Facing a lethargic job market and a still-fragile economy threatening his reelection chances, President Barack Obama Monday took on taxes and their impact on the recovery, calling for a one-year extension of the Bush-era tax cuts for those making less than $250,000 on Monday (NYT).
The effort puts the president at odds with Congress — where House Republicans want to extend the tax cuts for everyone and some congressional Democrats, including House Minority Leader Nancy Pelosi, have come out in favor of a $1 million cutoff for tax breaks. Meanwhile GOP presidential challenger Mitt Romney says the tax cut extension will hurt families and small businesses and slow job creation (CNN).
In remarks today, President Obama said his move would extend tax cuts to for the 97 percent of U.S. small business owners who fall under the $250,000 threshold. “This isn’t about taxing job creators, this is about helping job creators,” he said, noting he has cut small business taxes eighteen times and lowered the tax bill for the typical U.S. middle class family by $3,600 since his election.
If Congress does nothing, all tax rates will go up when the cuts expire at the end of the year. Sweeping federal spending cuts (Reuters) are also set to kick in at the beginning of 2013 — known as the “fiscal cliff” — and combined with an across-the-board tax increase could push the U.S. economy back into recession, analysts say.
Romney is promising to usher private lenders back into the federal student loan market in a bid to decrease default rates, increase efficiency, and protect U.S. competitiveness, but such a move could cost taxpayers tens of billions of dollars over a decade without saving students money (BostonGlobe), according to higher education analysts.
The Romney campaign says reintroducing private competition would spur innovation that could help prevent students from borrowing more than they should and coming out of school with crushing debt, hurting their personal economic prospects and the U.S. economy as a whole.
Critics say banks and loan companies stand to reap the biggest financial benefits from Romney’s plan, getting subsidies to make nearly risk-free, government-backed loans — the same firms that benefited from the system that existed for decades before 2010, when President Obama required that the government issue all federal student loans.
Private lenders, however, argue President Obama’s move in 2010 cost the industry thousands of jobs as companies went out of business or shut down divisions that dealt with the servicing of such loans.
Without a compromise between the White House and Congress, the Pentagon could have to cut about $50 billion more from its budget in January, a prospect that could harm President Obama’s reelection efforts in battleground states heavily dependent on military spending, particularly Virginia (WSJ).
Federal law requires companies to warn their employees of potential layoffs sixty days before they take effect, meaning thousands of defense workers could receive warning notices the Friday before the election.
Pentagon officials have warned the cuts would be detrimental to military readiness and urged Congress to find savings elsewhere. Mitt Romney says, if elected, he would restore the military cuts.
— Gayle S. Putrich, Contributing Editor