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Obama's First Challenges

When Senator Obama becomes President Obama next January, he will have many challenges before him. And one of them will be his dealings with the flush-with-power Democratic leadership in Congress.

On the surface, it should seem like it'll be smooth sailing. Obama is a Democrat, and so are the leaders of Congress. Further, both he and Vice-President Elect Biden will be coming from the Senate, so they're pretty much known entities. Biden, as vice president, will be President of the Senate. And Obama's first named appointment (it appears) is Representative Rahm Emanuel.

However, there is a downside to the shared affiliation. As noted, Obama is coming from the Senate. And he has absolutely no record of ever standing up against his party's leadership.

Obama's legislative record is built on the principle of "go along to get along." He has always been a reliable Democrat, ever willing to go along with whatever the leadership dictates. And I'd be more than willing to wager that Harry Reid, Nancy Pelosi, and other prominent lawmakers are expecting that that will continue now that Obama is in the White House.

My colleague Steve Schippert yesterday discussed what he saw as the major issues that will be addressed in the first 100 days of Obama's administration, and I'm going to cheerfully steal a few from him to discuss issues that I think have potential to cause conflict between Obama and Congress.

The war in Iraq: Obama built much of his campaign on his early opposition to the war. Well, it seems to be winding down, and in a way that is pretty good for the US and the Iraqi people. Will Obama manage to find a way to snatch defeat from the jaws of victory? And how will Congress -- which is still filled with Democrats who originally voted for the war, no matter how much they try to pretend they didn't -- react to that?

Defense spending. Representative Barney Frank, apparently not content with his role in wreaking havoc on the nation's financial system, has announced that he will push for a 25% cut in defense spending. This could actually work hand-in-hand with one of Obama's proposals for a "civilian National Security Force," which he said would be as well funded as the military. If the defense budget is slashed, then it makes it easier to fund a new organization at the same level.

Retirement funding, Several powerful House Democrats are talking about abolishing the tax breaks for 401K retirement plans, and replacing it with an expanded Social Security tax. This would have a devastating effect on the national economy, as it would take a huge hunk of capital that is currently infused into the financial system and syphon it off into government coffers. Again, this could help Obama, as it would give the government a fresh source of money to cover his planned spending increases.

That's just three examples. There are plenty more.

When Barack Obama takes the oath of office on January 20, he will be more than just the Chief Executive. He will be the titular head of his party, he will be the "face" of the nation, and his chosen vice president will be the presiding officer of the Upper House of Congress. It will be interesting to see if he uses his newfound clout to assert -- for the first time in his career -- his own agenda and goals over those of the leadership of Congress.


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Comments (20)

In an attempt to be humorou... (Below threshold)
Chip:

In an attempt to be humorous, does an Obama Presidency mean that when you copy another persons material or otherwise commit "internet piracy", aren't we just "spreading the wealth"?

Now as for the post, I agree with you Jay, this is going to be an interesting thing to watch, this Obama Presidency.

Obama has never been a lead... (Below threshold)
hermie:

Obama has never been a leader. He has always been part of a machine, so he has never been responsible for anything where he would be held accountable for his actions, or his failures.

The POTUS is the Chief Executive, and is held accountable, rightly or wrongly, for all Executive Branch agencies and departments' actions or inactions. This is not a job where you can point to a letter you wrote, vaguely expressing 'concern' regarding a problem; nor is it a position where you can hide behind a committee or group of advisors.

The Presidency is the most visible and most responsible position on Earth. You either suck it up and take responsibility, or you end up a footnote in Wikipedia.

If Obama and Democrats so m... (Below threshold)

If Obama and Democrats so much as fart in the general direction of abolishing tax breaks for 401(k)'s, he'll guarantee himself a one-term presidency, and a very ugly one at that.

"Baghdad" Jim McDermott is one of the asshats behind this push. Do what I did and send the SOB a very strong message.

http://www.house.gov/mcdermott/

So, abolishing the tax brea... (Below threshold)
Crusty Dem:

So, abolishing the tax break most Americans do not get on the corporate contribution to a 401k is insanity, but abolishing the health insurance tax break that most Americans do get is good public policy. Just checking here..

For the record, most of the suggestions in the article are completely retarded, particularly with regards to social security. I could see cutting the 401k subsidy if it would really give $80 billion/yr, as far as new taxes go (and we all knew there would be some, no matter who took office), it's not the worst. But the social security suggestions are idiotic.

As far as cutting defense spending and getting out of Iraq (in a reasonably timely fashion), that sounds like good libertarian government to me. Is there anyone who thinks there isn't an incredible amount of useless bloat in the defense budget?

Representative Bar... (Below threshold)
Mac Lorry:
Representative Barney Frank, apparently not content with his role in wreaking havoc on the nation's financial system, has announced that he will push for a 25% cut in defense spending.

Given all the giveaways Obama promised there's no choice but to cut defense spending by at least Barney's amount. Obama has said he would dismantle the missile defense program at a time when it's becoming a viable defensive weapon against the likes of Iran. Once dismantled it will take billions upon billions to bring it back when some despot makes it clear why the US needs it. Obama is also going after advanced weapons systems. You know, the stuff that lets a few American soldiers defeate hundreds of enemy soldiers, or gives us air dominance over the battlefield like the F22 Raptor. The goal must be to increase the American body count to deter the U.S. from going to war.

This could actually work hand-in-hand with one of Obama's proposals for a "civilian National Security Force," which he said would be as well funded as the military.

Civilian National Security Force is an oxymoron. It's really a national police force that's intended to patrol the suburbs like regular police patrol the slums of the inner city. Obama wants to give white suburban folks the same scrutiny that inner city blacks have gotten for years. The goal is to imprison white men at the same rate as black men. Obama intends to prove the theory that blacks don't commit any more crimes than whites, the disparity in imprisonment rates is only because of the scrutiny.

There there's the new IRS rules. You'll have to check a box indicating your race and all whites making more than 45,000 a year have to be audited going back seven years. Obama needs money and who's going to defend rich white tax cheats?

Again, this could help Obama, as it would give the government a fresh source of money to cover his planned spending increases.

I don't think Obama can get his hands on that money because the money from this new ponzi scheme is needed to prop up the current ponzi scheme (Social Security).

Crusty Dem,<blockquot... (Below threshold)
Mac Lorry:

Crusty Dem,

So, abolishing the tax break most Americans do not get on the corporate contribution to a 401k is insanity, but abolishing the health insurance tax break that most Americans do get is good public policy. Just checking here..

First if you read the report Jay linked to it's most of the tax breaks, not just the corporate contribution part. Here's a news flash for you. Most middle class people who don't have an employee or union pension plan have a 401(K), and it's not tax free, it's tax deferred. A person pays the tax when they pull the money out. If they don't have a lot of money in retirement they don't pay a lot of tax. What, you want to tax the poor now?

McCain ran on his idea of abolishing the health insurance tax break and was rejected by the voters. Had Obama ran on eliminating the tax deferred status of millions of people's 401(K) and then imposing a 5% increase in payroll tax McCain would be the new President. Would you be ok with that result? Just checking here. . .

Going to be an interesting ... (Below threshold)
GarandFan:

Going to be an interesting 4 years. A man with no major legislative accomplishments, always agreed with party members on every issue, never took a principled stand on any major issue...........now everyone HOPES that the leopard will CHANGE his spots and become a leader.
Yeah....that's gonna happen.

I would also say that one o... (Below threshold)
retired miliitary:

I would also say that one of the first things he will need to deal with is the Israeli attack against Iran that will probably occur between now and Inaugaration day.

"Is there anyone who thi... (Below threshold)

"Is there anyone who thinks there isn't an incredible amount of useless bloat in the defense budget?"

There's a lot of useless bloat in every.single.government.program. Yet for some reason, a significant portion of the electorate just voted to feed them more.

Mac,The article is... (Below threshold)
Crusty Dem:

Mac,

The article is extremely unclear, but my understanding is that they are not talking about eliminating the tax-break on 401(k)'s, but the corporate tax-break for matching 401(k)'s.

"From where I sit that's just crazy," said John Belluardo, president of Stewardship Financial Services Inc. in Tarrytown, New York. "A lot of people contribute to their 401(k)s because of the match of the employer," he said. Belluardo's firm does not manage assets directly.

Higher-income employers provide matching funds to employee plans so that they can qualify for tax benefits for their own defined-contribution plans, he said.

"If the tax deferral goes away, the employers have no reason to do the matches, which primarily help people in the lower income brackets," Belluardo said.

Also, note that this is not Obama's plan. I'm not saying he absolutely won't go for it (though I doubt he would), this isn't coming from him.

Crusty,McCain's pl... (Below threshold)

Crusty,

McCain's plan was to move the health care tax break from the corporation to the individual. He should have explained it that way, it would have made more sense and been less scary.

Removing the tax-advantaged status of the 401k would have other implications. For one thing, you would owe capital gains tax year-to-year, which would be exceptionally bad for returns. Growing tax free maximizes the return when you need it in retirement. Not growing tax-free means you will actually need SSI -- and be more dependent on the government to provide for you.

The other reason that the plan McDermott and others were discussing is bad is that it would almost instantly lower the price of stocks by making mutual funds in 401ks less-attractive of an investment. This would be an additional hickey on people who have existing 401ks. The only good thing would be that their losses would offset cap gains for a while, possibly a long while.

If it's Dow 4000 you're after, then by all means tax the 401k.

"Is there anyon... (Below threshold)
Crusty Dem:
"Is there anyone who thinks there isn't an incredible amount of useless bloat in the defense budget?"

There's a lot of useless bloat in every.single.government.program. Yet for some reason, a significant portion of the electorate just voted to feed them more.

Maybe I should clarify. Is there any government program with as much bloat as the defense department? Maybe the new medicare drug plan, possibly the new homeland security department, but aside from that, I don't think so.

And to clarify, my belief that the tax proposed here on 401(k)s is not a disaster is entirely based on the assumption that it's a reduction in the corporate benefit for matching. If I'm wrong and it's a year-to-year tax on the value of the 401(k), I think it's completely insane (and also has no chance of passage).

Crusty Dem,Here's ... (Below threshold)
Mac Lorry:

Crusty Dem,

Here's what the article says:

The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.

"I want to stop the federal subsidy of 401(k)s," Ghilarducci said in an interview. "401(k)s can continue to exist, but they won't have the benefit of the subsidy of the tax break."

So the plan is to eliminate the tax deferred nature of contributions to 401(k) plans as well as their earnings. That's a lot more than the employer matched contribution.

If this passed would they make you pay taxes on all the money you have in your 401(k). If so and if in a single year people would pay in the top income bracket and likely get hit with the Alternative Minimum Tax. In other words the bastards would steal half of your retirement savings. For that you get $600 a year.

Also notice the language Ghilarducci used. This person thinks that the government letting you keep the money you earn is a subsidy. That should scare the crap out of people. Next it will be a subsidy of the government lets you live in your own home.

Also, note that this is not Obama's plan. I'm not saying he absolutely won't go for it (though I doubt he would), this isn't coming from him.

I said the same thing by saying that had this been Obama's plan he would have lost the election. There's no better way to get booted from office than fooling with people's retirement. The phrase "keep you cotton picking hands off" might be racists now that Obama is President elect, but it's the message voters need to send the democrats.

Crusty:As... (Below threshold)
Larry:

Crusty:

As far as cutting defense spending and getting out of Iraq (in a reasonably timely fashion), that sounds like good libertarian government to me. Is there anyone who thinks there isn't an incredible amount of useless bloat in the defense budget?

Well, yes, no, maybe. The defense budget is actually a 50 state jobs program. And selected Dems will be screaming their lungs out if it costs one job in a Dem district. Parsing that carrot will NOT be about cutting useless bloat. It will be about eliminating jobs in Republican Districts while maintaining jobs in Democratic Districts.

I can give you past examples.

Cutting the defense budget ... (Below threshold)

Cutting the defense budget by 25% would mean dropping it from 4.4% or so to 3.3%, or just 10% above Clinton-era funding.

I moved to Temple, TX in 1992. When GHWB was President, the booming from the tank range at Fort Hood, 30 miles away, made you think there was thunder on clear days.

It got a lot quieter after Clinton won. We never heard them practicing the rest of the time I was there. Money for upkeep and maintenance was pretty tight.

A 25% reduction is a bad idea. Then again, BHO already promised to cut missile defense (then flip-flopped) and to slow down or eliminate Future Combat Systems upgrades to ground forces equipment. If you're just going to hit a budget target then I guess all of that stuff is optional.

Taking blame for people killed because of the absence of training or equipment for budget reasons is not optional, though.

Maybe I should cla... (Below threshold)
Maybe I should clarify. Is there any government program with as much bloat as the defense department?

Perhaps not in real dollars, crusty, but as a percentage of total expenditures, I'd say the Department of Education qualifies. I'd call 100% of its budget "bloat."

J.

Crusty, you're "thinking", ... (Below threshold)

Crusty, you're "thinking", "guessing" and "assuming".

No matter what people feel, think or guess, it's no way to run a country.

There's considerable "bloat" in corporations, but we can't control them. They're private entities and we can choose to give them our business or not. We don't have that luxury with the government. Bloat must be identified and addressed on a line-by-line basis, not on guesses or feelings of who is wasting how much money.

We know it's there. But just to announce a general 25% cut is no way to address such an issue.

Obama claimed that he would... (Below threshold)
Hermie:

Obama claimed that he would go through the budget line by line and eliminate 'waste'.

Hello! Unlike the Governor of Illinois, the President of the United States does not have a line item veto, and whatever the Congress decides to spend he has to accept it, or veto the whole thing. Didn't he stick around the Senate long enough to learn about pork barrel projects and earmarking?

Welcome to the big leagues Barry!

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