Total Rewards and the 2012 U.S. Presidential Campaign President Obama vs. Governor Romney
In an effort to help business leaders and total rewards professionals better understand the policies at stake in the upcoming election, the WorldatWork public policy team has summarized the positions of the presidential candidates on relevant issues. WorldatWork has analyzed the candidates' records in office, campaign Web sites, position papers and political party platforms to form a summary of the candidates' positions as detailed below.
Following the third and final presidential debate, President Obama released A Plan for Jobs and Middle Class Security, an updated version of his job creation agenda. The plan calls for an increase in manufacturing job opportunities through tax incentives for companies producing in the US and new export markets, investments in education and student loans to train prospective employees, deficit reduction through eliminating loopholes and objectionable tax breaks, and further development of current energy sources such as oil and natural gas as well as future clean energy sources.
In 2011's jobs plan, additional federal aid to states is requested in order to prevent public-sector job losses at the state and local levels. The plan also includes project-based infrastructure investments and calls for the creation of a nationwide “infrastructure bank” that would leverage private capital to fund public projects. States would be given additional flexibility to introduce new programs that specifically target the long-term unemployed.
The President's plan also would continue the current payroll tax cut for employees as well as on businesses for their first $5 million in payroll. The payroll tax would be eliminated for companies that add new workers or give existing workers pay increases.
Romney’s workforce plan emphasizes several major policies aimed at retraining workers to make them better fit existing opportunities – his campaign repeatedly points out the gap that exists between the needs of businesses to hire qualified workers and the lack of availability of training opportunities. Such efforts would include the consolidation of redundant federal-level programs, the creation of “personal reemployment accounts” that give assistance to unemployed individuals to use to retraining opportunities of their choice, and increased private-sector participation.
Romney has also released a five-point plan on job creation which he highlighted during the second presidential debate:
Achieve energy independence by 2020 through increases in domestic production, streamlining the permitting process, and approving the Keystone XL pipeline
Open new international markets, crack down on China's unfair trade practices, and create "Reagan Economic Zones" to stimulate international business
Provide access to higher education and job training programs
Deficit reduction through shrinking the size of government
Reducing taxes and regulations on small businesses
A second term for Obama would see the final provisions of the Patient Protection and Affordable Care Act (PPACA) come into full force. Next year the employer disclosure, under which employers must provide the annual cost of their group health insurance coverage to employees on their W-2 forms, would take effect, as would a reduction in the amount employees can contribute to health flexible spending accounts (FSAs) from $5,000 annually to $2,500. Among the major changes set for 2014 are the implementation of the tax penalty for individuals who do not carry health insurance, the requirement that employers of more than 50 people provide health insurance or pay a tax penalty, and the opening of the insurance exchanges through which individuals can compare and purchase coverage.
PPACA also included several measures aimed at reining in the growing costs of the Medicare program that will take effect in the next few years. The bill created the Independent Payment Advisory Board, a body which will make recommendations if cost targets are exceeded. Under PPACA, Medicaid was expanded to cover individuals making up to 133% of the Federal Poverty Level. As part of the Supreme Court's July 2012 decision on the PPACA's constitutionality, states will have the ability to opt out of the Medicaid expansion and cannot be denied existing federal funding for doing so.
As governor of Massachusetts, Romney supported a health care law that is in some ways similar to PPACA, including an individual mandate to purchase health insurance and the availability of subsidies to help low-income individuals. However, Romney has made it clear that he opposes applying these principles on a national level, and supports state-level control over healthcare mechanisms. Romney has stated he would issue waivers out of PPACA requirements to all states, and then work with Congress to repeal the legislation. In its place, Romney would pursue a plan which seeks to give states maximum flexibility in addressing their health care systems. These include limiting federal standards and requirements on both private insurance and Medicaid coverage, establishing high-risk pools for the chronically ill, capping non-economic damages in medical malpractice lawsuits, and allowing the purchase of insurance across state lines.
The Romney ticket would also seek to enact major changes in Medicare and Medicaid. As part of vice presidential nominee Paul Ryan’s FY2013 budget resolution, Medicare would shift to a “premium support” model. Participants would receive a voucher at a set dollar amount that they would use to shop for a Medicare insurance plan on the open market. In selecting an option that costs less than the voucher amount, the savings would be kept by the participants. Romney supports turning Medicaid into a block grant program, meaning that the federal government would provide each state with a lump sum payment and presumably fewer guidelines that exist under the current state-federal Medicaid partnership.
President Obama has expressed support for tax reform in a second term, and supports closing loopholes for top wage earners as part of adoption of the so-called “Buffett rule.” This would establish a minimum effective tax rate for income beyond $1 million annually, limiting the ability of high-income earners to utilize existing deductions to lower their effective rate. The President also supports a cut in the corporate tax rate from 35% to 28%.
Obama also supports the extension of the Bush-era tax cuts for all personal income under $250,000 for couples and $200,000 for individual filers, while letting the highest income tax bracket revert to the 1990s-era rate of 39.6%. At the second presidential debate, President Obama declared that "So what I've said is, your first $250,000.00 worth of income, no change. And that means 98 percent of American families, 97 percent of small businesses, they will not see a tax increase...For above $250,000, we can go back to the tax rates we had when Bill Clinton was president. We created 23 million new jobs. That's part of what took us from deficits to surplus. It will be good for our economy and it will be good for job creation."
As part of 2011’s debt limit and deficit reduction negotiations, President Obama expressed his support for deficit reduction achieved through a combination of both mandatory and discretionary spending cuts as well as revenue increases. Proposed revenue increases would partially offset the cost of the implementing the President’s jobs plan as described above.
Romney maintains that reductions in spending combined with tax cuts will stimulate the economy, produce jobs, and reduce the deficit, believing that “taxation [should become] an instrument for promoting economic growth.” Romney has vowed to not raise taxes as president, and has signed Grover Norquist’s anti-tax pledge. He supports an across-the-board 20% marginal rate cut and simplifying income taxes into two brackets (currently five), elimination of the Alternative Minimum Tax, and cutting the corporate tax rate to 25%.
To help pay for some of the cost of decreasing income tax rates and simplifying the tax code, Romney stated in the second presidential debate that "I'm going to bring rates down across the board for everybody, but I'm going to limit deductions and exemptions and credits...one way of doing that would be say everybody gets - I'll pick a number - $25,000 of deductions and credits, and you can decide which ones to use."
Romney has also promised smaller government and less spending, with his key goals being to cap spending at 20% of GDP, and achieving 4% annual economic growth. He would also cut non-security discretionary spending by 5% across the board. Romney believes that the long-term deficit problem is the fault of excessive spending rather than inadequate revenues.
The Obama administration estimated, as part of a 2010 report from the Council of Economic Advisers, that broad-based adoption of flexible workplace practices could save up to $15 billion in business costs annually. President Obama stated in a press release commemorating National Work and Family Month that "There are steps we can all take to help – implementing practices like telework, paid leave, and alternative work schedules – and my Administration is committed to doing its part to help advance these practices across the country."
The administration also encourages employers' adoption of practices such as job sharing and phased retirement for older workers. In late 2010, President Obama signed the Telework Enhancement Act, a law requiring federal agencies to establish a telework policy and provide assistance and guidance to employees who are authorized to telework.
During the second presidential debate, Romney highlighted his support for workplace flexibility by citing his gubernatorial experience in Massachusetts providing a flexible workplace for employees. Romney noted that his chief of staff had two school-aged children: "She said 'I can't be here until 7 or 8 o'clock at night. I need to be able to get home at 5 o'clock so I can be there for making dinner for my kids and being with them when they get home from school.' So we said fine. Let's have a flexible schedule so you can have hours that work for you." Romney went on to say that "employers that are looking to find good employees and bringing them into their workforce and adapting to a flexible work schedule that gives women opportunities that they would otherwise not be able to afford."
The 2012 Republican platform notes that "today's workforce is independent, wants flexiblity in working conditions, needs family-friendly options, and is most productive when allowed to innovate and re-think the status quo." The platform supports employee ownership in the form of stocks and believes that the federal government should promote portability in pensions and health insurance plans.
President Obama, pointing to success in increasing employee participation rates for employers’ 401(k) plans, supports similar automatic enrollment provisions for individual retirement accounts (IRAs). The enrollment would apply to employees at companies who do not offer 401(k) plans, and employees would be able to opt out of the enrollment. President Obama does not support reductions in benefits for current Social Security recipients.
A Romney administration would work with Congress to lower or eliminate taxes on capital gains, dividend, and interest income so that individuals could devote those tax savings to their retirement accounts. Romney also does not support reductions in Social Security benefits for current retirees but is willing to consider an increase in the retirement age as well as a modification to the way benefits are linked to inflation for high-income retirees.
President Obama is unlikely to seek any further legislative action on financial oversight in a second term, but his reelection would ensure that the bulk of Dodd-Frank’s rules come out as scheduled. As of early September 2012, only 38.8% of the rulemaking requirements from Dodd-Frank have been finalized.
Romney, as with healthcare, is in favor of a full repeal of one of President Obama’s major legislative victories, the Dodd-Frank Wall Street Reform and Consumer Protection Act. However, Romney does believe that some parts of Dodd-Frank are worth keeping, claiming during the first presidential debate that "we're not going to get rid of all regulation. You have to have regulation. And there are some parts of Dodd-Frank that make all the sense in the world."
To repeal Dodd-Frank, Romney would need substantial Republican gains in the Senate. However, in the absence of full repeal, a Romney administration would have options in dealing with the sections of the law that they find troublesome. Many of the regulations called for in Dodd-Frank have not yet been proposed or finalized by the Obama administration, so Romney would have the option of substantially weakening or delaying the issuance of specific rules.
As far as regulations beyond those affecting the financial sector, Romney does support a “streamlined, modern regulatory framework” that includes the rollback of many rules issued during the Obama administration as well as enhanced scrutiny of previous rules.