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09.19.11

Obama’s Debt-Reduction Dare

Incorporating ideas championed by the GOP in his debt-reduction proposals, Obama gives the right the choice of working with him or looking as though it’s forsaken the average taxpayer, John Avlon explains.

“This is not class warfare—it’s math.”

President Obama was playing the happy warrior while presenting his $3 trillion debt-reduction plan in a Rose Garden address, welcoming a fight over raising taxes on the wealthy while a tough re-election looms.

It is an ambitious plan in terms of debt reduction, more than doubling the $1.5 trillion benchmark set out for the Joint Special Committee. It is also a decidedly base-pleasing proposal, drawing a presidential line in the sand on requiring revenue increases as part of a “balanced plan” which promises to match spending cuts to tax hikes by a 2-to-1 ratio.

The president knows that he isn’t going to win over any new Wall Street fans. And he seems to have come to accept that reality with a belief that he can rally Main Street to his side with lines like this: “I reject the idea that asking a hedge fund manager to pay the same rate as a plumber or teacher is tax warfare.”

President Obama has been criticized widely on the left for not playing a good game of poker in the past, negotiating against himself and being too quick to compromise. He seems to have gotten the message—offering this base-pleasing opening bid in a broader negotiation over reducing the debt while spurring the economy. There is a real question of whether he will over-play his hand with independents and centrists.

Don’t get distracted by comparing the merits of one wholesale plan versus another—instead look for the areas of overlap, and you’ll get a sense of the art of the possible.

But the real action will be in the Republicans’ reaction. The impulse to label the so-called Buffett Rule “class warfare” on the Sunday shows was reflexive and predictable. However, in moments of tactical reflection, the GOP will need to ask themselves whether they can politically defend tax breaks for people making over $1 million a year at a time when the gap between the rich and poor—and even the super-rich and upper-middle class—keeps growing. The stock market, after all, has rallied some 30 percent since Obama took office, and many big businesses are again enjoying healthy profits, as small businesses still feel an ever-tightening squeeze.

When the president proposes lowering the corporate tax rate—long a fiscal conservative goal—will Republicans oppose it because it is done in exchange for closing some loopholes? Will the Tea Party oppose a requirement that banks which received taxpayer bailouts pay back every cent? Will Republicans walk into an electoral trap of allowing the Democrats to say they opposed a payroll tax reduction simply because the president proposed it? Will they want to be seen opposing tax incentives that could encourage companies from hiring returning GIs?

There is a political risk in simply refusing all these proposals just because they come from the president. The key substantive insight behind Obama’s jobs address to the joint session of Congress was that virtually all the policies included had been supported by both Republicans and Democrats in the past. If the GOP is simply seen as being all-or-nothing obstructionist in the face of a weakening economy—refusing to take action for political purposes—they could see themselves further abandoned by independents, who have been disapproving of their job in Congress since the spring.

Voter anger in our political times is directed at both big government and big business, rather than one or the other. Likewise, while President Obama has been facing a steady decline in poll numbers, the only people less popular in Washington are congressional Democrats and Republicans, respectively. Both parties have an interest in proving that Washington can work for the common good, at least on the very few issues where they can find common ground.

In the rush to the partisan barricades, it is often tempting to ignore an inconvenient detail because it disrupts a desired narrative—in this case, “Obama Lurches Left.” But the fact remains that the president’s plan includes over half-a-trillion dollars in entitlement reform, reducing the long-term costs of Medicare and Medicaid. This is not an insignificant proposal coming from a Democratic president, and it will no doubt prove controversial to the 70 plus liberal House members who have announced they will opposed any attempts at entitlement reform in a deficit deal. Republican leadership should be so willing to present a policy opposed by their base.

Likewise, when you listened to the president frame his tax plan, for all the ”soak the super-rich” rhetoric, it seemed as though he was opening the door to a broader tax reform. His two bottom lines in this opening bid were more revenues and flatter rates. In turn, Republicans will need to decide whether simultaneously lowering tax rates and closing loopholes—à la Bowles-Simpson—will be counted as a tax hike. To do so would be to put Grover Norquist’s Pledge ahead of the Pledge of Allegiance, assuming that you sincerely believe deficits and debt need to be reduced to put America on a more stable long-term fiscal footing.

There are plenty of details to disagree with in the president’s plan. I’d like to see long-term capital gains taxed at a much lower rate to incentivize real investment while stabilizing the economy, for example. Politically, history would caution against a presidential campaign waged on raising taxes (see Mondale, Walter). And of course it’s possible that the real plan could be decided in the congressional supercommittee, providing that they take multiple pages from the hard work already done by Bowles-Simpson and the Gang of Six. So don’t get distracted by comparing the merits of one wholesale plan versus another—instead look for the areas of overlap, and you’ll get a sense of the art of the possible.

Beneath all the bobbing and weaving in Washington is an attempt to seek the balance between campaigning and governing. The president is now playing offense on both fronts simultaneously, offering first a jobs plan and now a debt-reduction plan. They are best considered opening bids in an ongoing negotiation, a poker game being played at a time of maximum party polarization. At stake is the question of whether Washington can still reason together and ultimately meet in the middle. The answer will be determined by whether the urgency of an upcoming campaign in an angry, anti-incumbent year can focus Congress’s collective mind around the shared responsibility of governing. Left, right and center; it’s not the plans that are missing—it’s the political will.