In front of an overwhelmingly supportive town hall audience that cheered his jabs at Republican lawmakers, President Obama defended his economic policies of the last two years and said he has not yet decided whether to keep Treasury Secretary Tim Geithner and top economic adviser Larry Summers on staff after the midterm elections.
Obama said he had “not made any determination” on who would remain on his economic team for the rest of his first term.
He said Geithner and Summers have done an “outstanding job” but that they have “been at it for two years, and they’re going to have a whole range of decisions about family that will factor into this, as well.” The White House said privately that Obama was sending no signal of impending departures.
But the president spent much of the town hall, hosted by cable channel CNBC, defending himself from the charge that he is anti-business.
“There’s a big chunk of the country that feels I’ve been too soft on Wall Street. That’s probably the majority,” Obama said, in response to questions about his rhetoric toward Wall Street.
Obama said that his support to raise taxes on carried interest for hedge fund managers is a common sense solution.
“Everybody else is getting taxed at a lot more. The secretary of the hedge fund is probably being taxed at 25, 28 [percent]. Right? And these folks are getting taxed at 15 [percent]. Now, there are complicated economic arguments as to why this isn’t really income, this is more like capital gains and so forth, which is a fair argument to have,” Obama said.
“But the notion that somehow, me saying maybe you should be taxed more like your secretary when you’re pulling home a billion dollars or a hundred million dollars a year I don’t think is me being extremist or me being anti-business,” he said to cheers and applause.
But former Bush administration official Tony Fratto said that Obama’s answer revealed a lack of understanding of how markets work.
“Hedge fund, private equity and venture capital managers take actual risk. If their investment decisions don’t pay off, or even lose money, there’s nothing to tax. The president tried to compare this taxing structure to the firm’s secretary. Well, the hedge fund manager’s secretary gets paid no matter what — there’s no risk involved,” Fratto said.
“That risk has to be recognized, but I’d go further in saying it needs to be encouraged. It’s exactly the kind of investment our economy needs right now. We have a crisis of confidence, people are unwilling to make bets on the future, and the president is trying to penalize the very people who — despite the atrocious losses taken in the last two market busts — are still willing to take those risks,” he said. “These are the very people investing in entrepreneurial ventures, making existing firms more productive and profitable, and turning around failed firms. This is absolutely essential to our economy. The president simply doesn’t understand this key component of capitalism.”
While Obama received a few challenging questions from financial analysts or Wall Street brokers such as a the network’s Rick Santelli, the crowd was generally so supportive of the president that they cheered when Obama said it is “premature” to talk of House Minority Leader John Boehner taking over as speaker in event that Republicans regain control of the House.
As for new proposals, Obama sent mixed signals on whether he is in favor of a payroll tax holiday to encourage employers to increase hiring.
“This is something we’ve examined. We are going to be working with businesses to see, does it make sense to initiate some additional incentives in order to hire,” Obama said.
But when asked if he had just green-lighted the idea, Obama demurred: “We are willing to look at any idea that’s out there that we think will help. Bu we’ve got to do so in a responsible way … A lot of ideas that look good on paper, when you start digging into them it turns out that they’re more complicated and they may end up not working the way they’re supposed to.”
The president criticized the Tea Party movement as bereft of solutions to the nation’s biggest problems, namely the deficit and the debt, which Obama said is driven largely by the big three entitlement programs: Social Security, Medicare and Medicaid.
Obama knocked Tea Party leaders for only touting tax cuts instead of offering solutions to looming debt problems, contradicting his own attacks on conservatives who have said they would change or reduce entitlement programs.
“The challenge I think for the Tea Party movement is to identify specifically what would you do. It’s not enough just to say, ‘Get control of spending,’” Obama said. “I think it’s important for you to say, ‘You know, I’m willing to cut veterans benefits.’ Or, ‘I’m willing to cut Medicare or Social Security benefits.’ Or, ‘I’m willing to see these taxes go up.’”
However, Obama and many in the Democratic party have attacked some of the most prominent Tea Party candidates in this election cycle for the very thing the president asserted they were not offering: ideas on how to reduce the entitlement obligation.
Republicans, Obama said in his Aug. 14 weekly address, are “pushing to make privatizing Social Security a key part of their legislative agenda if they win a majority in Congress this fall.”
“It’s right up there on their to-do list with repealing some of the Medicare benefits and reforms that are adding at least a dozen years to the fiscal health of Medicare – the single longest extension in history,” Obama said. “That agenda is wrong for seniors, it’s wrong for America, and I won’t let it happen.”
Obama and top Democrats have attacked Tea Party favorites Rand Paul in Kentucky, Joe Miller in Alaska, Sharron Angle in Nevada and others for proposing different changes or even a phasing out of Medicare and Social Security.
Yet Obama represented the Tea Party movement and Republicans as having a platform consisting only of extending tax cuts.
“What you can’t do, which is what I’ve been hearing a lot from the other side, is saying, ‘We’re going to control government spending, we’re going to propose $4 trillion of additional tax cuts, and that magically somehow things are going to work,'” Obama said.