Economy will be major factor in presidential election

“The argument ends up being more than a matter of what’s fair and really also about what works,” said Austan Goolsbee, former chairman of Obama’s Council of Economic Advisers and now an economics professor at the University of Chicago. “The highest-income people had their taxes cut by trillions over the last 10 years, and it didn’t trickle down into faster growth or more employment. So the president has been arguing that it didn’t work the first time, so we shouldn’t do that again.”

What Obama argued Tuesday is that Congress should adopt his “blueprint for an economy that’s built to last — an economy built on American manufacturing, American energy, skills for American workers and a renewal of American values.” He said he would establish a “trade enforcement unit” to investigate unfair trade practices abroad.

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President Obama urged Congress to pass a payroll tax cut extension and to pass a tax reform that would prevent the wealthy from paying less in taxes through loopholes. (Jan. 24)

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But many parts of his plan are controversial.

Obama, who has tangled with the oil and gas industry, reiterated that he supports opening up 75 percent of the nation’s potential offshore oil and gas reserves for exploration, but he also proposed ending “taxpayer giveaways to an industry that’s rarely been more profitable.” Despite criticism of Energy Department loan guarantees, he said he wants to “double down” on clean energy.

He proposed to tax the vast pools of overseas corporate profits to try to persuade companies to move manufacturing jobs to the United States. But that would arouse the ire of many of the nation’s biggest and most influential corporations, which have been looking for tax breaks before bringing that money home. A handful of the biggest technology companies, for example, have well more than $100 billion parked overseas.

The president wants to put half the savings from the end of war spending into infrastructure, although many lawmakers want to devote all those savings to deficit reduction.

Obama also said he would ask Congress to approve a program that would allow homeowners who are current on their payments to refinance mortgages at the prevailing low interest rates. He said some of the administration’s proposed bank fees would cover the cost of the program. It’s another step for an administration that many housing experts say has not adequately addressed the deep and stubborn housing slump.

“I think it’s a good move,” said John Taylor, president of the National Community Reinvestment Coalition. “I think he’s getting it, that we have to save the property owner if we’re going to save the economy.”

Some of Obama’s supporters are daring to think that the economy might grow enough to convince voters that the nation is at least heading in the right direction. And on Tuesday night, the president claimed credit for a revived auto industry and for more private jobs being created in 2011 than in any year since 2005.

“American manufacturers are hiring again, creating jobs for the first time since the late 1990s,” Obama said.

Said Goolsbee: “If things continue like the last three months, that would be significant progress. The economy is almost certainly not going to be a big plus, but if it moves from one of the toughest things for the president to deal with to something not great but clearly improving, the implication for the president would be nothing but positive.”