President Obama took the populist approach with his new deficit-reduction plan — ignoring the political feasibility of the proposal to go after tax breaks for millionaires, corporate-jet owners, and investment managers.
“It’s about fairness,” the president said on Monday in the White House Rose Garden. “It’s time to do what’s right.”
Broadening the tax base and finding a way to increase revenues, these are not revolutionary concepts for deficit reduction. Neither is any serious discussion about taxing the wealthy or the merits of extending the Bush-era tax cuts. Still, Obama’s plan needs to go further than simply trotting out an attractive political slogan of going after Warren Buffett’s and other rich people’s money. In addition to looking at such revenue generators, it needs to delve into expensive policy moves like the mortgage tax-deduction rate that incentivizes home ownership. Or the cost of other tax expenditures, such as employers’ ability to deduct the cost of their contributions to employees’ health care plans.
These tax expenditures accounted for 7.4 percent of the gross domestic product in 2010, a figure that’s expected to remain roughly the same through 2016, according to a new analysis done by the Tax Policy Center. Yet, the tax expenditures go untouched and unmentioned in the president’s proposal.
The plan takes an equally broad approach to entitlement programs. It would not touch Social Security, largely because the White House does not see it as the principal driver of the deficit problem. Instead, it would tweak Medicare by reducing payments to providers, which would account for roughly $224 billion, or 90 percent of the health care savings.
It does not raise the eligibility age for Medicare, or tweak the structure of any of the three big, costly entitlement programs, which would have been tough political moves for both parties leading up to the 2012 presidential election.
If the president and Congress want to achieve real long-term savings and fiscal health, they’re going to need to dig deeper into the complexities of the tax code and entitlement programs. That’s an onerous task for any legislative body, especially such a divided one, and a task that will certainly take longer than the shelf life of the Joint Select Committee on Deficit Reduction.
It would require the president and Congress to take swipes at programs that affect a broader swath of people: the middle class, home owners, seniors, poor people, and, of course, the rich.