Obama Stresses Fairness in Building Durable Recovery

By Alexis Simendinger - January 25, 2012

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Although White House aides insisted that Obama’s address would be a traditional policy stem-winder to accompany his next budget, which will be unveiled Feb. 13, no one was buying that spin, even the president. Supporters and those who receive information from Obama’s campaign received personal email messages (with appeals for donations) from the president shortly after 7 p.m. Tuesday. “Dear Betty," one such email read. "I’m heading to Capitol Hill soon to deliver my third State of the Union address. Before I go, I want to say thanks for everything you’re doing. Tonight, we set the tone for the year ahead. . . . I’m glad to know you’ll be standing with me up there. Barack.”

As expected, middle-class Americans were protagonists in Obama’s tale of a revitalized nation. He argued for tax relief for middle-income earners, pegged to another extension of the payroll tax holiday -- a fight that will resume in Congress when the current one expires Feb. 28 -- plus retention of the Bush tax cuts for those earning less than $250,000 a year.

Obama challenged Congress to work with him to overhaul the tax code so that individuals earning more than $1 million a year would pay an effective tax rate of at least 30 percent. That new detail -- 30 percent, an arbitrary equalizer representing what White House advisers said most middle-class wage-earners pay annually -- expanded Obama’s embrace of the so-called “Buffett Rule,” named for billionaire advocate Warren Buffett.

It also coincided with Romney’s release Tuesday of his 2010 tax return and estimated tax information for 2011, which confirmed that the former Massachusetts governor, a multi-millionaire, paid an effective tax rate of about 14 percent.

A “fair deal” on taxes, Obama proposed, would bar those making over $1 million from taking advantage of tax deductions and subsidies currently allowed by law for mortgages, health care, retirement, and the costs of child care. The wealthy also could no longer qualify for food stamps, unemployment benefits or farm subsidies, the White House said. Previous news reports have underscored that no one who earned more than $1 million received food stamps recently, and in 2009, about 2,300 got unemployment benefits. The real target for the administration is likely the farm subsidies tapped by wealthy -- and mostly Republican -- farmers, possibly including a few in Congress.

While Romney has said he would veto the DREAM Act -- legislation that would provide conditional permanent residency to some illegal aliens -- Obama used his speech to reassure Hispanics that he wants to achieve a pathway to citizenship during his second term. “I will sign it right away,” the president said. Democrats believe Latino voters, along with independents, will make or break Obama’s chances for re-election. “We should be working on comprehensive immigration reform right now,” he added to applause in the House chamber.

Rather than offering U.S. corporations generous tax incentives to hire more workers but without conditions, as many Republicans advocate, Obama said he would ask Congress to work with him on “comprehensive corporate tax reform” that would close loopholes, eliminate incentives that encourage companies to ship jobs overseas, while also lowering some rates. The president said he would like to make all U.S. companies pay a minimum tax on their overseas profits, while creating a new tax credit to cover the “moving expenses” of companies that opt to shut down their operations abroad and bring their businesses home, offering jobs to U.S. workers.

Although Romney has said he would not have bailed out the auto industry, Obama touted his decision to back an industry that has recovered. “On the day I took office, our auto industry was on the verge of collapse,” the president said. “Some even said we should let it die.”

(The president will travel to Michigan on Friday, where he will reiterate his points and explain policies mentioned in his State of the Union address to help reduce college costs.)

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Alexis Simendinger covers the White House for RealClearPolitics. She can be reached at asimendinger@realclearpolitics.com.

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