- The Washington Times - Thursday, July 2, 2009


President Obama’s domestic agenda is losing steam in an increasingly contentious Democratic Congress amid growing public doubts about the veracity of raising taxes in a deep recession.

The economy remains sick. The stimulus plan isn’t working. Investment capital, the lifeblood of a vigorous economy, is still on strike. Over 40 House Democrats voted against his energy tax bill, which barely passed by a seven-vote margin and now faces huge obstacles in the Senate. His health care plan is on shaky ground. His promise not to tax middle-class workers is in shreds, and massive deficits are piling up as fears mount that the economy may face months if not years of anemic growth.

The White House fashions new, defensive arguments weekly in behalf of Mr. Obama’s stimulus. The latest argument coming out of the president’s economic advisers is that they never actually expected the stimulus bill to trigger growth this early in the year. It’s going to take a lot longer to show results, they say now.

The gross domestic product, the measurement of all the goods and services the economy produces, shrank at an annual rate of 5.5 percent in the first quarter. It is expected to shrink further in the second quarter but at a slower pace.

Americans are not spending; they are saving. The savings rate jumped to 6.9 percent in May, a 15-year high, while spending barely budged by 0.3 percent. “As the first half of ‘09 ends, investors are growing more anxious about whether the economy can bounce back later this year,” the Associated Press reported last week.

Holding the economy back is unprecedented borrowing and a raft of higher taxes Mr. Obama intends to impose on the country - from energy taxes that will increase the cost of everything we buy to health care taxes to pay for the president’s grandiose national health insurance plan.

None other than billionaire financier Warren Buffett, the president’s supporter, spoke out disapprovingly last week about the Democrats’ so-called “cap-and-trade” energy plan that he called a “huge tax” and a “fairly regressive” one that all of us will pay - hitting low-to-middle-income people the hardest. From turning on your light switch, to heating or cooling your home, to all the products we purchase and consume - no one will be spared.

That makes a mockery of Mr. Obama’s campaign promise that taxpayers who earn less than $250,000 would not see “any form of tax increase, not your income tax, not your payroll tax, not your capital-gains taxes, not any of your taxes.”

That’s why David Axelrod, Mr. Obama’s chief political adviser, avoided any mention Sunday of the president’s campaign tax pledge on ABC’s “This Week.” Indeed, he pointedly would not rule out taxing employer/employee health insurance premiums that are now fully tax-deductible - an idea that is being increasingly pushed by Democrats as the only way to finance his $2 trillion health care scheme.

Some Democrats say that would be the kiss of death for health care this year, but Mr. Obama may be willing to agree to it if it’s the only way to get his plan through Congress, say policy insiders. Notably, the president at this point does not want to engage in “drawing lines in the sand” beyond which he will not go in setting higher taxes, Mr. Axelrod said.

The president is willing to consider “a lot of different formulations” to finance his health care plan, he added. Further doubts about Mr. Obama’s tax pledge were fueled Tuesday when a White House reporter asked presidential press secretary Robert Gibbs, “Is that pledge still operable?” After dodging a bit, Mr. Gibbs replied, “We are going to let the process work its way through.” In other words, he’s keeping his tax options open.

Therein lies the rub. With this year’s budget deficit likely to surpass $2 trillion before Mr. Obama even begins to pay for his health, energy and other domestic initiatives, he’s going to need a lot of tax revenue to pay for the costliest domestic-spending legislative wish list in American history.

And, one way or another, it’s going to come out of the paychecks of America’s working class.

But the White House may be in deep denial about Mr. Obama’s agenda and its legislative prospects.

“It’s getting harder and harder to see how they are going to pass these sweeping overhaul bills in Congress,” veteran health care analyst Grace-Marie Turner at the Galen Institute told me.

“The pay-fors just aren’t realistic, and the left is going to balk if they don’t get a public plan and universal coverage. And they can’t pay for that,” she said.

Other tax changes are in the works that business executives say will be job killers if they are passed this year, as Mr. Obama is proposing. One of them is his plan to outlaw or restrict roughly $190 billion in tax breaks that allow businesses to defer paying tax rates up to 35 percent on foreign profits invested overseas to expand markets.

“It makes U.S. jobs more expensive,” Microsoft Corp. chief executive officer Steve Ballmer told Bloomberg Financial News last month.

If Mr. Obama’s anti-business initiative is enacted, Mr. Ballmer said, “We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”

Politically speaking, all of this may be reaching critical mass.

Mr. Obama’s popular support has eroded a little in recent months, although it is still high.

But support for his agenda has decidedly fallen well below his approval ratings, and that means it’s in for rougher sledding in the months to come.

Donald Lambro is chief political correspondent of The Washington Times.

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