 should be taxed at the Clinton-era tax rates, or 39.6 percent. He would extend the Bush tax cuts only for the middle-class. In order to boost job creation in the manufacturing sector, he would cut tax rates on domestic manufacturers (down to 25 percent) and end deductions for companies shipping jobs overseas.
Health care reform. - Apart from implementing the landmark Affordable Care Act, President Obama promises to expand the health reform tax credit to cover 50 percent of small businesses’ health care costs in 2014, though it’s unclear how he would pay for it. He also intends to expand access to group rates, so small businesses “won’t continue to pay up to 18 percent more than large companies for health insurance.”
…and what role will Congress play?
Elections matter—and not just at one end of Pennsylvania Avenue. The men and women who make up the new 113th Congress will play a big role in the success or failure of the president’s policy proposals.
Not surprisingly, redistricting led to some shifts in the House delegations of many states, including some incumbents. But the latest returns chalk this up as a status quo election despite the billions of dollars congressional candidates spent and the very low approval rating of Congress. Republicans will continue to hold a majority in the House of Representatives. In the Senate, where Republicans had a great opportunity to win control (Democrats were defending 23 seats, compared to 10 for Republicans), Democrats proved to be more competitive than was anticipated.
With a divided government, once again, our national policymakers face two pretty clear choices: gridlock or compromise. We should know very early on which course they choose, because the whole issue of a fiscal cliff will be waiting for them in January. Gridlock here means going over that cliff and risks pushing the economy back into recession. Getting to yes means the president and House Speaker John Boehner (R-OH) would have to bridge the cliff, picking up where they left off when the debt ceiling issue first surfaced in 2011. That means a lot of people will be unhappy, especially the progressives to Obama’s left and the vocal conservative core that Boehner answers to.