Over the past couple days I’ve been explaining to reporters that President Obama’s claim that his Administration will “cut the deficit in half” in four years is in fact credible, because it’s quite easy to see, in theory/on paper, how one could come up with a policy mix consistent with that goal. And the President himself has been very up front in explaining how that theory works, both during the campaign and since his inauguration.
The policy math is easy, as the Congressional Budget Office’s budget projections demonstrate. Under current law, the 2001 and 2003 tax cuts expire after December 31, 2010, and the Alternative Minimum Tax, still unindexed for inflation, continues to dip deeper down into the income distribution. As a result, under current law, CBO projects that the fiscal year 2013 deficit won’t be just half of the current fiscal year’s $1.37 trillion deficit (which includes the cost of the recovery package); it will be just $285 billion–or just over one fifth of the current year deficit.
Say you want to continue tax breaks for the “middle class” though–as President Obama wants to do. CBO estimates that extending the middle-income components of the 2001 tax cuts would cost $140 billion in 2013 (about half the cost of extending all of the 2001 and 2003 cuts). Continuing AMT relief would bring the total cost of extended tax relief in 2013 to $303 billion and the total deficit in 2013 to $588 billion. Hey, that’s closer to half of this year’s $1.37 trillion deficit, isn’t it?
The President is being honest in laying out his budget strategy by not pretending that he can afford to extend the entirety of the Bush tax cuts, given the new spending he wants to do, and even if that new spending were to adhere to (at least the spirit of) pay-as-you-go rules. If the entirety of the Bush tax cuts and AMT relief were extended, CBO estimates that the 2013 deficit would rise to $708 billion (slightly more than half of this year’s deficit, without any additional spending).
But I worry about how that honesty on tax policy is being framed/messaged. It still sounds like the old debate over the “Bush tax cuts” and which parts we should keep versus which parts we should let expire. Here’s how the President put it last night:
In order to save our children from a future of debt, we will also end the tax breaks for the wealthiest 2 percent of Americans.
But the fact is that the President and the Congress don’t have to “end” those tax breaks. Those tax breaks are already going to end under current law. The President and the Congress only get to start (pass) new tax breaks.
So I think that President Obama should be emphasizing those new tax breaks for those 95 percent of Americans that his budget will propose, rather than reminding Republicans in Congress that the old (and failed) Bush tax cuts will be going away.
Reminding those Republicans that one doesn’t like (and probably never liked) the “Bush tax cuts for the rich” will only bring back that rhetorical, politically-charged Republican line on “the largest tax increase in American history.” And then forget getting bipartisan agreement on that tax increase. I don’t know how we could expect that vote to go any better than the vote on the recovery package.
President Obama seems to know this will be coming. Last night immediately after his acknowledgment about raising taxes on the rich, he said:
Now, let me be clear. Let me be absolutely clear, because I know you’ll end up hearing some of the same claims that rolling back these tax breaks means a massive tax increase on the American people. If your family earns less than $250,000 a year, a quarter-million dollars a year, you will not see your taxes increased a single dime. I repeat: not one single dime.
In fact — not a dime.
In fact — in fact, the recovery plan provides a tax cut — that’s right, a tax cut — for 95 percent of working families. And, by the way, these checks are on the way.
That’s the same defensiveness on the Bush tax cuts we’ve heard all too often among Congressional Democrats over the past eight years. I would think the President can and should take a bolder, braver position. Governor Jindal in his GOP response indicated the Republicans still are incapable of seeing deficit-financed tax cuts as having anything to do with our deficits:
Democratic leaders say their legislation will grow the economy. What it will do is grow the government, increase our taxes down the line, and saddle future generations with debt. Who among us would ask our children for a loan, so we could spend money we do not have, on things we do not need? That is precisely what the Democrats in Congress just did. It’s irresponsible. And it’s no way to strengthen our economy, create jobs, or build a prosperous future for our children.
Yet the Republicans cheered at the President’s remarks on fiscal responsibility last night (this from the transcript vs. prepared remarks):
And there is, of course, another responsibility we have to our children, and that’s the responsibility to ensure that we do not pass on to them a debt they cannot pay. That is critical. [CHEERS from both Republicans and Democrats]
I agree, absolutely.
See, I know we can get some consensus in here.
With the deficit we inherited, the cost of the crisis we face, and the long-term challenges we must meet, it has never been more important to ensure that, as our economy recovers, we do what it takes to bring this deficit down. That is critical…
So I think what President Obama and the Democrats in Congress need to do is stop talking about ending “the Bush tax cuts.” Start talking about moving forward with tax policy in a fiscally responsible and fair way, so that we are committed to paying for all the new and critically-needed investments our citizens and elected officials are interested in pursuing in a genuinely bipartisan or “post-partisan” way. The substance of what the Obama Administration wants to propose for tax policy need not change very much; I think it’s largely a question of how to frame and message it. And look at who we have to handle that message! He can do it.