Can President Obama win the tax war?

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In 1936, nearly four years into his presidency, Franklin Delano Roosevelt gave a fiery speech in Madison Square Garden. “For twelve years this nation was afflicted with hear-nothing, see-nothing, do-nothing government. The nation looked to government, but the government looked away…Powerful influences strive today to restore that kind of government with its doctrine that government is best when it is most indifferent….Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me and I welcome their hatred.”

Roosevelt’s statement has proven a prophetic warning sign for Barack Obama’s presidency. It seems the same power struggles that existed from Wall Street to Washington at the height of the Great Depression are still present in the midst of the nation’s Great Recession, 75 years later.

In yesterday’s Rose Garden address, President Obama unveiled his new initiative to attack America’s long-term deficit, which has increased exponentially since the implementation of the Bush era tax-cuts, and been further exacerbated by the mortgage crisis, record job-loss, defense and war spending and ill-funded entitlement programs. Obama made a defiant call for $3.2 trillion in budget saving over the next decade, with $1.5 trillion comprised of increased taxes on the wealthiest 0.3 percent of Americans.

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The new approach is being lauded “The Buffet Rule”, since Warren Buffet first introduced the idea during the extensive debate over the debt ceiling, which was characterized by fierce Republican opposition to any tax increases for the rich and major corporations. The idea at the center of the rule is that it is intuitively wrong for Warren Buffet’s secretary to pay a higher effective tax rate than her employer, whose net worth is upwards of $50 billion.

Obama’s proposal would institute a minimum rate for those earning more than $1 million a year, because though the current tax structure dictates that income over $379,150 is taxed at 35 percent, the IRS reports that the overall tax contribution for those earning over a million in 2009 was actually 24.4 percent. This is due in large part to the tax breaks available to the wealthy. Even Buffet admitted his 2010 federal tax rate of 17.4 percent was lower than any of the 20 people in his office.

Reactions to the proposal have been overwhelmingly positive from the Democratic base to independents alike. Finally, amidst lagging approval ratings and vocal criticism for being too conciliatory, the president has a strong argument that the public and his party support both the American Jobs Act and the new deficit reduction plan.

Obama handled the inevitably negative Republican response by addressing it full-on. “It’s not class warfare. It’s math,” the president said. The policy status quo until now has been that the brunt of America’s tax burden was borne by its middle-class, whose median income in 2009 was $50,000 according to the IRS. These hard-working Americans don’t enjoy the privilege of capital gains loopholes and tax attorneys skilled at finding exemptions.

For many progressives it had been unclear whether Obama’s White House would allow the status quo to continue. But with yesterday’s announcement the president reset the parameters of the debate. He made clear that the inequity created by decades of increasingly complicated tax codes, now aggravated by Bush’s tax cuts, has left the nation mired in debt and deficits, without sufficient revenues to sustain its obligations.
So what now? Can Obama win the tax war? In the face of congressional Republican incalcitrance, the president’s challenge is to mobilize Democrats: using the bully pulpit in the lead up to next year’s election. If he can’t win a legislative victory, which is doubtful, Obama will have to take the fight to the ballot box.

The Congressional Black Caucus has already gotten the message. In a statement released yesterday CBC Chairman Emanuel Cleaver said “the Deficit Reduction Plan put forth by President Obama provides a balanced approach to creating jobs and reducing our nation’s deficit while investing in our communities.” Cleaver went on to explain that Republican proposals were “continually placing the burden on our most vulnerable communities, and those Americans who have been hit hardest by the recession.”

CBC support will undoubtedly resonate with Obama’s broader progressive coalition, and initiate a democratic challenge for republicans to explain their muddled arguments that call for reform, but refuse to budge on tax increases for the wealthy — a message that has become increasingly out of step with mainstream America. But so far, Republicans have continued to tote the party line. Their best counter argument to Obama’s proposal being the predictive claim that it is ‘class welfare’.

Senator Orrin Hatch of Utah expressed the general republican sentiment during his chamber address in July saying, “The poor need jobs. And they also need to share some of the responsibility.” It would be unfair to tax the “daylights out of everybody around here.” In this unscripted moment, Hatch unwittingly reveals he is a part of the problem — not the solution; and that he represents the very ‘wealthy’ President Obama is asking to share in the burden during these tough economic times. “Everybody around here” apparently refers to Hatch and his fellow senators, whose median net worth was $2.4 million in 2009.

Of course, what is saddest is that the Tea Party cohorts — and Republican presidential hopefuls currently on the campaign trail — easily convince rural and poorer conservative voters that somehow they are representing their interests, while framing President Obama and his policy as emblematic of income distribution. The truth? Republican opponents to tax reform are secretly protecting big oil, big business and wealthy conservatives who fund their campaigns with generous donations and create Political Action Committees (PACS) which, thanks to the Supreme Court decision in Citizens United, may prove to be the most influential force in the 2012 elections.

To the delight of many progressives, Obama vowed to veto any approach which called for benefit cuts in Medicare that did not levy new taxes on the wealthy. “I will not support any plan that puts all the burden for closing our deficit on ordinary Americans. We are not going to have a one-sided deal that hurts the folks who are most vulnerable.” This proved to be his shining moment, and perhaps the first time in his presidency that Obama has pre-emptively threatened a veto.

Pennsylvania Republican Senator Pat Toomey echoed conservative pundit talking points with the claim that Obama’s plan was “defined by political posturing.” While Democratic Senator John Kerry defended the plan saying, “The dialogue is always stronger when thoughtful, serious ideas are on the table.” And republicans will find it difficult to support their opposition with facts or figures.

The Bureau of Labor Statistics released information that showed between 1950 and 2010, payroll numbers were highest when high-end tax rates were highest, and unemployment increased when the highest tax brackets were lowest (the present economic landscape being a prime example). The report fully debunks any republican claim that an increase in taxes on the wealthy, who they’ve paradoxically coined job creators, would obstruct employment numbers and hiring.

In the address Obama seemed to channel the spirit of FDR who, in his 1936 speech said, “We had to struggle with the old enemies of peace: business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. They had begun to consider the government of the United States as a mere appendage to their own affairs. We know that government by organized money is just as dangerous as government by organized mob.”

President Obama’s latest approach proves he’s finally ready to welcome their hatred. His new tax proposal is exactly what America needs and the kind of bold leadership progressives have been waiting for. While the president recommends a deficit reduction plan and increased spending on jobs programs under the American Jobs Act, the only proposals from the Republican-led Congress have been austerity measures aimed at attacking spending on social welfare programs, while defending the lowest tax rates the rich have experienced in over 50 years.

So the question now becomes, who’s really looking out for your interests? The choice is clear.

Edward Wyckoff Williams is an author, columnist, political and economic analyst, and a former investment banker. Follow him on Twitter and on Facebook.