By Wendy N. Powell
President Barack Obama allegedly won the biggest financial challenge of his political career, or did he? The post mortem reveals troubling circumstances yet to come. The increases in taxes will affect all Americans and potentially trigger a new recession with all effects not yet known.
The increases will affect all Americans, not just the nouveau riche of the $400,000 set; it will affect us all. On the other side of the fiscal cliff, we already have started seeing finger pointing, blame, and change without hope.
The reality: In the final fiscal cliff package, only $15 billion in spending cuts are specified while tax revenues increase by $620 billion. That is a 41 to 1 ratio, tax increases to spending cuts, hardly acceptable considering the pulse of the American public.
Obama has reminded us that he won the election; he did indeed but there are hundreds of elected officials who are supposed to represent their electorate as well. The definition of “rich” has been contracted from his initial $1 million salary. Fair game? He promised to raise taxes on the rich in his campaign and has promised a new wave coming to a community near you soon.
No doubt, the President is at the very top of the government pecking order. In fact, he reminds us often. But he was the only person on the administration side of the bargaining table. It is a very lonely place with the House and Senate representing the American electorate with dramatically different posturing on the other side. President Obama’s role as chief executive officer of the United States is to lead through these difficulties, and reasonably review proposals to make certain we can tax appropriately while affording our expenditures. He is the driver, the head of this conglomerate called the United States. Being a strong supporter of collective bargaining, Obama must find himself in a conflicted role reversal of sorts, responsible to do the right thing but yet so very attached to his politics.
In a relevant comparison to collective bargaining, there are expected norms that both sides must follow. That includes respect for negotiators, positions and interests, and fair evaluation of the proposals. This does not include disparaging comments and automatic rejection of proposals and solutions.
Speaker of the House John Boehner put a package on the bargaining table that reflected Obama’s previous bargaining position, a tax increase for those wage earners of $1 million or more along with spending cuts. Significant expected spending cuts. But the rules of negotiations have changed, that was no longer good enough for the power of a second term president.
In Obama’s election victory speech, he said, "In the coming weeks and months, I am looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together: reducing our deficit; reforming our tax code…” Did he?
In reality, he strengthened his partisan resolve. His most memorable campaign promise was a tax hike for the “rich” and he won but he said he is not yet done. In the final throes of the nail biter they called the fiscal cliff, he chose to hold a rally of representative members of the middle class with cheers and laughter insulting those at the bargaining table. Bad form to say the least.
Not long ago, Obama warned that raising taxes in a struggling economy is "the last thing you want to do." So how exactly is this happening? A bitter pill provides difficult posturing.
An overwhelming number of Americans, however, also realize that raising taxes will not in and of itself solve the budget crisis:
- While many Americans support tax increases for higher paid households, it is likely that changes in the tax code would resolve the issue more effectively.
- 67 percent think more will need to be done to close the budget deficit, compared to 19 percent who think tax increases alone will work and 12 percent who aren't sure.
The President, House, and Senate need to review the pulse of the American public. It’s not only about a win in the presidential election. According to an NBC/Wall Street Journal poll:
- 68% view the effects of the fiscal cliff as very serious or serious
- 65% want to see compromise to reduce the deficit and cut spending
- Only 28% want to see Washington stick to their positions.
A Fox News poll revealed similar results:
- 89% want to see major cuts in spending
- 83% Democrats
- 91% Independents
- 95% Republicans
Rasmussen reports highest ever support for reduced government spending at 73 percent. Washington, this is your electorate speaking. In any responsible and productive negotiation, facts and opinions are critical aspects of the outcome, most certainly the positions and opinions of constituents.
The fiscal cliff negotiation is a model for bad faith bargaining. Instead of accusations by Senate Majority Leader Harry Reid (D-Nev.) of wasting time and DOA proposals, public criticism and name calling, they needed to take a critical look at the desires of the electorate—significant spending cuts and reduction of the debt. Reid referring to Speaker Boehner as a dictator does not foster cooperation in negotiations.
Actually, the score was 2-0. The House approved 2 bills to 0 for the Senate until VP Joe Biden rode in to “save the day.” Public perception is critical and the lack of fairness in this looming negotiation could result in taxpayer apathy. The result? Americans suffer, adjust withholding, reduce spending, and become unable to pay Uncle Sam, slowing the economy.
According to the Tax Policy Center:
The budget deal passed by the U.S. Senate today would raise taxes on 77.1 percent of U.S. households, mostly because of the expiration of a payroll tax cut. More than 80 percent of households with incomes between $50,000 and $200,000 would pay higher taxes. Among the households facing higher taxes, the average increase would be $1,635, the policy center said. A 2 percent payroll tax cut, enacted during the economic slowdown, is being allowed to expire as of yesterday. [Bloomberg]
In a sense, the elected officials that represent the American people are losing sight of what matters for the sake of their political views. Let’s not forget presidential candidate Obama made a pledge in 2008 never to raise taxes on anyone making less than $250,000 per year. Perhaps that was what he was making light of in his fiscal cliff press conference.
The American electorate and economy is need to be in full view and given primary consideration. The legacy that will remain long after the fiscal cliff negotiations are over is on the administration side of the table, the president. We will remember who the president was at the time of the fiscal cliff, but not too many other players.
~~Wendy N. Powell is the author of the critically acclaimed Managing Experience Acquired: Necessary Skills for Successfully Managing Any Employee. Her book is now available on all of the e-book sites. She has been featured on ABC, Fox, and NBC as a management and career expert. Powell writes for a number of publications, including a column at The Huffington Post. To learn more about Powell, see the website Management Experience Acquired.