Why the president must convince voters that Republicans are to blame for the ailing economy.
Yesterday, in what may be more accurately described as a campaign speech for the 2012 election, President Barack Obama offered a deficit reduction plan that included $1.5 trillion in additional taxes. The campaign metric was revealed by a senior administration official who briefed reporters Sunday night. “The president will make clear he’s not going to support any plan that asks everything of some Americans, nothing of others,” said the unnamed official. “He will veto any bill that takes one dime from the Medicare benefits seniors rely on without asking the wealthiest Americans and biggest corporations to pay their share.” Other advisers further noted that yesterday's speech was not one aimed at finding a bipartisan solution for deficit reduction, but an "ideological statement" about how the president himself would like to tackle America's burgeoning debt crisis. The ideology? Another of the president's seemingly endless efforts to stoke class warfare.
The tactic here is obvious, and it has little or nothing to do with solving America's jobs crisis. The administration itself has been forced to admit that unemployment will remain above 9 percent through next year's election, a monumental political concession when viewed through the prism of a president seeking another four years. It doesn't get any better when surveys reveal that Mr Obama's highly anticipated pivot to jobs, embodied by the American Jobs Act, has already been rejected by a 51 percent of the public, who doubt that it will dent that same unemployment rate. Add the whopping 62 percent of Americans who disapprove of the president's handling of the economy, and the nature of this current effort becomes clear: if Barack Obama cannot successfully transfer the blame for a stagnating economy to the Republican Party, he's toast in 2012.
Thus, we get an administration taking one of the oldest pages out of the Democrats' playbook and running with it once again. In his speech yesterday, the president stayed true to form. "We can't just cut our way out of this hole. It's going to take a balanced approach," he said. "It's only right that we ask everyone to pay their fair share."
It is surprising that the president still uses the word "everyone." Everyone is nothing more than a euphemism. If everyone were paying their fair share, it stands to reason that the 47 percent of Americans who pay no income taxes at all would be asked to contribute some percentage of income taxes to the upkeep of the country. As for "fair share," IRS data reveals that the top 1% of earners pay 38% of all federal taxes and the top 5% pay 58% of all federal taxes.
Yet that didn't stop the president from proposing the Buffett Tax, which calls for a 4.5 percent surtax on people making $1 million or more. It was named after billionaire investor Warren Buffett, who wrote an editorial for The New York Times bemoaning the fact that he pays taxes at the lower capital gains rate of 15 percent, while regular Americans are subjected to higher income tax rates. One day later, MSNBC political commentator Patrick Buchanan challenged the Oracle of Omaha. "I’m a little fed up with these people who come on, you know, their big op-eds, all these admonitions," said Buchanan. "Why doesn’t he set an example and send a check for $5 billion to the federal government? He’s got about $40 billion."
Oddly enough, Buffett did make a $5 billion contribution -- to Bank of America, which yielded a profit of $280 million in 24 hours. There have been no reports of Mr. Buffett making any voluntary contributions to the public fisc to date.
Yet even Buffett Tax rhetoric could not obscure the reality that a substantial portion of the president's proposed $1.5 billion dollars in tax increases on "millionaires and billionaires" would come from repealing the Bush-era tax cuts for couples making $250,000 or more. Why that particular level? Once again, IRS data reveals that 4.4 million American households earn more than $200,000, while only 319,000 families report $1 million or more of income earned. In other words, that's where the bulk of the revenue is.
Unsurprisingly, Republicans were opposed to the hikes. "By raising taxes on job creators, Obama may win back some support from disgruntled liberal voters, but America will lose even more sorely needed jobs," said Republican National Committee Chairman Reince Priebus. "Pitting one group of Americans against another is not leadership," said House Speaker John Boehner (R-OH). "Veto threats, a massive tax hike, phantom savings and punting on entitlement reform is not a recipe for economic or job growth--or even meaningful deficit reduction," explained Senate Minority Leader Mitch McConnell (R-KY).
McConnnell was also referencing other parts of the plan that include "nearly $580 billion in cuts and reforms to mandatory programs." Yet 90 percent of those cuts will come from "reducing overpayments in the system," according to a senior administration official. That is yet another euphemism. It means service providers, as in doctors and hospitals, will bear the overwhelming brunt of the cuts, while service recipients remain relatively unscathed. If one is looking for phantom savings, as McConnell refers to them, it should be noted that Congress has refused to pass scheduled physician payment cuts for Medicare and Medicaid services since 2002. There is absolutely no reason to believe they would do so now.
As for the "$1 trillion in savings over the next 10 years from our drawdowns in Afghanistan and Iraq," one hopes such a reduction is possible. Yet it seems that counting such savings as automatic, even as "Arab Spring" leaves events the Middle East largely in flux, is somewhat optimistic. Unless some basic understanding of war has been abandoned, "events on the ground" still ultimately determine how big a spending reduction can actually be. In fairness, Republicans have also counted such savings during debt negotiations with the president.
The last large number, the $430 billion in savings realized by less borrowing and smaller annual budget shortfalls, is another calculation based largely on optimism. Interest rates for borrowing are near historic lows. And interest rates are driven by our continued ability to sell public debt, much of which remains attractive only because Europe, enmeshed in an existential debt crisis of its own, looks worse by comparison.
Far more important than the individual details of the plan however, is the likelihood of its passage. While some individual items may garner bipartisan support, such as broad-based goals to lower tax rates by enacting tax code reform, the passage of this plan in its entirety is not going to happen. Democrats remain ideologically committed to keeping entitlements largely intact, while Republicans remain convinced that tax hikes, as opposed to tax reform, will kill job creation.
Yet it is not just Republicans who have opposed tax hikes. Back in 2010, 139 House Democrats joined 138 House Republicans to extend the Bush tax cuts, while 112 Democrats and 36 Republicans voted against them. The Senate vote was 81-19 in favor of keeping the cuts. Both houses of Congress were controlled by Democrats. Several prominent Democrats were quoted in the months leading up to that vote, with most of them noting that tax increases in the midst of a bad economy would severely hinder a recovery. One of those Democrats was the president himself.
So what's changed? Next to nothing with respect to an economic recovery. On the other hand, a special election for disgraced Democrat Anthony Weiner's seat was won handily by Bob Turner. He's the first Republican to represent New York's 9th Congressional district district since 1923, despite Democrats' 3-1 edge in registered voters. The president's job approval rating has hit an all-time low among liberals, down from a stratospheric 92 percent in May of 2010 to just 68 percent currently. Those same liberals are now vowing to mount a primary challenge to the president. And the administration is embroiled in two potentially significant scandals with respect to Mexican gunrunning (Fast and Furious) and a bankrupt solar company which burned through a half billion dollars in taxpayer money (Solyndra).
All of the above makes it exceedingly possible that Democrats running for office in 2012 will think twice before offering their unconditional support to the president.
Moreover, it is the 12-member "Super Committee" tasked with finding $1.5 trillion in savings that will be the ultimate arbiter regarding any combination of spending cuts and tax increases, whether that achievement is accomplished via bipartisan negotiation or automatic triggers. In the unlikely event the committee reaches an agreement, there is virtually no chance the president would veto it, despite his pledge to do so absent tax hikes. The whole point of the president's latest proposals is to portray himself as a man standing against congressional Republicans in particular, but also against a "do-nothing" Congress in general if it becomes necessary. If the Super Committee reaches an agreement, a presidential veto would completely undermine that strategy.
As for the president's "fierce urgency of now," it was Democratic Senator Dick Durbin (D-IL) who injected a dose of reality into that characterization. In an exchange with Candy Crowley on CNN's "State of the Union," he admitted that the earliest the Democratically-controlled Senate would take up the president's proposals was early October. How that delay accrues to charges of Republican "obstructionism" is anyone's guess.
Yet how another re-hash of economic proposals based on class warfare, which are nothing more than Keynesian economics with a populist twist, are going to revive the economy -- when they have already failed before -- remains an even bigger question.