Political analysts, predominantly conservative, are writing off Democrats in the electoral race on November 2, even as the Obama Presidency nears the end of its second year. Republicans have kept telling the country that the President's big stimulus of last year failed to turn the economy around, creating no jobs, and all his measures were expanding the Federal Government and increasing the budget deficits and debt. Nor Democrats, by and large, have been effective in pinning down the crisis on Republicans, whose earlier policies of “cutting taxes for millionaires and corporations” led to collapse of free market capitalism in 2008 and the Great Recession.

At stake in the midterm elections are the 435-member House of Representatives and 36 seats in the 100-member Senate. The House, elected every two years, has now 255 Democrats and 178 Republicans with two vacancies. Democrats also have a majority in the Senate but less than 60 needed to overcome Republican filibuster, thus necessitating compromises in key bills over the last year. Republicans need to wrest 39 seats from Democrats to regain control of the House they lost in 2006 and the latter would also suffer some Senate losses.

Turning the current tide — seemingly a pro-Republican wave -would be a great political challenge to the President, given his own popularity at home and high standing in the world, in order to be able to advance on his vision of 'Remaking America', which takes care of its middle classes. A stronger Republican presence in Congress, even if they do not wrest the majority, would not help President Obama in smooth implementation of his historic enactments on health care and financial regulation and pushing the medium-term agenda of promoting job-intensive growth as well as fiscal responsibility.

As desperation among Democrats who lacked a unified message, especially in states badly hit by home foreclosures, declining manufacturing jobs and peaking unemployment, President Obama has pitched on new economic initiatives designed to provide some immediate job creation and move the economy toward sustained long-term growth. Launching himself into the battle, President Obama has unveiled a three-pronged plan which will include “renewing” the nation's infrastructure over six years, with a 50 billion dollar upfront investment to help create early jobs.

The more significant elements of the package to foster stronger recovery are (a) a permanent extension of R and D tax credits for business and,(b) allowing companies to fully deduct (100 per cent) of qualified investments in plant and equipment through 2011 instead of over a longer period of 3 to 20 years. White House officials said the permanent R and D credit at a higher rate of 17 per cent as well as the investment-incentive tax breaks would encourage companies to expand their capital stock for growth and make investments for future growth and adding to jobs.

Some 1.5 million corporations and several million individual firms are expected to benefit from the investment tax break which is estimated to put 200 billion dollars in the hands of business within next two years with which to expand investments and create jobs. The new measures would supplement the bill already in the Senate providing tax relief for small business, eliminating capital gains tax on key investments, and expanding their access to credit. This bill involving some 35 billion dollars is likely to be taken up when the Senate reassembles after the Labour Day recess.

A more controversial issue in the poll debate is the Bush-era tax cuts which are due to expire at the end of 2010, which the Republicans want to be made permanent. President Obama is firm and so Democrade that it should be made permanent only for middle class with annual incomes above 200,000 dollars. 'We should not hold middle class tax cuts hostage any longer', the President said and faulted Republicans for advocating the same philosophy that led 'to this mess in the first place' (the worst recession since the Great Depression of 1930s). Republicans have not come up with any coherent alternate agenda.

President Obama chose to announce his new plan at Cleveland (Ohia) from where Republican House minority leader Mr John Boehner, had earlier charged the President with being “out of touch” with Americans worried over rising deficits and debt. Democrats countered that Republicans had no new ideas beyond “cutting taxes for millionaires and corporations” and neglecting the middle class. The President, equally concerned about deficit reduction, has made it clear his new tax cut and incentive proposals are 'fully paid for'

The Administration will rely on closing certain tax loopholes and levy on oil/gas companies to make up for the 50 billion dollars to be invested in the first stage of the 6-year plan for infrastructure to rebuild roads, bridges and runways, modernizing transportation infrastructure, a programme which has traditionally had bipartisan support. However, no immediate Congressional action on his plan before the midterm election is likely.

Rejecting the demand for putting off the tax increase for wealthy after 2010, the President said that the cuts for the rich (two per cent of population) cannot be extended permanently as giving away 100,000 dollars on average for each millionaire would mean a revenue loss of $ 700 billion over ten years, adding to the deficit. However unwelcome it is to Republicans, they cannot also take a stand against limiting the tax cuts for households with annual incomes of less than 200,000 dollars.

The President at last seems to have put Republicans on the defensive by coming up with tax cuts and incentives for business which they have always stood for. They would now have to choose between handing the Obama Administration victories ahead of election or rejecting his ideas altogether. Mr Boehner has now proposed a two-year freeze on all tax rates and a cut in government to the levels of 2008, as his party's agenda.

US business has generally welcomed the new incentives announced by the President though many of its leaders would favour continuation of the 2001 and 2003 tax cuts of President Bush. Some analysts have proposed that the tax cuts could be given a moratorium of two years as a political compromise for the Administration and Democrats facing what could be one of the toughest elections. The President does not agree in extending breaks to the wealthy. He considers that the business tax breaks he has announced are the largest giveaway and would do more to stimulate the economy than by extending the Bush tax rates for the millionaires. (IPA Service)