Obama's Pearl Harbor Day press conference: naive, incapable, or disingenuous?

Commentary | By Craig Gurian |

December 9, 2010 — Either I give in or “folks” get hurt, says the President at his Pearl Harbor Day press conference. There was no other way the President could get any stimulus, say those desperately trying to find a silver lining to a plan that would give 25% of all tax cut benefits in 2011 to the highest earning 1 percent of taxpayers (see chart).

These “realists” apparently believe that the GOP has developed magical or superhuman immunity to public pressure. Panicking, they substitute ominous warnings about “protracted political combat” leading us over a cliff for a sober assessment of either what a late-day offensive would entail or what the landscape would look like over the cliff (or beyond the horizon).

Shares of the total tax cuts in 2011
Income group       Obama/GOP
      tax deal
Lowest 20% 2.6%
Second 20% 6.6%
Middle 20% 10.1%
Fourth 20% 16.9%
Next 15% 25.2%
Next 4% 13.1%
Top 1% 25.4%


SOURCE: Citizens for Tax Justice (Dec. 7, 2010)

A little advice: calm down and focus on what could be done in the last three weeks of December and the first three weeks of January.

Imagine a Democratic President — in coordination with Congressional Democrats and organizational allies — sending a message every day through the end of the year that a Democratic Congress has been trying to give all American families a tax cut on their first $250,000 of income, but that the GOP has blocked a vote.

Each news cycle would also find the President condemning the GOP for holding hostage 2 million American families who desperately need to have their unemployment benefits extended…obstructionism all carried out so, for example, a married couple with adjusted gross income between $10 million and $20 million would get on average a tax cut each year of just under $700,000, instead of the paltry $78,000 the couple would reap under the Obama plan (see chart at bottom of this page).


But won’t Democrats be blamed?

Now let’s assume that January has rolled around, and the solid wall of GOP opposition hasn’t yet cracked.

Well, the estate tax rate is now 55 percent on estates of over $1 million. Democrats in the Senate have the ability to filibuster any proposed changes to that permanent level.

The top marginal income tax rate has returned to 39 percent (yes, what the wealthiest were paying during the Clinton Administration). Democrats in the Senate have the ability to filibuster any proposed changes to that permanent level.

Oh, and have you heard? Article I, Section 7 of the Constitution gives the President the power to veto legislation.

So, as the deadline draws closer for increasing the federal debt ceiling, and as scrutiny increases as to why Republicans are prepared to sacrifice all for the wealthiest few, the GOP would be facing that heat without having any of its desired goodies in hand.

But, instead of acknowledging the possibility that holding out and mobilizing public opposition to GOP intransigence would increase Democratic leverage, “realists” of the Obama school would likely be panicking once more: if we engage with the GOP on Bush tax cuts, we’ll lose.

Let’s be frank: that’s the sound of those who have been completely intimidated, not the sound of calm analysis.

The President himself asserts that “the American people are on our side” in opposing tax cuts for the wealthiest. Indeed, recent CBS and Bloomberg polls show strong public support for ending tax cuts for the wealthiest. Interspersed with daily scenes of the hardship that GOP refusal to extend unemployment benefits was causing, the President could act to change the political dynamic (it’s called a dynamic because it’s generally thought to be at least somewhat malleable):

I am ready to sign a tax cut for all Americans covering the first $250,000 that each married couple earns. I’m not ready to sign a budget busting giveaway of tax cuts on the second, or the tenth, or the 100th $250,000 of a couple’s annual income. I can bring the overwhelming majority of the Democratic Caucus in each House on board; all we need is a few Republicans to place concern for middle class Americans above messianic zeal for huge tax cuts for the wealthiest.

If Obama were to make a case like that with persistence, he wouldn’t even need to be a Great Communicator to mobilize public opinion and place the GOP under substantial pressure.


State of the Union

If we were still at an impasse by the time we got to the State of the Union address in late-January, higher tax rates would have been in place (and extended unemployment would have been denied) for all of three weeks (if this counts as “protracted political combat,” there is a serious issue of lack of stamina that needs to be addressed).

During that time, the GOP would certainly be claiming that Democrats had raised taxes. And the charge will be endlessly repeatedly by credulous journalists accepting that framing. It’s just that Democrats are on record voting for tax cuts for the first $250,000 earned by every couple, and Republicans are either on record as voting no (in the House), or not permitting a vote on the merits (in the Senate). Thus, it is Democrats who could most credibly blanket the news media with the “you raised taxes” charge against the Republicans.

And, I do seem to recall that it’s the President, with a captive audience, who has more of a chance to shape discussion via the State of the Union than the spokesperson from the opposing party.

No chance that Republicans might soften their stand? Of course there is.


I want to fight…just not now

In his Pearl Harbor Day press conference, the President insisted that he would be “happy to have that battle” over whether to make permanent the Bush/Obama tax cuts for the wealthy. Surely he doesn’t believe that he is going to cause Mitch McConnell or John Boehner to have an epiphany of political philosophy? To take him at his word, therefore, the President does believe that he can shape public opinion in the face of ideological opposition — at that same time he argues that surrender now is necessary because “I have not been able to budge” Republicans. It doesn’t add up.

Just like the this-was-the-only-way-to-get-some-stimulus argument doesn’t add up. There is another way: changing both “optics” and substance to generate broad and active public support for a robust stimulus package. You know, one that actually has a reasonable chance to meet the need.

Doing so, of course, would require a White House who didn’t think that “shared sacrifice” consisted of federal workers having to live with a pay freeze and more of the high priests of Wall Street having to put their assets in a blind trust while they join the Administration as top advisors.

But, sadly, it appears that the President has drawn a line in the sand against that kind of change.

Obama scaleback of the Bush income tax cuts versus the GOP plan to extend all of the Bush income tax cuts. Effects on high-income married couples in 2011
Adjusted income group Average Bush tax cut with full extension Average scaleback % scaleback % of Bush tax cut kept under Obama Average Bush tax cut kept by Obama
$250,000-300,000 $-9.186 $98 -1% 99% $-9.088
$300,000-400,000 -10,528 1,098 -10% 90% -9,430
$400,000-500,000 -10,128 2,626 -26% 74% -7,502
$500,000-750,000 -19,685 9,666 -49% 51% -10,019
$750,000-1,000,000 -36,473 23,736 -65% 35% -12,736
$1,000,000-1,000,000 -66,864 50,363 -75% 25% -16,521
$2,000,000-5,000,000 -153,460 128,069 -83% 17% -25,391
$5,000,000-10,000,000 -357,663 312,844 -87% 13% -44,819
$10,000,000-20,000,000 -694,601 616,332 -89% 11% -78,269
$20,000,000 or more -1,932,994 1,739,414 -90% 10% -193,580


SOURCE: Citizens for Tax Justice (based on ITEP Tax Model).

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