Obama's Achilles Heel

Presidents come to the job with a kitbag of personal strengths and weakness that together determine, in part, their effectiveness on the job.  President Obama stands high in many of the core characteristics of a successful President.  He has a clear vision of what he wants to do, a moral compass that guides his actions, is a strategic thinker who listens to various sides of an argument, and is not subject to emotional distractions.  So far so good, you may say.  But this President has shown to have an Achilles Heel as well, one which precludes his ability to leverage his strengths to lead America through these troubled times.  

During the presidential campaign, Sarah Palin made the observation that she had more leadership experience as a town mayor than Obama would have ever gained as a community organizer.   The observation seemed politically self-serving at the time; in retrospect she may have been on to something big.

In his seminal text, Presidential Power, Richard E. Neustadt addresses the means by which the chief executive can put his stamp on public policy in the readily stalemated American political system.   To do so the President has to assertively use the powers of his office to build and maintain public support, and to hone a reputation among fellow policymakers as a skilled, determined political operator.   

No one doubted Lyndon Johnson’s ability to close the deal, and Ronald Reagan’s ability to mold public opinion was second to none.  George W. Bush, despite his poor public speaking skills, marshaled broad public and legislative support for a pre-emptive strike in Iraq.  

In contrast, President Obama has allowed the right to define the public agenda time and time again.  Rather than build on his considerable accomplishments to instill American confidence in his leadership, he has sat quietly on the sidelines as the airwaves are pummeled with stories over federal death panels, the rising threat of illegal immigration, European socialism and the like.  Instead of driving home the impact of his stimulus program on limiting job losses, he has allowed the program to be characterized as a failure and eroded requisite public and political support for further economic injections.  In his dealings with Congress he has alienated many Democratic supporters, making more difficult the job of the House and Senate leadership to move legislation.   

To be sure, the President will take to road to build up political support over the coming months but it will likely be viewed as the very politicking that he promised to rise above when running for office.  Cool and poised to a fault, and uncomfortable in the often bruising political ring, President Obama has failed to live up the promise of leadership that engaged so many voters.    

Winning the White House without even a plurality of voter support, George Bush was quick to speak about and act on his ‘mandate’ for change.  President Obama, elected to office by a significant voter majority, seems to lack the will to lead and fight for the principles that propelled him into office.  His popularity has plummeted along with prospects for maintaining a Democratic legislative majority.  Whether he has the fight in him to preserve is problematical.

The Great Tax Debate

Pundits and cable networks will soon focus on Congressional deliberations regarding income taxes, specifically what should or should not be done to the tax cuts - put into place by President Bush and a Republican-controlled Congress in 2001-2003- that are set to expire at the end of this year. Since there will be substantial political spin from both sides, a common understanding of the tax and income distribution situations might be in order - a citizen’s tax playbook if you will.
By way of background, US budget deficits rose substantially under Presidents Reagan and Herbert W. Bush as a result of substantial tax cuts and increased military spending. Subsequent tax increases to contain and then reduce the deficit- the first by President Bush at the end of his term and second under President Clinton- did the job. Higher tax rates, and more importantly, a growing economy operating at full employment, ultimately resulted in budget surpluses beginning in 1998 and rising to $230 billion in 2000. Presidential candidate George W. Bush campaigned, in part, on his pledge to bring the budget back into balance by reducing tax burdens.


The Bush tax cuts, when they came, were re-packaged as a response to the mini-recession of 2001. Although there were cuts for everyone, the lion’s share of the cuts went to upper-upper class Americans, the top 1% of Americans who were most likely to invest heavily in U.S. Corporations. Income taxes paid on corporate dividends were slashed from 28% to 15%: long term capital gains taxes - paid on earnings from the sale of stock were reduced significantly. Simply put, stockholders paid lower taxes on the dividends they received from corporations and on any stocks they sold for a profit. Economists and politicians debate the economic impact of the tax cuts, but none deny the shift in the distribution of wealth that has occurred as a result. Currently, the disparity in wealth is greater than at any time since the late 19th century’s Gilded Age, the time of the robber barons such as Rockefeller, Carnegie, and Vanderbilt.


The impact is born out in actual tax data. According to most recent Congressional Budget analyses, the top 1% of Americans – those with an adjusted gross income of over $400,000 – receive almost 25% of the income earned by all Americans (as opposed to 8.4% in 1980). To put this in perspective, envision being one of one-hundred people gathered to share the proceeds of a $100,000 lottery winning. One individual, say the individual who bought the ticket on behalf of the group, steps forward and takes $25,000 for himself leaving the other ninety-nine to split up the remaining $75,000.


The actual disparity is likely far greater. The Internal Revenue Service estimates that it is able to accurately tax 99 percent of wage income but that it captures only about 70 percent of business and investment income, most of which flows to upper-income individuals.


The upper-upper class pays more taxes, to be sure, but less so than in the past. The top 1% of American taxpayers faced an average tax rate of 22.5% in 2007(as opposed to 34.5% in 1980 and 27.5% in 2001). By way of comparison, those Americans earning between $66,000 and $113,000 saw their average tax burden fall by only one percentage point since 2002, to 9.43%. Bottom line: the very rich have substantially out-earned the rest of us over the last decade, while enjoying proportionally greater benefits from Federal tax reductions.


There is no single answer for the ‘proper’ distribution of wealth among American citizens. Each of us has a right to our own opinion regarding what is fair or unfair. Many decry the million dollar bonuses paid to corporate leaders and bankers and hold the President accountable for allowing these payouts. These same people subsequently defend the need to limit the tax burden on the very rich in order to avoid stifling risk-taking and creativity. Most experts, in contrast, are of the opinion that the best way to stimulate long-term investment is to reduce annual deficits and thus upward pressure on interest rates.


In the early 1990s the Republicans artfully used Congressional rules to craft a $1.3 trillion tax cut -well in excess of the amount that would bring the Federal budget into balance. Attaching a ten-year sunset provision allowed Republicans to pass a bill that without having to justify the likelihood of substantial future budget deficits: taking the route of budget reconciliation – the same route that was decried by Republicans when suggested by the Democrats as a means to pass health care-- avoided the possibility of a Democratic filibuster. Now these cuts are up for renewal. The sunshine provision means that -if Congress does nothing- the Bush tax cuts will be rescinded. As you follow the debate, be careful not to lose sight of the bigger picture: who were the main beneficiaries of the tax cuts and what is fair treatment for the very rich given how far they have advanced in recent years.