Category: Taxes


President Obama has signed three free trade agreements with South Korea, Colombia, and Panama. Free trade agreements are important in America, because it opens new markets, and it creates jobs in our country. These trade agreements were started by President Bush, and President Obama completed the deal after he was sure that American workers were protected, and environmental practices were followed.

Many believe that this free trade agreement is as important as the North American Free Trade Agreement (NAFTA). NAFTA is one of the most successful trade agreements in history, and has contributed to increasing trade and investments between the United States, Canada, and Mexico. The goal of NAFTA was to eliminate barriers to trade and investments, and eliminate most of the tariffs.

As a result of NAFTA, Mexico and Canada are the first and second largest export markets for United States agricultural products. This free trade agreement has benefited farmers, ranchers, investors, and consumers.

Trade will not go away as an issue with the Obama administration. These three new trade agreements will bring the number to 20 countries that have free trade agreements with the United States. The Republicans wants the president to be more aggressive in finding more free trade deals with other countries.

“From day one the guiding principle has been not just to complete the three trade agreements, but to develop a new paradigm for trade, and rebuild and restore America’s confidence in our trading policy. The administration is on track to reach Obama goal set early last year of doubling US exports over a five-year period,” said US Trade Representative Ron Kirk.

Trade agreements have always been a tricky business because you always want to do business with a friend, but that is not always the case. In many countries around the world, they levy high tariffs on US goods, and Americans allow them to ship their goods to our country with few or no duties. Many countries are trying to control their economy and keep American products out of their markets.

Nevertheless, supporters say these three deals are a winning proposition for American businessmen and farmers, who face high tariffs in these three countries. The deal in South Korea could boost exports by $10 billion and increase exports in Colombia by $1 billion. Many of the experts think that these three deals can create 70,000 jobs for Americans.

Agriculture Secretary Tom Vilsack says, “Overall, these agreements are a win for the American economy, they mean higher incomes for farmers and ranchers, more opportunities for small business owners, and jobs for folks who package, ship, and market agricultural products.”

President Obama is also getting applause from other industries. The following statement is attributable to the president Gary Shapiro of The Consumer Electronics Association.

“The Congress passage and now Presidential signing of these free trade agreements is the first major action in five years on free trade. It tells the world that the US is back in business and wants to remain a global player. Enacting these three agreements will strengthen our economy. Free trade has helped foster a high-tech boom, created more than 25 million jobs during the past 15 years, and increased real wages for U.S. workers.”

As President Obama continues with his plan to increase jobs for American citizens, he will have to reduce high tariffs in other countries, which will help American businesses large and small. Signing a bill is only the first step in implementing the trade agreement. Working together and ensuring compliance from the three countries will help improve the trade deficit, and keep the U.S. economy strong.

When legislators in Congress are appointed to a “presidential blue-ribbon committee,” their importance raises in their party. Instantly, their influence is more significant, and the media begins to seek them out for interviews. The six Democrats, three from the Senate and three from the House, and the six Republicans three from the Senate, and three from the House comprise “Obama’s Super Committee.”

The “Super Committee” is a twelve bipartisan Congressional group who will work on a debt-reduction strategy to reduce the deficit by $1.5 trillion by Thanksgiving of this year. The twelve member panel has a historic opportunity to overhaul the Tax Code and entitlements. If the committee fails to produce a debt reduction plan of $1.2 trillion, across-the-board cuts would kick in evenly divided between defense and non-defense spending to make up $1.2 trillion in cuts.

The committee’s co-chairs are Representative Jeb Hensarling (R-TX) and Senator Patty Murray (D-WA). The rest of the members are as follows; Representative Chris Van Hollen (D-MD), Senator Jon Kyl (R-AZ), Senator John Kerry(D-MA), Senator Pat Toomey (R-PA), Senator Max Baucus (D-MT), Senator Rob Portman (R-OH), Representative Xavier Becerra (D-CA), Representative Dave Camp (R-MI), Representative James Clyburn (D-SC), and Representative Fred Upton (R-MI).

There is a good cross-section of experience and knowledge on the panel, but I wonder if anyone has the courage to significantly cut the military’s budget and funding. In the last ten years, the military base budget has increased by 80% from $302 billion in 2000 to $545 billion in 2011, says the National Priorities Project. The total cost of the Iraq war since 2001 is $869 billion, and the cost of the Afghanistan war $487 billion.

Most people ignore the nation’s security budget, but that became a new line item in 2001 with homeland security. This is a hard line item to arrive at because it flows through dozens of federal agencies. It started as a request for 16 billion, but in the last ten years the government has spent $636 billion.

When the figure for military spending for the last ten years is added up, the number is around $8 trillion. This is the number that the National Priorities Project has used, but a recent study published by the Watson Institute of International Studies at Brown University took a broader approach. By including funding for such things as veterans benefits, future cost for treating the war-wounded, and interest payments on war related borrowing, they came up with an additional $3.2 trillion.

These additional expenses increase the number for military spending in ten years to be around $11 or $12 trillion. With all the serious discussion on reducing the debt, it would seem logical to take a hard look at military funding and spending. There are some on the Super Committee who are against cutting military spending and believe that funding should be increased.

Nevertheless, the question must be raised, is our country safer with all the money being spent, and is the money being wasted? For the last ten years, the government has tries to do an audit with the military, and they haven’t had any success. There are so many secret funds, because of national security, an audit is vertically impossible.

Everyone knows that there is fraud, waste, abuse, and mismanagement in the military’s budget. It would appear that in the military’s budget, the legislators could find $600 to $700 billion to cut over the next 5 to 10 years. Cutting another $500 billion is going to be tough and the Super Committee has its work cut out for them.

The president is finally getting the parties to sit down and arrive at a compromise. All eyes and the media will be focused on the Super Committee for the next four months.

U.S. Senate leadership

On the evening of July 31, 2011, the Senate and The House of Representatives have reached a tentative agreement. Ending a perilous stalemate, President Obama announced an agreement on Sunday night on a compromise that would avoid the nation’s first-ever financial default. The deal would cut more than $2 trillion from federal spending over a decade.

This agreement is tentative and the Congress must ratify the deal with a vote. No votes were expected in either house of Congress until Monday, to give rank and file lawmakers time to review the package. The framework of the deal would give the President a debt ceiling increase of up to $2.4 trillion, and guarantee an equal amount of deficit reduction over the next 10 years.

“Default would have had a devastating effect on our economy,” Obama said at the White House, relaying the news to the American people and financial market around the world. He thanked both the leaders of each party.  

After a tough week of meetings and negotiations, the House of Representatives, Senate leadership, and the president are able to feel good about their accomplishment. According to Democrats and Republican sources, here are the key elements of the deal. There is still work to be done and the leaders of both parties are rounding up votes for the deal.

The debt ceiling increase tentatively would be around $2.1 trillion and the spending cuts would be equal to increase over 10 years. The formation of a special Congressional committee to recommend further deficit reductions that may take the form of spending cuts or tax increases. The special committee must make recommendations by late November, before the Thanksgiving recess.

Congress must also approve those cuts by December 23, or automotive cuts across the board go into effect, including cuts to federal defense programs and Medicare. This trigger is designed to force action on the deficit reduction committee’s recommendations to both Democrats and Republicans. There would also be a vote in both houses on a balanced budget amendment.

As the Congress gets down to the 11th hour, the two houses are close to a deal. During President Bush’s eight years the debt limit was raised 19 times, without the fuss and fight of this Congress. When Bush took office the debt limit was $5.95 trillion, and when he left it was $9.81 trillion.

Top Aide to President Obama, Valerie Jarrett

President Obama has been deeply involved in trying to win a debt deal that both parties find agreeable and can work with. “He’s getting absolutely no sleep. He’s working tirelessly, meeting with his economic team, doing a lot of outreach, exploring all kinds of possibilities for compromise,” top Obama aide Valerie Jarrett told Reuters Insider. This has translated into even longer days than normal at the White House, which already begins with a senior staff meeting at 7:30 am in the morning.

It appears that all the hard work has paid off for President Obama, and his administration. It is still too early to relax, but all the leaders are announcing that a deal has been struck. Democrats won’t like the fact that Medicare could be exposed to automatic cuts, but the sizes of the Medicare cuts are limited. They are designed to be taken from Medicare providers, and not beneficiaries.

Finally, the House of Representatives and the Senate are starting to compromise, and do what is best for the citizens of the country. Somehow President Obama must make bipartisan a reality in Washington, and get the two parties to cooperate, and work together. Making decisions together that improve and enhance the country is the job of our representatives.   

President Obama gets tough on Republicans concerning Debt Limit …by Roger Caldwell.

Last week President Obama decided to take his battle with the Republicans to the street and the public. He held a press conference and he sharply chastised Republicans as supporting tax breaks for jet-setting corporate executives, at the expense of college scholarships or medical research. The president also criticized members of the Republicans of not being prepared with their facts on the debt ceiling, and more concerned with taking a vacation.

Representative Raul Labrador (R-Idaho)

This press conference did not sit well with the Republicans and they immediately began to fire back at the president. Senate Minority Leader Mitch McConnell called on Obama to drop what he’s doing and come to the Capitol for a meeting.

Representative Raul Labrador said, “House Republicans acted, and now we await your spending reduction plan – perhaps not with open arms, but we have open minds.”

The Democrats and the Republicans have been debating for the last month over raising the nation’s borrowing limit. Both parties agree that in order for the country to continue to pay its bills, it is necessary to raise the debt ceiling. Since 2001 the credit limit has been raised 10 times, so every time the lawmakers vote for spending hikes essentially they have raised the ceiling.

Nevertheless, it is necessary to formally vote on the size of the increase, and some lawmakers want a bigger increase and others want a smaller increase. The first limit was set in 1917 at $11.5 billion, and the current debt limit is set at $14.2 trillion. The country’s accrued debt hit that number on May 16, 2011.

Either party or the president is not happy with our country being $14.2 trillion in debt, and the president at his news conference laid out his reason why it is necessary to raise the debt limit. “These are bills that Congress ran up,” Obama said, in explaining why the U.S. must not default on its debt obligations. “They took the vacation. They bought the car. Now they’re saying, maybe we don’t have to pay.”

Treasury Secretary Timothy Geithner

Treasury Secretary Geithner has set the date August 2, 2011 as the day when the debt limit must be raised for the country to continue to pay its bills. At this moment both parties are busy playing politics, but at some time soon every one will have to agree. Politics is a nerve racking business and our lawmakers tend to wait till the last days to strike a compromise.

Following President Obama’s press conference, White House Chief of Staff Bill Daley had strong words for the Republicans. Many political pundits and experts are concerned with the bluntness of the Obama’s administration and are afraid that their tough position will drive the two sides further apart.

Bill Daley said, “I find that at times people who continually attack the president, beat him up on not only on

White House Chief of Staff Bill Daley

policy, personality, and a whole bunch of things. The minute he takes a tone that is a little more direct, and it was not personal. It was direct in that the leaders of Congress in both parties and especially those who are saying that revenue are off the table period in trying to solve this problem, that somehow that’s going to hurt feelings of people. This is not a time to worry about feelings; this is a time to get results.”

Maybe the president is now putting on his boxing gloves, and he is going toe to toe with the Republican Party. It is too early to make that assumption, but in his last news conference, the president was aggressive and assertive. The president was elected to lead and sometime to lead, it is necessary to hurt feelings to get the job done.

Parliament building for the Canadian government

The jury is still out, if the $80 billion bailout from the federal government for General Motors and Chrysler saved the auto industry. Chrysler is repaying $5.9 billion in U.S. loans, and a $1.7 billion loan to the Canadian government. The company has been bought by Fiat, the Italian company, and the U.S. government will lose around $1.4 billion in the bankruptcy deal.

 

 

General Motors who also went through bankruptcy, received $49 billion from the federal government. The vast bulk of the bailout money was $6.7 billion in pure loan, and 60% equity stake in the company. The Canadian government gave GM $1.4 billion as pure loan, and another $8.1 billion for an 11.7 percent in equity holding. The U.S. and Canadian government initially together owned 72% of the company.

In the last weeks, the Obama administration has announced that GM and Chrysler have paid back their loans to the federal government and they will loss only $14 billion. It is very strange that these two companies are able to pay back a loan and either company has broken even or made a profit.

It is obvious that the federal government and the two automobile companies are doing some creative accounting to make the numbers work. Without a company making a profit, it is very difficult for it to pay back a loan, unless they were given more money in another deal.

GM was able to pay a loan off ahead of schedule, because the Obama administration gave the company and additional $13.4 billion as “working capital.” There were no stipulations on how they could spend the money. GM used the money to pay back the U.S. and the Canadian government with “working capital” money.

In other words, GM is using government money to pay back government money to get more government money. President Obama and his administration is celebrating the auto companies for doing a good job with the bailout loans, but the government is giving them more bailout money.

The government is not being transparent with its information, when they tell the public that the two auto companies are paying back their loans. Both of the companies were bankrupted and the government is using taxpayer’s tax money to prop and financially support the companies. The government is digging a deep hole, and they are only telling half of the story.

The government has sold Chrysler to Fiat and the Italian automaker now controls 52% of the stock. The rest of the stock is owned by United Auto Workers, and there are no guarantees that this partnership will be successful. But at this point the U.S. can wash its hands of this financial nightmare.

GM is a bigger headache because the government still owns about 23% of the stock, and the loan was paid

U.S. Secretary of Treasury Tim Geithner

by other government money. U.S. Secretary of Treasury Tim Geithner says, “Today, America automakers are mounting one of the most improbable turnarounds in recent history – creating new jobs and making investments in communities across our country.”

This is a great statement, but either one of the auto companies have broke even up to this point. Paying off government loans with more government money is deceitful and eventually there will be a major financial problem.

Losing $14 billion on any loan is a terrible deal. Knowing that the loan was paid with more government money makes the auto bailout a worst deal, which could put our economy back into a recession. Without any earning or profits, there should be no celebration and announcement of a historic turnaround in the auto industry.

Senate Leader Harry Reid

In Washington, there is political theatrics controlling the Congress, and every politician wants to be on the news. Everyone is playing games and they know that they are not doing their job. The President ran on a platform of change and the expectation level in the country was incredible.

America was ready for fundamental changes in Washington, and President Obama initially was a politician that progressive citizens could believe. He started his term with a majority of Democrats in the Senate and the Congress, and he got passed over 60 bills. He was able to get the Healthcare Reform Bill passed that other presidents had tried but failed.

President Obama’s polls approval rating initially was in the high sixties into low seventies. Minority communities’ approval rating for the president was in the nineties. But as the euphoric honeymoon began to dissipate into reality, we found many of the problems with the Obama administration were the same as other administrations.

The political fights between the Republicans and the Democrats were the same, but in President Obama’s administration they were a little meaner and nastier. With the emergence of the Tea Party, a new ideology was initiated that wanted a smaller federal government and were extremely conservative.

President Obama and the Democratic Party underestimated the influence and the political clout of

Tea Party

 the power of the Tea party movement. It is a loosely organized nationalized movement, which is the mobilized radical arm of the Republican Party. They are dissatisfied with the direction the country is going and they are angry.

With the country $14 trillion in debt, and every state treasury in debt, the Tea Party is correct when they say the Congress needs to balance its books and control spending. The problem with the Tea Party is they want to go backward as opposed to forward. Much of their ideology is based on state’s rights, American supremacy, and the good old-boy’s system.

Nevertheless, without a doubt the Tea Party members are a major impediment, and they make it harder to get the federal budget passed. They are a divisive force, and with the election of 2010, the new 85 Republican House members are connected to the Tea Party.

But all the blame for not getting the 2010 budget passed can be blamed on the Republicans and the Tea Party. When the Democrats had a majority in both Houses, they still could not get the budget passed. Somewhere there appears to be a problem with leadership, or planning in the party. If the Speaker of the House and the leader of the Senate are both Democrats, they should be able to agree on a budget, and get it passed.

This week the government shutdown was averted with a late night deal right before the deadline. Even though the shutdown was avoided this fight was over peanuts, because the debate over the 2011 budget will soon start. With a divided Congress, who doesn’t like each other, there will probably be a major fight within the parties, and against each party.

John Boehner, Speaker of the House and Harry Reid, Senator Leader met President Obama four times in one week to finally come up with a deal. John Boehner says, “The president is not leading. He didn’t lead on last year’s budget, and he clearly is not leading on this year’s budget.”

President Obama meets with his aides

At times President Obama is not engaged and he leaves certain projects and initiatives in the hands of his administrators. It appears the president’s strategy is to remain behind the scenes and let his aides do the negotiating. No longer can the president let his aides do the negotiating.

The president must be engaged from the very beginning and be the leader of his team. Our government needs the president to get vocal, get serious, and demand results.             
President Obama

 Today, February 14, 2011, President Obama will present his 2012 budget to Congress. He has labeled this budget as a “middle ground”, where there are areas for investing, and specific areas will things will be cut.

There will be hard decisions that the president will have to make, because everyone in the country will be forced to make adjustments and sacrifice.

The budget is not just a collection of numbers, but it embodies the values, priorities, and aspirations of the president and his administration. President Obama has promised spending cuts that are an expression of “shared sacrifice” needed to balance a $1.3 trillion budget deficit.

The nation has projected deficits over the next decade of $12.5 trillion, so at this point our budget is in the red. It is important that the president’s budget begins to put our country on a path of sustainability, and we stop spending money that is not in the bank.

This year the president is presenting his budget, and it is expected that it will be in the area of $3.6 trillion. The president has pledged that the 2012 budget would help the United States, “live within our means while investing in our future.” Many of the political pundits interpret the term investing with spending money, and funding programs that keep our country in debt.

Nevertheless, the president will call for a five year spending freeze and no pay raises for federal workers. He will target social programs, including cuts to a home heating assistance program for low income households. He also proposes reduction in the popular Community Development Block Grant programs, and in funds for community action grants.

It is obvious that this year, President Obama has a divided Congress and he will be forced to negotiate with the Republicans in the House, who believe that the cuts don’t go far enough. The president made it clear in the State of the Union address that he wants to work with Congress with our country’s short-term and long-term fiscal challenges.

As the president said in his State of the Union address, “Now that the country is back from the brink of a potential economic collapse, our goal is to win the future by out-educating, out building, and out innovating our rivals so that we can return to robust economic and job growth.” This will not be easy, because in the inner cities the unemployment rate is anywhere in the 35% to 50% range.

Everywhere you look around the country everyone is talking about cutting programs as opposed to expanding programs. Many of these programs that are being cut impact the basic needs and necessities in poor communities. With a $1.3 trillion budget deficit, everyone will be forced to make “shared sacrifices” and it will impact everyone.

Once the budget is presented that is only the first step. Now 40 congressional committees and 24 subcommittees will debate and hold hearings on what is feasible. Some of the president’s proposals will be accepted, some will be thrown out, and others will be compromised on. The process is exhausting, and once both houses can agree, it is sent to the president for his signature.

If everything goes according to schedule and goes well, the formal federal budget for 2012 is signed by the president and goes into effect October 1, 2011. If all doesn’t go according to plan, Congress will pass a temporary spending measure known as a continuing resolution to continue funding on September 30th.

This year, Congress did not agree so the government has been running on a series of short-term continuing resolutions. Now Congress will be forced to debate another budget and the 2011 budget has not been formalized. All we can hope is that Congress can agree on something.        

As Congress concludes its business for the 111th session, the “Bush Tax Cuts” will determine if taxes are raised, and hundreds of thousands of people are impacted by the loss of unemployment insurance. The Republicans and President Obama have made a deal that the Obama administration can work with, and they believe it is good for the country and our depressed economy.

President Obama is aware that the new Congress will have a majority of Republicans in the House, and it will be necessary to negotiate and compromise. As a pragmatic statesman, President Obama is reaching out an olive branch to let the Republicans know that he is listening, and he is their friend.

He is aware that there are ideological and core differences in their philosophies, but the goal is to make America better for all Americans. The president is ready to make concessions to move forward the committee meetings and debates. There are going to be intense discussions on the direction the new Congress will take, and the Republicans in the House possess the votes to have their policies accepted.

Nevertheless this week in closed-door meetings, the Democrats made it clear to President Obama that they are not in support of the tax deal he made with Republicans. The words “Just say no” were the new mantra being espoused by many of the Democrats. They felt that President Obama was changing boats in the middle of the stream, and they were angry and upset.

Many Democrats believe that the wealthy are in a position to pay higher taxes to help improve the economy. If the tax cuts are extended for two years, it will cost the economy $120 billion that it will be missing in tax revenue, and over 10 years it will impact tax revenue by $800 billion.

I have no idea how the Joint Tax Committee comes up with its numbers, but it was my understanding that extending the tax cuts were only for two years. President Obama’s plan according to most economists, is supposed to boost the economy. At the end of the two years, the administration and the Congress would sit down again and make an assessment of the economy and determine what direction to take.

At this point by extending the tax cuts, the administration would increase the money supply, reduce consumer uncertainty about raising taxes, and continue keeping the consumers spending money. In order for the economy to grow, it is necessary for the consumer to spend more money, and help put more Americans back to work.

President Obama understands that in politics, there are no permanent friends and there are no permanent enemies. In order to arrive at a compromise, everyone must be willing to give up something. Everyone has a wish list, but they understand at the end of the day they will only get a portion of their demands and wishes.

The tax cuts end on December 31, 2010, and the Democrats can be stubborn and refuse to compromise, or allow the wealthiest two percent of Americans keep their tax breaks. By letting the wealthy have their tax breaks, millions of Americans will continue to have unemployment insurance, and millions of Americans will not have to worry about their taxes increasing.

The Democrats need to get on board and support the “Obama Tax Cut Deal.” The Senate Democrats are on board but the House Democrats are angry and grand-standing. Many of these Democrats will not be back in the new session of Congress, because they lost their election.

It is my hope that the House Democrats support President Obama’s Tax Cut Deal, so everyone can go home and have a wonderful and healthy holiday.

Check Roger’s other columns at http://www.presidentobamawatch.blogspot.com and sign up for updates on Facebook and Twitter.