Week in Review

The Week in Review: The Politics of Economics

Anna Cammisa ’13

All the major U.S. news outlets featured articles this week about the ongoing congressional battle over the extension of payroll tax cuts and Republicans’ eventual reversal of the their position on the issue. President Obama’s 2013 budget proposal was released earlier this week and has so far generated a number of varying responses. The Huffington Post’s Jeff Madrick and a Los Angeles Times editorial, “What about the U.S. debt?,” are two of the week’s articles, each taking a different side on the budget debate.

Earlier this week, Republican leadership proposed a 10-month extension of the Social Security payroll tax cuts without offering how the cuts would be funded—completely contradicting their previous stance. Politico’s Manu Raju and Jake Sherman called the GOP’s reversal on their opposition to allowing an extension of unfunded payroll tax cuts a “180-degree change” in Republican policy. The move puts the Republican Party in an even more precarious situation as it surprised many party members and angered conservatives and rank-and-file members who believe that the tax cuts will further ruin the current Social Security system. However, GOP leaders maintain that the change of stance was necessary due to political considerations—the idea that Republicans do not support tax cuts for the middle class would be detrimental in an election year with the economy at the forefront of political debates.

President Obama recently unveiled his $3.8 trillion budget proposal for 2013, the final budget proposal of his term. Jeff Madrick, along with other news columnists, identifies key differences between Obama’s 2012 budget, which emphasized deficit reducation, and the 2013 budget, which focuses more on job creation and a renewed stimulus effort. Obama has adopted a reenergized and more aggressive stance towards programs that will reinvigorate economic growth and redistribute wealth. Although not explicitly in the budget proposal, he continues to back the proposed Buffet tax, which will tax higher incomes at 30%, and also supports raising taxes on dividends and capital gains for the wealthy. Reducing the deficit is still integral to Obama’s budget, which can be seen in the tax changes as well as the reduction in military spending. Madrick calls attention to the obvious partisan political opposition that Obama will face in attempting to implement his plan, but many believe that the 2013 budget will be key in creating new American jobs and in sustaining the economic recovery into the next year.

On the other side, the Los Angeles Times published an editorial  criticizing Obama’s budget proposal, calling it a plan that “offers no real solution to the United States’ long-term fiscal problems.” The U.S. economy has seen modest improvement in the past few months which lead some to believe that now is the time to reel in deficit spending and start trimming our national debt. While this editorial recognizes that Obama’s initial budget proposal does include measures for addressing the deficit, it claims that it will be extremely difficult to implement these measures, especially the proposed tax increases targeting the wealthy. While there have been increasing tensions between political parties regarding spending and program cuts throughout Obama’s term, many believe more cuts and an edited health care plan are necessary solutions to the growing debt problem. With the debt crisis in Europe igniting fears in governments across the globe, politicians in Washington are starting to seriously believe that an uncontrollable debt could be the downfall of the U.S. economy in the future, so it will be very interesting to see how the two parties can compromise to find a suitable budget for the upcoming year.