President Barack Obama has spent months recasting Democratic goals on climate change and health care reform from liberal-leaning moral imperatives to hard-core economic necessities.
But when it comes to paying for them, Obama’s creative juices seemed to run dry as he turned Thursday to his party’s most predictable revenue enhancer: taxing the wealthy.
The result: an instant revival of an old and predictable Washington debate.
“This budget makes clear that the era of Big Government is back, and Democrats want you to pay for it,” said House Republican leader John A. Boehner.
And right on cue, Obama defended his $1.3 trillion in tax hikes over 10 years with a little class warfare.
“I know that this will not always sit well with the special interests and their lobbyists here in Washington, who think our budget and tax system is just fine as it is. No wonder — it works for them,” the president said. “I work for the American people, and I’m determined to bring the change that the people voted for last November.”
The exchanges beamed from microphones at either end of Pennsylvania Avenue offered reminders of how fresh Obama’s gains are and how fleeting they could become if he loses the aura of bringing a new style of leadership to the White House.
Thus far, the president has managed fairly successfully to use fresh rhetoric to produce a makeover of what is essentially an old Democratic agenda.
In his Tuesday night address to the nation, the president didn’t pitch expanding health coverage to all Americans as the duty of a great and wealthy society, as most Democrats have done for more than a decade.
Rather, he argued that containing health care costs is essential to economic recovery, observed Rebecca Blank, a domestic policy expert at the Brookings Institution. Expanding health coverage to everyone is simply an integral part of that goal, the president suggested.
On energy, Blank noted, the president touted investment in alternative fuels and energy technology as the next, best chance to spur a big wave of new job creation.
The well-worn Democratic mantra of reducing global warming was offered as a positive byproduct of that more tangible and urgent objective.
Those shifts in emphasis make the case for both programs that have long been on the party’s wish lists more compelling and relevant.
But no amount of spin or recalibration could fuzz up the flashback to previous Democratic administration’s fiscal policy when Obama unveiled his spending plan.
What is different this time, however, are the stakes.
Most economists now say the nation’s economy is in the worst shape since the Great Depression. Striking the right balance on tax policy could help a recovery along. A miss could thwart it by driving money out of the market.
The precariousness of the situation wasn’t lost on the White House’s new economic team.
Obama ran on a promise to repeal of President Bush’s income tax cut for wealthy earners to 36 percent from 39.6 percent before it expires in 2010.
But as the financial system collapsed last fall, he hedged on the pledge, saying tax hikes during a recession may not be a wise idea since it could affect job growth.
Congressional Democrats, including House Speaker Nancy Pelosi, leaned on the White House to move quickly and repeal the Bush tax cuts.
But, as it turns out, Obama’s budget keeps those tax cuts in place through 2010, a period in which many economists and the president hope a recovery will arrive.
Some economists argue that the anticipation of a return to higher tax rates may be enough to thwart critical investments and purchases.
For instance, the White House has been working for months to get the nation’s banks to begin lending again and Treasury Secretary Timothy Geithner recently announced a new government program aimed at getting loans to small business and to car and house buyers.
And who are the people out there today with the cash — and confidence — to spend? Most often they are people and families with earnings ranked in the top echelons and who will be subject to the Obama tax hike.
In addition, the spending plan includes other tax hikes that will take effect sooner and could also retard the impact of recovery programs.
One proposal calls for new taxes on hedge fund operators. But those are the very people that Treasury Department is likely to try recruit to buy up some of the “toxic assets” on bank balances.
Finally, the redistribution of wealth featured in Obama’s budget — it imposes higher taxes on wealthy households to offset tax breaks for working class families — could undercut the president’s attempts to rally a broad range of interest groups to back his policy reforms.
“It’s increasingly beginning to look like we’ve all been invited to the dinner, but some of us are showing up as the main course and others are the invited guests,” said Martin Regalia, the chief economist for the U.S. Chamber of Commerce, which has supported Obama’s economic recovery programs.
The timing and scale of the tax hikes ultimately could work in Obama’s favor. If the new tax revenue hits the federal coffers at the same time a recovery is underway, it could significantly improve the nation’s economic and budget outlook.
In addition, today’s politics lower the risks that Obama and his Democratic colleagues will take a big hit from a classic “tax-and-spending” tarring by the Republicans.
Bush’s tax cuts were passed at a time when housing values were still rising and ordinary Americans didn’t reject out of hand a proposal to shift their social security benefits to a stock plan.
Today, the excesses of Wall Street are stoking a populist backlash against a gilded class that seems even more remote and unattainable as ever to the working class.
In defending the hikes, the White House has also noted that they are coupled with tax cuts for most Americans and a repeal of the Bush income tax breaks will lead to a tax rate equal to the Clinton era — when the economy seemed to be doing pretty well.
“We are asking those who, for quite some time, have shared in the benefits of previous tax cuts to give a little bit more,” said White House spokesman Robert Gibbs.