President Obama wants to inject new life into the economy with a “grand bargain” that will package Republican and Democrat desires into one omnibus bill. Obama made his first big move in selling this package to America and the Congresspeople who represent it at a distribution center for Amazon.com in Chatanooga, Tennessee. What’s in the grand bargain, why do it this way and what will happen in Congress? Here’s what you need to know:
1. The basic deal is a cut in the corporate tax rate plus an economic stimulus package
Billed as a “grand bargain for the middle class,” Obama wants to make life easier for corporations, while simultaneously providing a boost in spending in areas that include infrastructure improvements and manufacturing. The tax cuts have already been floated: a reduction in the corporate tax rate from 35% to 28%, and down to 25% for manufacturers. The idea is to get a new spending initiative through Congress by offering Republicans something from their wishlist: reduced taxes.
2. Both ends of the deal are being promoted as good for jobs
The selection of the Amazon distribution center, opened in 2011 and one of the company’s biggest, is chosen to highlight what corporations can do when given more capital to work with. It both sells the idea and provides cover for Republicans who want to support that end of the proposal. Stimulus spending, though it doesn’t always get credit for it, does boost the economy by providing jobs, which provide income, which gets moved around the economy some more.
3. Republicans are already complaining about this deal
The focus of Republican ire has been not the stimulus spending, but the tax cuts. The problem, according to Speaker of the House John Boehner is that the corporate tax cuts are not bundled with an individual tax cut. This seemingly populist move would actually benefit the rich: the argument being made in favor of cutting both corporate and individual taxes is that some small businesses file as individuals. To also provide these businesses with a tax cut, Obama would likely have to give the Bush tax cuts back to the richest Americans.
4. The main areas of investment in the grand bargain: manufacturing, infrastructure and renewable energy
Manufacturing and construction still form much of the backbone of the middle class in America, and many people still struggling from the 2008 recession are in those sectors. Boosting those industries will help get the middle class back on its feet in a relatively expedient way. Renewable energy is on the cusp of being the next big industry in America. The cost per watt still needs to come down a little, but solar is getting close to being cost-competitive with coal. Also, we need a course correction to not suck the planet dry of the resources it needs to sustain 7 billion people (and counting).
5. This deal will need a lobbying push from big business to get through
Democrats will be happy to get behind this grand bargain as laid out by Obama. Both Obama and Democratic Senators and Representatives see the need for more infrastructure spending, and the only way they can get that through Congress is with a sweetener, such as a corporate tax cut (something most Democrats are fine with). Republicans, however, don’t want to give Obama any big victories before the 2014 election (or the 2016 election for that matter). They also don’t want to be seen as making deals with Obama, which would be fodder for primary challengers, such as Liz Cheney in Wyoming. The only way Republicans will be motivated to work on this deal will be if their big business supporters make it clear that they want that tax cut.