Tax Policy Center Releases Guide to the Tax Provisions of Obama's 2012 Budget

You can check out the summary of their report below, or click here to download the complete analysis in PDF format.

The Tax Policy Center has examined the key tax proposals in President Obama’s 2012 budget. Separate discussions below describe each of the proposals including current law, proposed changes, and, when appropriate, the distributional effects. The budget as presented by the president lacks complete details on many of the tax proposals. Some provisions had virtually no detail, and our discussion of them is necessarily limited.

The budget assumes a baseline in which the 2001–03 tax cuts are permanently extended for single people with income under $200,000 and couples with income under $250,000, the estate tax permanently reverts to its 2009 level, and parameters for the alternative minimum tax (AMT) are permanently indexed for inflation from their 2011 levels.

Continue reading at TaxPolicyCenter.org…

Tax-Cut Extension May Bolster Economy, Limit Need for Fed to Go Beyond QE2

From Bloomberg.com:

President Barack Obama’s agreement to prolong Bush-era income-tax cuts may reduce pressure on the Federal Reserve to extend its $600 billion bond-purchase program while spurring U.S. economic growth.

Obama’s deal with congressional Republicans may raise gross domestic product next year by as much as half a percentage point to about 3.1 percent, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. Tom Porcelli, a senior economist at RBC Capital Markets Corp. in New York, is raising his growth forecast for 2011 by one point, also to 3.1 percent.

The agreement goes beyond what economists were expecting by including a 2 percent cut in payroll taxes, which fund Social Security and Medicare. The proposal also sets the estate tax at a top rate of 35 percent, extends aid for the long-term unemployed by 13 months and would allow companies next year to deduct the full cost of investments in equipment.

“I think it does reduce the odds that the Fed does more purchases,” Feroli said. “You’re going to have a pretty nice increase in disposable income and that should lift consumer spending.”

Stocks rallied after the agreement was announced, sending the Standard & Poor’s 500 Index to the highest level since the financial crisis in September 2008. Gains were erased in the final hour of trading after Obama said he’ll push to overhaul the tax code in two years. Treasuries fell and copper rose to a 31-month high.

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Short on Votes, Deficit Panel Delays Decision

It looks like Washington is sticking with their usual methods of dealing with problems: just delay the vote! This method has been used so often, it’s almost a joke. Except, no one’s laughing. Between no clear call on the Bush tax cuts, estate tax changes, and now the deficit panel, all of Washington seems to be suffering from the same problem: procrastination in the face of opposition.

From Reuters.com:

A presidential panel on balancing the U.S. budget on Wednesday revised its fiscal austerity plan with deeper spending cuts and a more flexible tax code overhaul, hoping to draw broader political support.

The 18-member commission, established in February by President Barack Obama, discussed its revised plan at a public meeting on Capitol Hill. The panel is due to vote on it on Friday, two days later than originally scheduled.

The plan envisages reducing the budget deficit to 2.3 percent of gross domestic product by 2015, from 8.9 percent in the last fiscal year as the United States, along with other major powers, struggles to right its economy after the world financial crisis and deep recession.

Republican Senator Judd Gregg and Democratic Senator Kent Conrad, both veterans of Washington's budget wars, voiced support for the plan at the commission meeting.

"I am prepared to support this plan and support it strongly," said Conrad, who chairs the Senate Budget Committee.

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Acne Cream? Tax-Sheltered. Breast Pump? No.

As part of the new health reform bill, a handful of medical expenses will result in a break for American taxpayers. Dentures, acne cream, and even artificial turf for children with allergies are all viewed as medical expenses by the IRS. However, nursing mothers will not be allowed to use tax-sheltered health care accounts to pay for breast pumps, since the IRS has ruled that breastfeeding does not qualify as a form of medical care.

NY Times.com reports

With all the changes the health care overhaul will bring in the coming years, it nonetheless will leave those regulations intact when new rules for flexible spending accounts go into effect in January. Those allow millions of Americans to set aside part of their pretax earnings to pay for unreimbursed medical expenses.

While breast-feeding supplies weren’t allowed under the old regulations either, one major goal of the health care overhaul was to control medical costs by encouraging preventive procedures like immunizations and screenings.

Despite a growing body of research indicating that the antibodies passed from mother to child in breast milk could reduce disease among infants — including one recent study that found it could prevent the premature death of 900 babies a year — the I.R.S. has denied a request from the American Academy of Pediatrics to reclassify breast-feeding costs as a medical care expense.

In some respects, the biggest roadblock for mothers’ groups and advocates of breast-feeding is one of their central arguments: nursing a child is beneficial because it is natural.

I.R.S. officials say they consider breast milk a food that can promote good health, the same way that eating citrus fruit can prevent scurvy. But because the I.R.S. code considers nutrition a necessity rather than a medical condition, the agency’s analysts view the cost of breast pumps, bottles and pads as no more deserving of a tax break than an orange juicer.

Read more here

The Pros and Cons of a Nation Wide Foreclosure Freeze

Bank of America made headlines with their announcement that they would temporarily pause all foreclosure proceedings to investigate procedures and allegations of false affidavits. Shortly thereafter banks like Chase and GMAC also issued a memorandum against evictions. The current review is only expected to take a few weeks. At that point financial institutions are hoping that foreclosures can resume, however, the possibility of mass foreclosure fraud has worried taxpayers across the country. Currently, 10% of Americans are delinquent on their home loans, and with an election just around the corner many members of Congress have spoken out about the possibility of a nationwide foreclosure freeze. Although the Obama administration does not support the moratorium on a Federal level, the Senate Banking Committee has scheduled a hearing on November 16^th to address the issue.

For all of my readers confused about the foreclosure fraud investigations and nationwide freeze, I have put together the following list of pros and cons. If you can think of any that I might have missed, drop me a line on either Twitter or Facebook.

Pro: Help to Struggling Homeowners

The number of American families that has suffered a foreclosure has been on the rise since 2007, and it has been expected that nearly five million homeowners could face foreclosure in the next two years. With a freeze in place, thousands of families will be able to stay in their homes. However, the current moratorium is only temporary and banks are still tracking delinquency so that they can resume foreclosure proceedings once the investigation has concluded.

Con: Nightmare for Banks

Although the investigation into foreclosure practices might be good for families struggling to pay their bills, it could become a nightmare for banks, and many other Americans. The credit market has been tight for years, which has made it difficult for small business owners to hire additional workers. Economists suggest that financial institutions stand to lose $2 billion every month that foreclosures are not moving forward. If revenue continues to decline, many worry that it will continue to prevent any improvement to the unemployment problem. Additionally, if banks are found guilty of foreclosure fraud it could lead to hundreds of lawsuits.

Pro: Fraud Investigations

The reason banks have been stalling foreclosures is to look into allegations of foreclosure fraud. When Bank of America began their freeze, officials claimed it was to look into cases to ensure no fraudulent documents were used to confiscate homes. After the investigations conclude, safer foreclosure programs are expected to be enacted which will help protect American homeowners. Additionally, some taxpayers could receive compensation if it is deemed that banks used fraudulent documents.

Con: Economic Recovery Prevention

Many politicians have warned a federally mandated nationwide foreclosure freeze would be bad for the economy. During a speech in New York, Senate Banking Committee Chairman Christopher Dodd said “a broad, sweeping moratorium is probably unwise. There are many institutions that are actually engaging the foreclosure process intelligently and well and doing a good job. To stop that across the board from happening would be very harmful for the economy.”

Pro: Stop to Robo Signing

Unfortunately, as financial institutions foreclosed on record numbers of homes over the past few years, the practice of using robo-signers emerged. Experts are accusing these so called robo-signers of approving hundreds of foreclosures every day, without taking the time to review them for legality. If investigations prove that this practice led to unjust foreclosures, then the government may step in to prevent robo-signers.

Con: Housing Market Instability

The Obama administration’s main objection to a nationwide foreclosure freeze seems to stem from a fear of further damage to the housing market, and economy. The real estate market has certainly seen a rough few years. A nationwide foreclosure freeze would only create more uncertainty, and possibly lower home values.

The Tax Implications of The New Small Business Jobs Act

In September President Obama signed the Small Business Jobs act into law. The legislation was designed to provide tax cuts to small businesses and increase access to small business capital with a $30 billion fund for local community banks. Just one week after being signed into law the Small Business Administration was able to approve nearly 2,000 loans for nearly $970 million. There were 8 main tax implications of the new legislation, and I have put together the following list of how these changes will affect small business owners.

1. Capital Gains from Business Investments

The first tax cut included in the legislation is a 75% exclusion from capital gains taxes for key small business investments. The act also puts another provision into tax law that will eliminate all capital gains taxes on these investments if they are held for five years. It even eliminates the alternative minimum tax on these sales. The White House estimates that this change will affect over one million small business owners.

2. Expense Investment Limits

The bill raises the amount of investments that businesses can write off for 2010 and 2011. The limit was raised from $250,000 to $500,000. It also expands Section 179 to include improvements to rental property. However, these provisions will expire at the end of 2011.

3. Bonus Depreciation

The act also restores the 50% first-year depreciation for qualifying property through the end of 2010. The President claims that it will allow 2 million businesses to make new investments to stimulate the economy.

4. Self-Employment Deduction

In addition to deducting health insurance expenses for themselves, small business owners and self-employed taxpayers can deduct the cost of their family’s health insurance premiums from their taxable income.

5. Cell Phone Expenses

The legislation also makes it easier for a business to deduct or depreciate cell phones. Before, cell phones were included in the listed property category, meaning that if they were not used mostly for a business purpose then the deduction would be subject to strict limits. However, now the IRS has removed this documentation requirement so that virtually every business owner can qualify for the deduction.

6. Start-Up Expenses

To encourage taxpayers to open new businesses, the bill has increased the amount of start-up expenses that can be deducted. The limit was temporarily raised from $5,000 to $10,000 and the cap on expenditures that triggers a phase-out was increased from $50,000 to $60,000.

7. Five-Year Carry Back

The Small Business Jobs Act also allows qualifying business owners to “carry back” their credits to offset five years of taxes, while also allowing the credits to offset the Alternative Minimum Tax. To ensure that this law only affects small business owners, qualifying businesses must have less than $50 million in annual gross receipts.

8. Limitations on Penalties for Errors

The final tax change in the legislation limits the penalty for failing to report certain tax transactions to a percentage of the tax benefits from the transaction. The penalty had been criticized for imposing a large burden on small businesses.

Obama Won’t Re-Nominate Former DOJ Tax Division Choice

From Main Justice.com

President Barack Obama will not re-nominate his former choice for the Justice Department Tax Division, whose nomination the Senate most recently sent back to the White House in August, a White House official told Main Justice on Tuesday.

Mary L. Smith, whose nomination was returned to the president twice by the Senate, will “pursue other opportunities,” the official said. She is currently Senior Counsel to Assistant Attorney General Tony West of the Civil Division. Smith, a Cherokee Nation member, would have been the highest-ranking American Indian ever to work at the DOJ.

The former nominee faced resistance from Republicans who were concerned about her lack of tax law experience. Smith was a partner at the Schoeman, Updike & Kaufman LLP and former in-house counsel to Tyco International Ltd., the international security products and services conglomerate.

The president first tapped Smith for the post in April 2009. The Senate Judiciary Committee initially endorsed her in June 2009 without any backing from Republicans. Her nomination was returned to the White House for the first time in December. Obama re-nominated her in January, and she was reported out of committee again in February with no Republican support.

Smith was the last Obama administration Assistant Attorney General nominee waiting for a vote in the Senate when her name was returned to the White House in August. Indiana University law professor Dawn Johnsen, who had faced similar opposition to her nomination to head the DOJ’s Office of Legal Counsel, withdrew from consideration in April.

White House Aides Owe the IRS $831,000 in Back Taxes -- And they're Not Alone

A new report completed by the Washington Post revealed that 41 White House aides owe a combined $831,000 to the IRS. However, these aides are not alone. Federal employees nationwide owe the IRS an estimated $1 billion in unpaid taxes.

The Los Angeles Times reports:

Over the years a lot of suspicion has built up across the country about Washington and its population of opportunistic transients coming to see themselves as a special kind of person, somehow above average working Americans who don't work down in that former swamp.

Well, finally, an end to all those undocumented doubts. Thanks to some diligent digging by the Washington Post, those suspicions can at last be put to rest.

They're correct. Accurate. Dead-on. Laser-guided. On target. Bingo-bango. As clear as it's always seemed to those Americans who don't feel special entitlements and do meet their government obligations.

We now know that federal employees across the nation owe fully $1 billion in back taxes to the Internal Revenue Service.

As in, 1,000 times one million dollars. All this political jabber about giving middle-class ...

... Americans a tax cut. Thousands of feds have been giving themselves one all along -- unofficially. And these tax scofflaws include more than three dozen folks who work for the president with that newly decorated Oval Office.

Read more here

Democrats Against ObamaCare

From the Wall Street Journal:

This wasn't a good week for ObamaCare, with Missouri voting to repeal the law and a Virginia judge refusing to dismiss a serious Constitutional legal challenge. Unlikely as it sounds, however, the repeal movement even came to include House Democrats.

To wit, the House voted last week to repeal one ObamaCare mandate. It might have been the first part of the bill to go over the side, except Democrats rigged the vote so that it failed, even though it got a majority.

The target was an ObamaCare footnote that could wreak havoc with more than 30 million small businesses. In the name of smoking out the illusory "tax gap" of unreported business income, Democrats snuck in a requirement that companies track and submit to the IRS all business-to-business transactions exceeding $600 annually. This 1099 reporting detail received no scrutiny until the IRS's National Taxpayer Advocate Nina Olson exposed the paperwork burden, which would produce no improvement in tax compliance.

Just before the House left town for August, Dave Camp, the ranking Republican on the Ways and Means Committee, offered an amendment that would have rescinded these mandates; as a "motion to recommit," it was guaranteed an up-or-down vote.

Speaker Nancy Pelosi and wingman Sander Levin were terrified that rank-and-file Democrats would defect, so they pulled their entire bill and reintroduced it a few hours later, with the basic Camp language included. In other words, not only was the House leadership unwilling to defend the 1099 provision but it took the lead in rolling it back, if only to prevent an embarrassing floor spectacle.

Who Would Obama Tax Increases Hit?

From the Wall Street Journal:

Some conservatives and moderate Democrats say that letting the Bush Administrations tax cuts expire only for top earners, as President Obama has proposed, would actually hurt small business.

Sen. Jon Kyl (R. Ariz.) said the increased tax rates that would result would “clobber small businesses.”

“Small businesses generated roughly 64 percent of net new jobs in the past 15 years,” he wrote in response to a Washington Post editorial. “Of the almost 120 million private-sector workers in the United States, slightly more than half work for small businesses. So if we’re trying to promote economic policies that create jobs, why raise taxes on the job creators?”

Democrats counter that the taxes would mainly hit wealthy–a group voters typically are much happier to tax than small business. They point out that taxes would rise only for those households earning $250,000 or more.

So who would be hurt? Small businesses or rich people?

The Tax Policy Center, a venture of the Urban Institute and Brookings Institution, just released an analysis of IRS figures showing how many of those top earners–whose rate would jump to 39.6%–also are small-business owners.

Get Tan Today: 10% Tax On Its Way

Getting a bronze glow for the summer -- at least artificially -- is about to get a little more expensive. If you were planning on hitting up the tanning salon in the near future, then you should try to get to the salon before the end of the day. The tanning tax is going to take effect tomorrow, meaning the price you pay for your tan will increase by 10%. For more information on you can check out my blog entry explaining the tanning tax, or read more about this new tax from the article below courtesy of CNN Money.

A 10% tax will be tacked on to indoor tanning bills starting Thursday, as part of the health-care reform President Obama signed into law in March.

According to guidelines from the IRS, the tax will apply to electronic products designed for tanning that use one or more ultraviolet lamps with wavelengths between 200 and 400 nanometers. Other sunless tanning options, such as spray tans, are not subject to the tariff.

The tax is expected to generate $2.7 billion by 2019, according to the Congressional Joint Committee on Taxation.

Tanning salons are charged with collecting the levy and reporting it to the government each quarter. That money will help fund the health-reform package, which carries a price-tag of $940 billion.

A Scramble to Finish Bank Rules This Week

President Obama is meeting with world leaders at the Group of 20 Summit this weekend in Korea. Our financial overhaul regulations need to be completed before the President’s trip and Lawmakers are scrambling to sort out their differences on a range of certain provisions. According to the Wall Street Journal, in their debate they are are discussing everything from bank regulations to consumer protection. If they don’t complete their work this week, Obama will go to the Group of 20 Summit without a bill and Congress might not be able to pass a law before their July 4th recess, which is what they have been pushing for.

One provision under debate is the Volcker Rule (originated by former Federal Reserve Chairman, Paul Volcker) which had originally imposed a ban on banks making investments with their own money—a practice called proprietary trading. Lawmakers are looking to compromise with allowing large banks to invest a small amount, like 2%, into certain privately managed funds. "Mr. Volcker wants and expects a really strong bill," said the former Fed chairman's assistant, Tony Dowd. "He doesn't want it to look like Swiss cheese."

They were also divided about how to set up stricter capital rules for banks with more than $10 billion of assets, as required by an amendment Senator Susan Collins (R., Maine) attached to the Senate bill last month. Banks are saying the new rules would restrict their ability to lend. Lawmakers on Monday did reach a deal that would limit the amount of fees banks are allowed to charge retailers for processing debit cards.

The conference committee of congressional negotiators seeking to resolve differences between the House and Senate versions of the bill plans to work through the consumer-protection issues on Tuesday, the Volcker Rule on Wednesday, and derivatives regulation on Thursday. The timing could slip if lawmakers need more time to resolve disputes. The very reason for the Summit is to discuss measures to promote the financial stability of the world—having our domestic issues worked out would sure look better for the President during the Summit.

Permanent middle class tax cuts too costly

We are entering mid-term elections and thus everything is becoming a “political issue.” Not outside of the norm, tax cuts have become a primary focus. Tax cuts enacted under former President George W. Bush are scheduled to expire at the end of the year, affecting taxpayers at every income level. President Barack Obama proposes to permanently extend them for individuals making less than $200,000 a year and families making less than $250,000 — at a cost of about $2.5 trillion over the next decade.

Many Democrats want to extend them before the elections, so they can campaign on passing tax cuts for the middle class. But Republicans argue that many of the high earners who would face tax increases under Obama's plan are small business owners struggling to stay afloat in a tough economy.

House Majority Leader Steny Hoyer said Tuesday that tax increases will eventually be necessary to address the nation's mounting debt, and pull in revenue, raising a difficult election-year issue.

Hoyer raised the possibility that Congress will only temporarily extend middle-class tax cuts set to expire at the end of the year. He suggested that making them permanent would be too costly.

In the short term, government spending has been necessary to stimulate the economy, Hoyer said. But in the longer term, Congress will have to rein in spending and raise taxes to tackle the debt, he added.

"Raising revenue is part of the deficit solution, too," Hoyer said.

Senate Republican Leader Mitch McConnell said, "It's now official. Top Democrats on Capitol Hill are starting to signal their intention to raise taxes on the middle class."

Read the full Associated Press article here.

Supreme Court Nominee Elena Kagan

By now you have all probably heard about Elena Kagan, President Obama's nomination to replace Justin Stevens on the Supreme Court. Although her confirmation hearings have not yet began, I decided to make some predictions, based upon her career thus far, about her business and tax views.

No Tax Records

It is very difficult to determine exactly what impact Kagan would have on the U.S. tax code because, if confirmed, she would be the first Supreme Court Justice—in nearly four decades—to serve without any prior experience as a judge.

Respected Member of the Law Community

Kagan has a Bachelor's degree in history from Princeton, a Masters in Philosophy from Oxford and a J.D. from Harvard. She was a professor at the University of Chicago Law School, before being appointed as dean of Harvard Law School. Kagan is a highly respected member of the legal community.

Clerking Experience

Kagan worked as a clerk for Judge Abner Mikva, as well as Justice Thurgood Marshall. Mikva is widely known as a very progressive member of the DC Court of Appeals, which has led many to believe that Kagan will be progressive if confirmed to the U.S. Supreme Court. However, because of her limited record on social and fiscal issues this is merely an assumption.

Pro Shareholders as Solicitor General

Although she has never served as a judge, Kagan has been serving as Solicitor General since Obama took the White House. During her time as Solicitor General, she joined lawsuits on the side of shareholders against companies and mutual funds. According to Bloomberg, prior Solicitor Generals did not side with shareholders, leading many in the business community to consider her nomination as a slap in the face to many large corporations.

Social Justice

Although we do not know much about her tax views, according to A Taxing Matter, Kagan wrote her senior thesis at Princeton on the socialist movement in New York City in the early 20th century. Therefore, we can predict that Kagan is at least informed about arguments for social justice in our "capitalist-based economic system."

Furthering Obama's Tax Agenda

Kagan has been considered as a possible Supreme Court Justice since Obama won the election in 2008. As this article published last month on NY Times.com explains, Kagan is known for supporting "assertions of executive power." Therefore, we could expect that she would support Obama's tax agenda if confirmed to the U.S. Supreme Court, which could have significant impacts on the U.S. tax code.

The Pros and Cons of Value Added Taxes

A few weeks ago the U.S. Senate rejected a proposal to institute a Federal Value Added Tax (VAT) with an 85-13 majority vote. Although common throughout Europe these taxes are highly unpopular in America. The Senate’s decision was significant, as it is the first time either of the Congressional chambers have sent a strong message against a Federal VAT.

It was important for the Senate to go on record voting against a VAT as President Obama’s debt commission is considering a handful of tactics to improve the country’s debt problems. The commission – which is made up of eighteen members including six Senators – is expected to submit a report later this year on how to deal with the country’s financial problems. All six of the Senators in Obama’s commission voted against a VAT. Since the President’s rules assert fourteen of the eighteen members must agree on the commissions final recommendations, it is very unlikely that a VAT will be included in their proposal.

Since we have been hearing so much about a Federal VAT over the past few years, I wanted to take a minute to review some of the largest pros and cons of such a tax with all of my blog readers.

PRO: Increased Revenue

Obviously, the largest benefit of any new taxes would be an increase in federal revenue. Currently, only state and local government agencies charge taxes on purchases, but by instituting a VAT the federal government could benefit from consumer spending as well.

CON: Regressive Tax System

Compared to our current tax system a VAT would be considered significantly regressive, meaning they benefit higher income taxpayers more so than those living closer to the poverty line. As we have all seen from recent headlines 47% of Americans pay little or no federal income tax. However, if the government instituted a VAT many more would pay federal taxes.

PRO: Easier Tax System

The U.S. tax system is very complicated and confusing. More and more Americans pay for professional tax help each year because of how complicated U.S. tax law has become. Proponents of a VAT suggest that it would make taxes more efficient and easier for taxpayers to understand.

CON: Higher Probability of Fraud

Although tax fraud is a serious issue currently facing the Federal government, many experts predict that since a VAT would create a more open system, that would likely lead to increased fraud. Additionally, the change from our current tax system to one with a VAT would be very difficult and time consuming, with lots of opportunities for fraud.

PRO: Lost Online Sales Taxes

Online stores such as Amazon.com, often get out of charging consumers sales taxes because of a 1992 Supreme Court ruling that retailers must have a physical presence in the state to collect excise taxes. However, some experts claim that a VAT could solve this problem of lost online sales taxes by levying taxes on all sales, even online sales.

CON: Less Revenue Than Expected

Unfortunately, it takes government agencies a lot of time and money to enforce VATs. In some countries, the VAT has generated significantly less revenue than expected because of the hefty enforcement costs. As such, it is hard to predict how a VAT would impact federal revenue since there is no way to predict how much the change, and ensuing enforcement would cost.

What is the American Opportunity Education Credit?

Earlier this week the RDTC Tax Help Blog posted a great new article explaining the American Opportunity Education Credit (AOEC), which was introduced through President Obama's American Recovery and Reinvestment Act. Check out the article below.

Expansion of the Hope Credit

Although the name is new, the American Opportunity credit is actually just an expansion of the highly popular “Hope Scholarship” credit. The former credit could only be claimed for two years (up to $1,800) to pay for tuition and other school related expenses. However, the expanded AOEC can be claimed for up to four years, or up to $2,500.

Credit Amounts

The most each student can claim is $2,500. Taxpayers can claim 100 percent of the first $2,000 in qualified educational expenses, and then 25 percent of the next $2,000 for a total of $2,500.

Allowed Expenses

The most common qualifying expenses are tuition fees and related expenses. Students can also claim other expenses depending on their individual studies. For example you could include the cost of a computer in your credit amount only if it was a requirement for a class. Likewise, you could claim the costs of a textbook if it was required reading by one of your professors. If you are unsure about a specific expense then you should speak with a qualified tax professional who can examine your unique financial situation.

Continued reading at RDTC.com…

Obama Tells Panel on Federal Debt to Consider All Options

From NY Times.com:

As President Obama’s bipartisan commission on reducing the mounting federal debt headed to its first meeting on Tuesday, the president told its members that “everything has to be on the table” as they consider options for reducing spending and increasing tax revenue.

Mr. Obama, appearing in the Rose Garden at the White House, recounted some steps his administration has already taken to restrain the growth of annual deficits. But he said, “This alone will not make up for the years in which those in Washington refused to make hard choices and live within their means.”

“And it will not make up for the failure to level with the American people about the costs of the services that they value,” he added. “This is going to require people of both parties to come together and take a hard look at the growing gap between what the government spends and what the government raises in revenue. And it will require that we put politics aside, and that we think more about the next generation than the next election.”

The president was flanked by his choices to chair the commission: Alan K. Simpson, the former Republican senator from Wyoming, and Erskine Bowles, a Democrat and former White House chief of staff. With a grin, Mr. Obama saluted them for their courage in accepting the assignment — a nod to the low expectations that many in Washington have for the commission, given the polarization between the parties, especially in an election year.

Mr. Obama then left for Iowa for the next stop on his “Main Street Tour,” and the commission members walked across the street to an executive conference center for their three-hour inaugural meeting.

Obama to Wall Street: 'Join Us' In Reform

Later today, President Obama is scheduled to give a highly anticipated speech on the topic of banking reform. According to the White House, the President wants Wall Street to know that he is not hoping to fight them, but work with them to reform the banking industry.

Obama will give the speech at Cooper Union in New York, and as this CNN Money article explains, he is going to proclaim his support for legislation in both houses of Congress aimed at reforming the banking industry. The President will reportedly claim the bills represent "significant improvement on the flawed rules we have in place today."

Obama said he's sure many of the lobbyists working to defeat the measure are acting on behalf of the Wall Street firms represented by members of the audience.

"But I am here today because I want to urge you to join us, instead of fighting us in this effort," said the president. "I am here because I believe these reforms are, in the end, not only in the best interest of our country, but in the best interest of our financial sector."

The speech has prompted some hand-wringing in the investment world this week. Senior officials in the Obama administration told CNN that top bankers have called the White House recently to express concerns about "how bad" the speech would be for Wall Street.