No Tax Increases in Barack Obama's Economic Recovery Plan, Yet

President-elect Obama is set to announce his economic stimulus plan on Monday, and aides say that it will be much bigger than the $175 billion plan he endorsed during the presidential campaign. The plan is expected to contain the usual infusions of government spending on roads, bridges, and other infrastructure projects, long a favored economic policy idea of liberals; but it is also likely to contain Obama's signature call for "tax cuts" on the middle and working class. Obama proposed cutting taxes for 95% of Americans during the campaign, while promising to roll back the Bush tax cuts for the other five percent. However, in what may be a tacit admission that campaigning is not like governing, the Obama economic plan to be unveiled contains no offsetting tax increases to all the increased government spending.

Obama and Congressional Democrats are aiming to have the enabling legislation for the package passed in the new year, in time for Obama to sign it after the inauguration on January 20th. Obama had hoped in the wake of his election that an economic stimulus plan could be passed in the remaining months of this year, to be signed by President Bush. But Bush and Congressional Republicans balked at the idea of a second stimulus without Democrat support for the languishing Colombia Free Trade Agreement, killing off that hope. Troubled American automakers will have to wait until the new year as well for aid from the federal government, as their request for a second $25 billion was met with skepticism from both Democrats and Republicans.

Get the new
PD toolbar!

Obama aides said that the Presdent-elect has not decided when, if ever, to call for his promised tax increases for the wealthy. They speculated that he may simply decide to let the Bush tax cuts expire in 2011, as is set in current law. Doing so would result in a tax increase not just for the wealthy, but for all Americans who pay taxes. The Bush tax cuts of 2001 and 2003 cut income tax rates in all brackets. Given that some Democrats, like New York's Sen. Chuck Schumer have called for as much as $700 billion in new federal spending to revive the economy, Obama may find it much more difficult to keep his campaign promise of cutting taxes on most Americans. Republicans attempted to increase the pressure on the incoming administration, asking why Obama would not come out for holding off on tax increases for his first two years in office.

During the presidential campaign, Obama drew criticism for seeming to decrease the income threshold at which Americans could qualify for tax relief under his plan. With the lack of specificity on taxes in the economic plan he is to announce, Obama may be feeding into fears that he will go back on his word to cut taxes for most workers. President Bill Clinton did much the same thing upon taking office in 1993, when the middle class tax cut he campaigned on did not materialize. If one goal of announcing his economic plan early is to calm Americans worried about the direction of the economy, Obama would do well to give workers more details on how he plans to pay for all of the government spending he proposes.


Follow PoliticsDaily On Facebook and Twitter,
and download the new Politics Daily toolbar!