Mark Twain is often credited with saying, “Never argue with a fool; onlookers may not be able to tell the difference.” In politics, however, you don’t always have a choice. People throw some crazy ideas out there with the expectation that, sooner or later, Congress will warm to them. That’s especially the case when a foolish idea emanates from 1600 Pennsylvania Ave.
President Obama labeled his latest economic brainstorm a “grand bargain for middle-class jobs.” On its surface, it’s innocuous enough — even brilliant. People like bargains, they love jobs, and every politician wants to identify with the middle class (even those who vacation in $7 million estates on Martha’s Vineyard).
The problem lies in the execution. Obama proposes cutting top corporate tax rates to 28 percent but, in the process, insists that Uncle Sam collect even more in taxes than before. So far, he’s been coy about the size of the tax increase, but Senate Majority Leader Harry Reid says it should be $1 trillion. They want to spend that money on a slew of new programs they claim will create jobs — especially the “middle class” kind.
After years of assuring America that he was serious about fixing our unfunded entitlement costs and piously claiming he wanted real tax reform, Obama is offering not a grand bargain, but a grand head fake. Politically, it undermines steps already taken by congressional leaders on both sides of the aisle. Financially, it leaves the growing crisis within Medicare and other entitlements untouched. Legislatively, it will go nowhere.
The president’s folly starts with his demand that tax reform now be equated with tax increases. That runs counter to both history and practical politics. In 1986, the sweeping bipartisan tax reform success was built on a revenue-neutral bill, neither raising nor lowering overall collections. In 2012, House Speaker John Boehner even agreed that revenues might be raised modestly within a tax reform bill — but only if that legislation dramatically simplified the code while addressing the exploding cost of entitlement programs, the greatest risk to the country’s fiscal health.
Obama suggests we ignore our budget problems and spend more on, for instance, new job-training initiatives beyond the 47 such federal programs already in place. Cloaked in rhetoric about “investments,” his plan amounts to more government spending. The last time we tried shoveling out money in this manner, it was on a stimulus bill that promised a lot but failed to deliver. (Remember the billions wasted on “green jobs” schemes that went bankrupt?) The nonpartisan Congressional Budget Office found that the stimulus bill cost $831 billion; that surely works out, to judge from CBO employment estimates, to hundreds of thousands of dollars of government spending per job created — and likely far more. Why would Obama’s current plan work any better?
The politics of Obama’s new plan are even more confounding. For nearly two months, Senate Finance Committee Chairman Max Baucus has been quietly surveying senators to determine which tax breaks they’re really willing to fight for. It’s a sensitive and thankless job, but essential for any tax reform bill to actually get done. The president’s cavalier demand upends this cautious process and demonstrates his lack of knowledge about — or concern for — the delicate politics of maneuvering a serious tax bill through Congress.
Perhaps this is payback for Baucus’s referring to Obamacare as “a huge train wreck coming down.” Regardless, Americans should be wary of Obama’s big plans. Both Obama’s health care bill and Dodd-Frank financial regulation — the signal achievements of his first term — are hardly economic growth stories. Even the president is running from the mandates and taxes he promoted so eagerly in 2010.
Meanwhile, Europeans — who never met a regulation they didn’t like — are demanding that America’s complex new financial rules be kept out of their markets. When they think you have gone off the regulatory deep end, you have some soul-searching to do.
Today, the recovery has stagnated. Job creation remains anemic, and GDP growth has flat-lined at levels well below historic trends. In this environment, the “grand bargain” looks like an act of desperation. It’s economically dangerous, and it will never become law. Hanging his hat on a slogan without a hope of figuring into the policy outcome simply confirms Obama’s political impotence. He has become irrelevant to the legislative process with nearly three and a half years left to serve.
Perhaps the president fears that remaining silent during the tax debate would make him look foolish. But as Twain observed, that’s far better than opening one’s mouth and removing all doubt.