STOCK MARKET WATCH -- Monday, 9 July 2012

[Demeter]

34. Obama Poised for New Fight With G.O.P. Over Tax Cuts

http://www.nytimes.com/2012/07/09/us/politics/obama-seeks-2013-tax-cuts-within-limits.html

With a torpid job market and a fragile economy threatening his re-election chances, President Obama is changing the subject to tax fairness, calling for a one-year extension of the Bush-era tax cuts for people making less than $250,000. Mr. Obama plans to make his announcement at the White House on Monday, senior administration officials said. The ceremony comes as Congress returns from its Independence Day recess, and as both parties and their presidential candidates head into the rest of the summer trying to seize the upper hand in a campaign that has been closely matched and stubbornly static. House Republicans plan to vote this month to extend for a year all of the Bush tax cuts, for middle- and upper-income people.

The president’s proposal could also put him at odds with Democratic leaders like Representative Nancy Pelosi of California and Senator Charles E. Schumer of New York, who have advocated extending the cuts for everyone who earns up to $1 million. And it will most likely do little to break the deadlock in Washington over how to deal with fiscal deficits, an impasse that has only hardened as Republicans sense a chance to make gains in Congress this fall. But by calling for an extension for just a year, Mr. Obama hopes to make Republicans look obstructionist and unreasonable. Trying to bounce back from another weak jobs report on Friday, he also hopes to deepen the contrast with his challenger, Mitt Romney. On Friday, the president said Mr. Romney would “give $5 trillion of new tax cuts on top of the Bush tax cuts, most of them going to the wealthiest Americans.”

...Proposing a one-year extension, a senior official said, recognizes that Mr. Obama and the Republicans are not likely to resolve the larger debate over whether to extend the Bush tax cuts for everyone or, as Mr. Obama has long advocated, just for the middle class. That debate is likely to be decided at the ballot box, where a victory by Mr. Romney would almost certainly enshrine all the tax cuts...A one-year extension for people making under $250,000 would cost the government $150 billion in revenue, the administration estimates, an amount that would be added to the deficit. In a point of comparison, economists estimate that letting the cuts expire for people above that threshold would generate $850 billion over 10 years...For Mr. Obama, the biggest advantage of the tax proposal may be simply to move the political discussion off the job market. On his bus tour through Ohio and Pennsylvania last week, the president took pains to present himself as a guardian of the middle class, whose most cherished childhood memories included raiding the ice machine at a Howard Johnson while on a Greyhound tour of the United States. On Friday, however, when the latest poor jobs number was reported, Mr. Obama was back to talking about the long road to recovery.