White House Press Secretary Jay Carney on Friday related the president’s by now familiar lament about his lack of plenary power, saying of the his boss’s budget that “it is not what he would do if he were king.”
We believe him. On the surface, the president’s latest gesture at a “grand” bargain, the details of which were leaked last week, may appear slightly more restrained than his previous ones — during the fiscal-cliff negotiation, the president asked for $1.6 trillion in new taxes; now he is down to about $1.2 trillion. In the interim, though, the president managed to raise most Americans’ taxes by enough to make up that difference and then some, so the marginally more modest ask reflects an interest in compromise less than a poorly hidden moving of the goalposts.
It would be one thing if these tax hikes were asked for in the context of proposals that responded credibly to the country’s fiscal challenges, but the president’s latest budget will by all accounts be unequal to that task.
President Obama’s budget will reportedly claim to reduce the deficit by $1.8 trillion. Based on what we know, that number will result from the same double-counting and gimmickry of the Senate Democrats’ budget. Even some of Obama’s actual spending cuts are problematic. A large chunk of them comes from instituting so-called chained CPI, an alternative measure of inflation, in various government calculations. This change would reduce entitlement payments, but it would also raise taxes over time. The way tax brackets are adjusted each year already results in the government’s getting a disproportionate share of the benefits of economic growth, and this proposal would make that share larger. The proposed cuts to Medicare spending take the form of lowered reimbursement rates for providers. Such attempts at setting prices distort medical markets, and are simultaneously too large to stick and too small to make a difference.
Additionally, the budget looks to introduce nearly $1.5 trillion in new spending by canceling sequestration, extending old and introducing new “stimulus” programs, and instituting a new universal pre-K education program funded through a new tax on cigarettes — a tax that would be highly regressive and likely self-undermining (generating less revenue if it succeeded in getting Americans to smoke in lower numbers). This means Congress would almost certainly have to go back to the well for more revenue.
The remainder of the tax increase comes largely in the form of a cap on deductions at 28 percent for higher-income earners. The cap would affect charitable-giving, homeownership, and municipal-bond deductions, among others. The president would also cap the size of IRA and 401(k) contributions to keep more wages in the taxable pool. Such a proposal is unlikely to raise much revenue, but what little it would raise would come at the expense of taxpayers saving for their own retirements.
What the point of all this is isn’t quite clear, unless it’s simply to generate press coverage about how reasonable the president is. The media are playing along, even though this supposed feint toward a grand bargain is profoundly underwhelming. It doesn’t seriously grapple with the impending entitlement crisis, and it comes after the House and the Senate have already passed their budget resolutions. House Republicans should stick to their strategy of “regular order,” and their message to the Democrats should be: Pass whatever you can through the Senate and then we’ll see you in a conference committee.