It now appears likely certain now that Barack Obama will be unable to fulfil his pledge of reversing George W. Bush’s tax cuts for the wealthiest Americans.

Last week, Democratic lawmakers returned home to prepare for next month’s mid-term elections having failed in either chamber even to put the issue to a Vote.
In spite of the fact that President Obama made reversing the tax cuts a central pledge of his election campaign, along with ending combat operations in Iraq, a promise he fulfilled in August, the White House was abandoned last week by nervous Democrats to fight alone at the barricades. To the surprise of many, Nancy Pelosi, the Democratic speaker, did not even schedule a vote before Capitol Hill went home.

“For all the Republicans’ talk about reining in spending and getting our deficits under control, they want to borrow another US$700B, and use it to give tax cuts to millionaires and billionaires,” said Obama in his weekly address before the final week of Congress. “On average, that’s a tax cut of about US$100,000 for millionaires. Instead of cutting taxes for the wealthiest few, I’ve called for tax cuts for middle class families who saw their incomes shrink by 5% during the last, lost decade.”

But Obama’s plea went unheeded. In the absence of a Vote, even one that went the wrong way, deprives Democrats of a clear election talking point about Republicans holding middle-class tax cuts hostage to the interests of the wealthy.

Republicans want to extend the tax cuts, which are due expire in December, for all Americans. Democrats want to exclude the top 2% who earn above US$250,000.

The conclusion is this; Congresswoman Nancy Pelosi did not believe she could get a large enough majority of Democrats to Vote her way. And last week, 47 Democrats in the House of Representatives signed a letter opposing any increase in capital or dividend taxes from the 15% rate for Any income group.

In the Senate, a number of centrist Democrats, including Ben Nelson of Nebraska, Evan Bayh of Indiana and Joe Lieberman, the Independent Democrat from Connecticut, argued that ending the tax cuts for the wealthiest would hit US growth at a time of slackening demand.

The tax cuts now face one of 3 scenarios.

The 1st and most likely is that lawmakers agree to extend the tax cuts for at least a yr, probably 2 yrs, during the “Lame Duck” session of Congress after next month’s mid-term elections. That would push their expiry date back to Y 2012, a Presidential election yr in which it seems unlikely that they would be allowed to lapse.

The 2nd is that lawmakers are again unable to reach a compromise during the Lame Duck session and have to convene a highly unusual session after the Thanksgiving Holiday in late November. A possible compromise could include raising the threshold of Americans who would be exempt from US$250,000 to, say US$500,000 or even US$1M thus embarrassing enough Republicans to Vote with the Democratic majority.

And the last and least likely scenario is that lawmakers are unable to produce any compromise and the tax cuts are allowed to expire on December 31. This would set up an early showdown between what looks likely to be a Republican House and the Obama Administration in which the newly victorious Republicans extend the tax cuts to everybody and dare Obama to veto it.

In none of the 3 likeliest scenarios does Obama get what he wants,his pledge fails.—Paul A. Ebeling, Jnr. www.livetradingnews.com

Posted by Shayne Heffernan on Oct 5th, 2010and filed underLatest News, News & Events, USA.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site