Obama and The Tax Cut Gremlin

Next year at about this time we’re going to learn something about Barrack Obama. Some presidents are “lucky”, like Ronald Reagan and Bill Clinton, and nothing bad ever sticks to them. Some presidents can’t sit in Airforce One without getting mud all over their shoes—like Jimmy Carter and Richard Nixon, the ones we call “unlucky”.
Which one will O’bama prove to be? Onto every administration little screw ups are going to fall—like pattering rain drops. A big one just took aim at him. This new stimulating tax cut—the one where everybody got money off on his taxes and us retirees get $250 checks--?
Ahem. The Internal Revenue Service, with its incomparable gift for conveying bad news in the worst possible light, just admitted to miscalculating the new withholdings. If their revised calculations are correct, lots and lots of people are going to have to give money back next April.
As near as I can figure it, I’m going to get $250 this month and then have to give most or all of it back next tax time. The same is likely to be true for people with two jobs or in families with two working parents—the hit there can be around $400. And a few thousand or million other folk.
How happy we are all going to be. What stimulates this spring looks like it is going to be a lot like driving with the emergency brake on next spring. Some unforgiving souls are going to be certain that O’bama did this to them on purpose, that it was all a plot.
The crucial question in an election year is: How many? How many are going to think it was sleight of hand; how many are going to laugh it off as they take a smaller return or write out a cheque for $250 or $400 bucks? The answer will absolutely tell us whether the president falls into the lucky or the unlucky category.
If he’s lucky and as smart as he seems to be, he will find some painless way to fix everything before the end of the year so that nobody has to give anything back at all. Going through Congress to raise the stimulus to the higher levels reflected in current withholding will be a messy chore.
Telling everybody that, oh oops, starting in August you get a whopping increase in this year’s withholding (and maybe a deduction from Social Security cheques) kind of defeats the whole idea of a stimulus. It could be even messier.
Going through Congress might be easier—but it will play havoc with the already unconscionable budget deficit. It may work. After all, much of Congress faces election next year. They don’t need everybody mad at them come next spring and summer.
Then, again, maybe somebody can come up with a relatively painless third alternative—it escapes my limited mind at the moment. But the budget people in the White House can be as crafty as a New York banker when needed. Now’s the time.
This tax hit next spring will come at about the same moment when we begin to have a clear fix on how well O’bama’s draw down strategy in Iraq is working. We’ll have a notion of whether or not 21,000 more GIs can solve Afghanistan’s problems. Will Pakistan survive?
All sorts of program report cards will be coming through voter mail slots next year at this time—too late to blame all the problems on George Bush. Will we have universal health coverage? Will we ever get it? Are people being hired again? At decent wages? If things are working out, we should have a pretty good idea when next year’s tulips start blooming. Or if not.
The tax miscalculation could be felt as a last straw (especially for somebody who loses his job between now and then) or it could be passed over as a minor blip on the road to renewed prosperity.
If your house isn’t in foreclosure and your payments are makeable, losing a few hundred off your tax return can be far more endurable than if the notice has already been nailed to your door.
By spring and summer of 2010, we will be in a much better position to decide if O’bama is one of the lucky ones—or not.
I’ve said it before, but it’s worth repeating. When the Emperor Napoleon wanted to hire an official for his government, he always only had one final question before choosing: “Is he lucky?”