Obama & The Tax Cuts: The Global Reaction

This was the topic that I was very excited to be invited on Fox News’ Hannity to talk about the other day. (Producers of such shows supply the topics to guests in advance, from anything from a few minutes to a few hours before airtime, as the more informed the guest is, the better they perform for the viewer).

For those who watched, Mr Hannity had other ideas! Not one to waste my homework, here is a bit of it now…

A number of international commentators’ eyebrows have been raised at the irony that The Tea Party wandered up and down the USA calling for spending to end – and that their congressional leaders just added getting on to a trillion dollars to the debt over the next two years.

There is a split between what is going on in Europe (deficit reduction) and the US (stuck on stimulus) but this in turn reflects the views of economists. I’ve recently read editorials from them saying that what Congress has done is right, that it should lead to 4% growth next year in the US and a 1% reduction in unemployment. I’ve also seen scaremongers say that if the US doesn’t cut its deficit NOW, it will end up like Japan in 5 years time – with debt service costs consuming nearly all tax revenue.

At least, however, deficit reduction does finally seem to be on the agenda in the US, even though nothing has been done about it yet. It has been pointed out by both Secretary of State Clinton and the chairman of the Joint Chiefs, that the deficit itself poses a threat to national security. Rumour has it that Obama may make major tax reform (essential for deficit dealing) the main focus of his State Of The Union address in January.

And so we come to Obama. Outsiders – and insiders – think he is gaining a momentum about him. The Republicans are on the backfoot – the President just got a second $900 billion stimulus package with their blessing. This should improve things for Main Street by the time it goes to the ballot box in 2012. Meanwhile, if Obama does now focus on tax reform and the deficit, he gets to claim that as his own.

Obama is having a better time of it post the shellacking. He is Mr Tactician getting into bed with the Clintons, thus shoring up his own party support for 2012 (however much very Liberal Democrats are grumbling at present, who else are they going to support?). His reclaiming of the middle ground by compromising, will also serve to lure back the Independents.

Where there is agreement from all I have spoken to both internationally and in the US? The GOP needs to find an alluring and moderate candidate fast, otherwise the second term is Obama’s for the taking.