TAXES: $1.5 trillion in increases. $1.5 trillion in higher taxes, almost all of which hits the top 2 percent. Half of that sum comes from eliminating the Bush tax cut for the households making more than $250,000; the other half comes from
limiting deductions for these same households and closing loopholes that the president discussed in the debt ceiling negotiations
ENTITLEMENTS: $300 billion in cuts to Medicare/Medicaid. No changes to Social Security; provider-side cuts to Medicare and Medicaid that the administration promises won't affect the programs; no change in the Medicare
NEW STIMULUS: The $450 billion American Jobs Act. This plan includes Obama's proposal to combine payroll tax cuts with targeted infrastructure and education spending.
This plan is both highly progressive and highly reliant on the status quo. Two trillion dollars in savings seem to come from doing nothing. More than $1 trillion comes from war spending that was going to decline, anyway.
Another $800 billion comes from letting the Bush tax cut expire on the
wealthiest households, which is following current law. These two plans would accrue interest savings in the billions.
But in addition to planning on doing nothing, the White House is veering left after it was seen as capitulating to Republicans in the debt ceiling negotiations. With $450 billion in new stimulus and $1.5 trillion in new taxes concentrated on the richest households, this is as populist as we've seen the White House.
The administration is not going to win over many right-of-center
moderates with this blueprint. It's certainly not going to win over any
Republicans. Two months after dangling Social Security cuts and a new Medicare retirement age to get tax increases from Republicans, the White House is back with a plan that offers higher tax increases without either entitlement reform.
You can read this two ways. First, you can write off the White House as a political cop-out that's more worried about the 2012 election than making serious changes to entitlements. I think that's short-sighted. More complexly, you can see this as a keen strategic play. If Republicans are going to vote for higher taxes, they will need to be seen forcing the White House into some sort of concession on spending or entitlements. If the White House proposes those very concessions in their opening bid, they're not concessions, anymore. They're just the White House plan.
The White House plan doesn't include entitlement reform. But it would be a big mistake to see this blueprint as the end of entitlement reform. By proposing a tax hike this far to the left of the House of Representatives, it's clearly setting up a sort of policy hostage exchange. The White House refuses to deliver entitlement reform without new revenue; Republicans defeat most of the White House's tax plan; and we end up with moderate savings to Social Security and Medicare with slightly higher effective tax rates on the rich.
That's the long game, anyway. And that's why I think this plan -- as progressive, even "populist" as it seems -- as a necessary step in the road to reasonable deficit reduction. In the (somewhat likely) chance that Republicans continue to fend off tax increases, at least the White House will go down with a plan on paper they can point to on the campaign trail.