Wednesday, January 25, 2012

US is back as a global power, says Obama

Business Times - 26 Jan 2012


US is back as a global power, says Obama

He also calls on wealthy Americans like Romney to pay more in taxes

By LEON HADAR
WASHINGTON CORRESPONDENT

ON THE same day that leading Republican presidential candidate Mitt Romney released his tax returns which showed that he paid less in taxes than top wage earners, US President Barack Obama launched his populist re-election campaign during his State of the Union Address.

Among other things, President Obama called on wealthy Americans like Mr Romney to pay more in taxes and pledged to come to the aid of many middle-class Americans who, unlike Mr Romney, live from pay cheque to pay cheque.

Mr Romney's tax returns showed he paid a lower effective tax rate than wage-earners on his US$42.5 million (in combined 2010 and 2011) income from investment profits, dividends, and interest.

President Obama's nationally televised address before Congress that marked the start of his campaign highlighted a vision of government that invests in strengthening the manufacturing base, reforming education, and creating new sources of energy and that places at the centre of its policy the plight of America's workers and middle-classes as it tries to give every American a 'fair shot'.

Indeed, the agenda that President Obama promoted in his speech drew a sharp contrast with the free market policies that are going to be central to the vision of the Republican presidential candidate.

'When Americans talk about folks like me paying my fair share of taxes, it's not because they envy the rich,' President Obama said. 'It's because they understand that when I get tax breaks I don't need and the country can't afford, it either adds to the deficit or somebody else has to make up the difference.'

Unlike his three previous national addresses before Congress that had placed an emphasis on bipartisanship and cooperation with the Republicans, this time, President Obama tried to dramatise his ideological and policy differences with the Republicans.

The Republicans have used their control of the House of Representatives to sabotage many of the White House's initiatives.

If, as it is still widely expected, former business executive Mr Romney, whose estimated net worth is close to a quarter of a billion US dollars is nominated as the Republican presidential candidate, President Obama would be facing a rival who embodies a pro-business orientation not only in terms of his conservative political ideology but also in his background.

Mr Romney is one of the wealthiest Americans ever to run for the White House. More significantly, some of his wealth is held in the Cayman Islands and other foreign tax havens. Mr Romney, as an executive in the unpopular financial industry, made a fortune restructuring ailing companies and in the process laying off thousands of American workers.

The US tax system favours income from investment over income from wages. That explains why Mr Romney will pay around 15 per cent in taxes on his income. An American top wage earner could pay 35 per cent on his income.

That the US tax code is helping the rich get richer and help widen the social-economic gaps in this country - and that Republicans are championing policies that benefit Wall Street and the wealthiest Americans like Mr Romney - looks to be one of the major themes of President Obama's campaign as he tries to get re-elected for a second term.

Mr Romney and other Republicans have accused President Obama and the Democrats of fomenting 'class warfare'. They argue that the tax rates on business owners should remain low so as to provide incentives for these 'job creators' to create new jobs.

But the rise of the Occupy Wall Street movement has helped draw public attention to the unfairness of the economic system and President Obama is clearly hoping to highlight that by inviting Debbie Bosanek, the secretary of billionaire Warren Buffett to attend his address on Tuesday, sitting next to First Lady Michelle Obama in the chamber of the House of Representatives.

Berkshire Hathaway chairman Mr Buffett noted that his secretary's tax rate was higher than his, leading President Obama to promote the so-called Buffett Rule, requiring a minimum tax rate for Americans making more than US$1 million a year.

President Obama also used his address to pre-empt the economic nationalism of Mr Romney and the other Republican presidential candidates by proposing the establishment of a new 'trade enforcement unit' that would investigate unfair trade practices pursued by China and other economies and introduce measures to counter them.

In a way, President Obama seemed to be continuing to develop the narrative he had sketched earlier this year when he painted himself as the political heir to Teddy Roosevelt, one of the 20th century's most celebrated progressive American presidents who, very much like President Obama, tried to reform an American economy facing major global challenges. He also stood up to an out-of-control Wall Street and built the foundations of a viable welfare state that would protect the interest of the middle-classes.

President Obama hopes to follow in Teddy Roosevelt's footsteps by insisting as he did during his speech that he would oppose any efforts to return to the economic policies pursued by Republican administrations that brought about the 2008 financial crisis and to demolish the foundations of the existing welfare state.

And President Obama also used his address to respond to the accusations by Mr Romney and the other leading Republican presidential candidates that he has weakened US global strategic position. President Obama highlighted several of his foreign-policy achievements, including the mission that killed Osama bin Laden and withdrawal of all US troops from Iraq.

'America is back' as a world power, President Obama said.

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