Obama’s Plan of Inaction

In business, chief executives develop plans that they think they can execute. In the Obama White House, a “plan” is apt to be something the president knows that he has no chance of pulling off.

The latest example is the purported plan the president announced Monday to trim $3 trillion from the federal deficit (still running more than $1 trillion a year) over the next 10 years. Half would come from tax increases that President Obama knows he will not get Congress to pass.

Another chunk would come from the wind-down of current military campaigns. The president is apparently certain that military action on a similar scale will be entirely unnecessary for the next decade. The people in charge in Iran, North Korea, Syria and other rogue, proliferating states will be glad to hear that. So will the terrorists and pirates currently plotting mayhem in their hideouts around the Horn of Africa.

There would be some $580 billion of cuts in entitlement programs like Medicare and Medicaid, but the cuts – if they ever happened – would come mainly out of providers’ hides. The president would not bring the Medicare eligibility age back in line with Social Security, so the law would, ridiculously, continue to make me eligible for federal medical care at age 65, even though I could not collect full Social Security benefits until after age 66. And Social Security itself, whose funding source the president already has chosen to raid to jump-start the economy ahead of his re-election, would not be touched at all.

The president somberly intoned that he “will not support any plan” to reduce the deficit that “does not raise serious revenues by asking the wealthiest Americans and biggest corporations to pay their fair share.” The president and his supporters use the phrases “fair share” and “balanced approach” almost constantly. We can safely assume that this language has scored well in focus group testing. Republicans, for their part, have equally well-tested objections to “job-killing” tax increases and the president’s penchant for “class warfare.”

When we cut through all the smoke, we can find one elemental truth: Obama and his fellow Democrats want all sorts of tax increases on wealthy Americans, except the one that has been theirs for the taking all along.

All they need to do is let the Bush-era tax cuts expire. It would have happened at the end of last year, except that Obama compromised with a Democrat-controlled Congress to extend those cuts for two years. They also reinstated the estate tax at a historically low rate and a large exemption.

So the Bush cuts now are scheduled to expire at the end of next year. Obama need do nothing except wield his veto pen, in the unlikely event that a Republican-sponsored extension even makes it through the Senate. Taxes would go up on the wealthy Americans that the president so badly wants to tax.

Of course, taxes would go up for a huge swath of middle-class America, too. That was the trade-off, shortsighted though it was, of the Bush tax compromise. Reducing the top marginal rates was either was a giveaway to the wealthy or a boon to the economy, depending on your viewpoint. But nearly half of all American households were all but eliminated from the income tax rolls. They still pay Social Security taxes, but those are the taxes that Obama wants to sharply cut next year, even as he assures taxpayers that his Social Security tax holidays will have no impact on their future benefits.

If the Bush tax cuts really tilted unfairly toward the rich, then allowing those tax cuts to expire should undo the unfairness and get us somewhere close to the “fair share” that the president thinks people should pay. Unless, of course, the president thinks a fair share of income taxes for half the households in America is zero.

This is precisely what the president appears to think, because time and again, he rejects his only readily available tax increase. Reversing the Bush tax cuts entirely would restore the direct and visible connection between the costs and the benefits of government. Instead, the president seeks to bury the costs by turning businesses and business owners into his tax collectors. He talks about making these parties bear the burden of closing the government’s mammoth spending gap, even though they will ultimately pass most of the costs on to society at large through reduced hiring and investment, higher prices, and lower wages.

What the president issued yesterday was not a plan for financing and operating the government’s business. It was a campaign brochure, long on promises and rhetoric, and extremely short on deliverables.

The difference between running for president and being president is that, in the first case, you can say you’ll do almost anything without fear of contradiction, since you cannot do anything at all until you take office. But when you already are the president, people can watch what you do – or don’t do – and tune out everything you say to the contrary.

If America is tuning out Obama, it is because what he says he will do and what he actually does have little to do with one another. This, from all appearances, is the president’s plan.

About Larry M. Elkin 533 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

1 Comment on Obama’s Plan of Inaction

  1. obama really hasn’t done much in 3 years, at least nothin substantive, except burnin through massive piles of cash at breathtaking speed.trillion here trillion there every where a trillion.by next year u s will be breaching the 20 trillion dept mark, if that doesn’t spur action, nothin will

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