The President’s budget, announced yesterday, may have the finest calibration of budget details in the history of the human race. But, its delivery was not a political success and whether Budget Director Peter Orzag is a genius with numbers or not, he was not very adept as he made the round of the news shows yesterday explaining it.
The first thing to know about big annual announcements is that you need to decide in advance what you want the news cycle to focus on. It is not clear that the White House really thought that one through and, in the absence of any significant new direction or methodology, the press focused mostly on the size of the package. And that size is big, bigger than big actually, a stunning $3.8 trillion. As a news item, it plays directly into the Republican narrative that the President is spending our children’s future recklessly. It doesn’t matter whether the money is well spent, or needs to be spent. Unless there is news value in the way it is being spent, the press will focus merely on the size of the package.
Orzag was stuck defending goulash and budgetary goulash is difficult to defend. He discussed this proposal and that proposal. There was no central organizing theme. And, if you are defending goulash, he could have at least put budgetary honesty at the top of the list. You will recall that during the Bush Administration, the cost of the wars in Iraq and Afghanistan were not in the budget at all, so about $200 billion of the Obama increase is attributable merely to the President commitment to simple honesty. Make the republicans defend their prior budgetary dishonesty and see how that sits with the Tea Party crowd.
Most of all, Orzag and the administration have failed to articulate the need for higher taxes on the wealthy. The wealthy do not pay nearly the share of federal tax dollars that they paid in the 1950s and 1960s when the economy was booming. And, there are whole categories of taxes that they do not pay at all. Social Security and Medicare are funded through a payroll tax, so people who take their money as management or professional fees and those who make millions in investment income do not pay anything towards the solvency of Social Security or Medicare which are the two most expensive items in the federal budget. Why should a billionaire investor pay nothing towards Social Security while a waiter or teacher or factory worker pay 14% of their income in payroll taxes?
The last major overhaul of the tax code was in 1986. Whether the Democratic majorities in both houses of Congress survive the November elections or not, the President will be needing a bipartisan project for next year. It is not too soon to begin thinking about what that plan should be. But, the White House needs to think outside the box of very smart policy experts on this, and think about what will help make average Americans feel like someone is looking out for them. The answer, long proposed by Mike Kinsley, is a liberal version of a flat tax, retaining the progressive tax rates, but radically simplifying the code itself, ridding it of all the special tax breaks it contains, and removing the caps on payroll taxes and making those taxes more broadly applicable. After all, the Supreme Court has decided that corporations are individuals: Let’s tax them like they are.
Populism does not come easily or naturally to President Obama. He is not "one of the guys" and thank God for that. But, figuring out ways to address the budgetary crisis facing the nation is one big invitation to engage in the kind of populism the Republicans will have difficulty fighting. The tax code is not 14 volumes long because it needs to be. It is 14 volumes long because lobbyists have successfully gotten their special tax breaks inserted into it. The average Joe does not have a lobbyist doing anything for him. Obama needs to get past the policy experts, even the smart ones, and talk to the average men and women. See how they would react to such a proposal as a progressive flat tax. He might find that it is a winner, economically and at the polls.