Democrats Balk at Obama Tax Plan

Democrats Balking at Obama Tax Plan

“This is the time for new ideas, not re-fighting old battles for short-term political gain.”

-- Aide to a Democratic senator talking to “Power Play” about President Obama’s tax proposals.

President Obama’s idea for a millionaire tax is hardly new. It’s a favorite idea in cash-strapped Democratic states like Maryland and New York and some version of it has been part of Obama’s economic agenda since his candidacy.

Obama is doing something different today, though, as he proposes a 4.5 percent surtax on those with incomes over $1 million in addition to his plan to raise taxes on individual incomes over $200,000 and reduce charitable deduction rates for high earners.

What’s different is the timing.

Obama kicked off his fall campaign swing two weeks ago today with a Labor Day speech at an AFL-CIO rally, followed up with an address to a joint session of Congress and then an aggressive swing-state schedule. His goal, repeated again and again, is to cast himself as an activist on jobs compared to a Congress that won’t act.

His explicit threat is that while the economy may not be getting better, voters will know it’s the Republicans’ fault. It was a strategy that initially thrilled the president’s supporters – the kind of in-your-face, confrontational style that they have long urged Obama to adopt.

The problem, though, has been that the president’s stimulus plan has mostly received a bipartisan shrug in Congress. When the best Obama can get as an answer to “pass this bill today” from Sen. Dick Durbin, the number two Senate Democrat, and longtime friend and home state senator is, “sometime next month” one gets the sense that the blue team is not feeling the fierce urgency of now.

Part is the fact that Obama served up mostly a rehash of his first, February 2009 stimulus package. The White House thought that would make it harder for Republicans to say no since the ideas aren’t controversial. But not only have Republicans been able to repeat “more failed stimulus” until they are hoarse, but Obama has not been able to win the support of key moderate Democrats.

Even the payroll tax cut extension and expansion, assumed to be the least controversial parts of the president’s plan, have been kind of a fizzle. Conservatives said such temporary measures don’t work since businesses crave predictability and many Democrats dislike the fact that taxes being lowered are the ones that finance Social Security.

There seems to be a lot of support for some kind of reform to unemployment benefits, but that’s hardly stimulus. There’s also a lot of interest in spurring road work through a new infrastructure bank and a speedy reauthorization of highway spending for next year, but again, nothing that makes either side in Congress stand up and cheer.

But maybe worse for the president’s re-election bid is that neither has there been anything to provoke a huge fight. After nine months of constant conflict with House Republicans on funding the government and raising the debt limit, Obama’s stimulus proposal has mostly been shrugged off.

To make his pitch to voters, Obama needs a foil. So far, congressional Republicans haven’t provided one. Part of the reason has been that Senate Democrats haven’t put them on the spot.

Obama has been trying to step up the pressure on House Republicans, following his initial jobs proposal with two proposals for tax increases. First came the idea for closing loopholes to finance $450 billion in stimulus last week. Now comes the idea of a $1.5 trillion package of tax increases to reduce future deficits. That includes the millionaire tax and the idea to allow current tax rates to lapse for the top bracket, sliding rates up to 40 percent from 35 percent.

Obama is also mostly taking a pass on entitlement reform, limiting his deficit-related proposal to calls for further reductions to the payments to doctors and hospitals – essentially doubling down on his own national health law’s premise.

The president is pretty plainly trying to bait House Republicans into a battle in which they are defending “millionaires and billionaires.” Obama is even naming the measure after billionaire Warren Buffett, one of his most prominent supporters, who has asked that he be taxed at a higher rate. And rather than talking about stimulating the economy, Obama is explicitly talking about flattening income inequality.

Obama knows that there isn’t support in either chamber of such a massive tax package, even if it is cast in stark terms of pitting the haves against the have nots, but if House Republicans can be made to resist on behalf of the haves, Obama will be able to add a new wrinkle to his stump speech.

But the congressional Democrats on whom Obama is relying to keep Republicans pinned down have so far not joined the president at the barricades. Part of that has been that liberals aren’t happy that the president has proposed stimulus lite, but mostly because Democrats don’t currently see Obama as a good friend to have these days.

Since Obama began his fall campaign effort, the administration has been beset by scandal (Fast and Furious, Solyndra and LightSquared) and Democrats have lost two special elections in which Obama himself was the central issue. The president has obtained no job-approval bounce from his latest publicity blitz. The administration is pushing back with vigor against a new book by Ron Suskind which shows a dysfunctional White House and a president who compares his own management style with that of Jimmy Carter.

Looking at all this, moderate Democrats are not eager to join the president in yet another violent clash with House Republicans. If Obama can’t rally them to his cause soon, his 2012 strategy will be a bust even before 2011 is over.