Romney is slippery when all wet

Obama continues to insist that Romney has proposed a $5 trillion tax cut -- he did it again today at a rally in Denver -- and liberal commentators such as Greg Sargent and Steve Benen make the same claim.  But that line of attack is too rigid. Romney can wriggle out from under it, as he did during the debate (as I forecast a half hour prior).

It remains true, deny though Romney will, that he cannot a) cut marginal rates by 20%, b) make that cut revenue neutral by reducing tax deductions, c) exclude investment income from the deduction reduction, and d) not raise taxes on Americans earning less than $200k per year.  It's also true that Romney has promised to do all of the above. Romney, therefore, is lying.

But it's not true that Romney has proposed a $5 trillion tax cut (over 10 years). He's proposed a $5 trillion marginal rate cut. That means he must either a) increase the structural deficit by up to $5 trillion by failing to reduce deductions enough to offset the rate cut (i.e., cut taxes by up to $5 trillion); b) raise taxes on the middle class; or c) not cut marginal rates by a full 20% across the board. Recently, he's intimated that he will break his package promise by going for option c).  You may argue, as Jonathan Bernstein and others have done, that the likeliest option is massive rate cuts with only token, or at least wildly inadequate, loophole closures. But that's an inference -- choosing one of three doors. You can also point out that in past debates Romney has referred to his "tax cut."  But he can plausibly claim to have misspoken -- from the beginning, he's included the not-credible "revenue neutral" claim.

It's hard to attack incompatible promises in a sound byte, especially four-part promises.  But insisting that Romney proposes to "cut taxes" by $5 trillion simply affords him deniability.

Romney's contortionist abilities should come as a surprise to no one. They were on full display throughout primary season, when he proved himself the best liar in the field and soothed appearances of inconsistency with a multi-verse lullaby.

Obama beware: Romney's tax plan is a moving target

The president is a busy man, and James Fallows warns us that presidents often don't have time to prepare adequately for debates. If I could, I would warn the president that Romney in recent days may have nominally eased himself out of the tax reform trap he set himself, as exposed by the Tax Policy Center. If Obama claims that Romney proposes to raise taxes on the middle class, Romney will protest that he's proposed no such thing, and may be able to offer enough 'specifics' to at least seem to rebut the charge.

Is Obama his own Grover Norquist?

As David Brooks noted in the midst of the 2008 campaign, Obama has put himself in a box on taxes. Here's David Plouffe on Meet the Press today:

DAVID GREGORY:
--bring up taxes, though. Is-- in the President's plan as he envisions tackling the deficit, do taxes have to go up? Does that have to be part of this equation across the board?

DAVID PLOUFFE:
Well, this is part of his budget for next year. He has said he believes-- taxes on the higher income, people over $250,000-- should eventually go up.

Pulping the bully approach to presidential leadership V: a counter-argument

Returning once more to Frances E. Lee's demonstration that presidential advocacy of a specific policy increases partisan polarization on that issue: one strand in Lee's data may call in question the notion that Obama can best foster a comprehensive tax/budget reform compromise by keeping a low profile at this stage (because a detailed presidential plan would immediately harden the party battle lines).

Yesterday I noted that according to Lee's statistical analysis in Beyond Ideology: Politics, Principles and Partisanship int he U.S. Senate, tax policy is already so polarized by party that there's not that much room for a President to worsen the division. Therefore, presidential advocacy on tax issues has less of a polarizing effect than presidential advocacy on most issues. More generally, presidential input has a more measurable polarizing effect on issues that are not strongly maked by ideology, such as space exploration, than on issues where ideology already clearly divides the parties.

Presidential input increases partisan division by increasing both parties' voting cohesion.  So again, perhaps if the president does not "go first" in laying out a plan for long-term tax/budget reform, he can increase the chances of a bipartisan compromise. But here's the rub: according to Lee's data, on strongly marked ideologial issues presidential input increases his own party's cohesion signficantly more than the opposing party's. For tax policy, from 1991-2004, presidential input increased his own party's cohesion on roll call votes 10.2 points, from 53.7 to 63.9, while slightly reducing opposite party cohesion, from 48.5 to 47.3. 

No crusade in the SOTU?

Matt Yglesias was onto something -- if only administration thinking -- when he wrote:

It sounds silly to call for less presidential leadership, but I think the evidence suggests that what’s needed here is actually a very vague and generic endorsement of the concept of tax reform plus some themeless pudding. Frances Lee’s important book Beyond Ideology: Politics, Principles, and Partisanship in the U. S. Senate argues persuasively that what happens when a president tries to “lead” on an issue like this is that a dynamic of partisan polarization kicks in. What you really need to get tax reform is for some hard-working members of congress from both parties to take the initiative in hammering out a framework and building support on the Hill. If such a thing happens, the White House should of course try to play a constructive role. But jumping all over the issue and a creating a dynamic where tax reform becomes “a key priority for the Obama administration” that opportunists on the right want to kill for the sake of a political win would not be a constructive intervention.

Today, the WSJ's Jonathan Weisman relays (alleged) administration thinking in advance of the State of the Union address:

The president will try to keep the deficit conversation in broad terms, fearing that detailed proposals would put Republicans, Democrats and Washington interest groups into a defensive crouch before real negotiations can take place, according to those officials [familiar with the speech]. White House officials, for instance, have assured Democratic lawmakers that the president will not explicitly call for cuts in Social Security benefits, though he will say changes are needed to put the program on a solid fiscal footing.

Obama, the bully pulpit, and the battleship

For those of us juiced by the prospect that Obama might make comprehensive tax reform a focal point of the remainder of his term -- kicked off, as eloquently urged by William Galston, by a vision laid out in the upcoming State of the Union address, Matt Yglesias tosses some cold water in the soup ("juiced?" "soup"? -- never mind):

It sounds silly to call for less presidential leadership, but I think the evidence suggests that what’s needed here is actually a very vague and generic endorsement of the concept of tax reform plus some themeless pudding. Frances Lee’s important book Beyond Ideology: Politics, Principles, and Partisanship in the U. S. Senate argues persuasively that what happens when a president tries to “lead” on an issue like this is that a dynamic of partisan polarization kicks in. What you really need to get tax reform is for some hard-working members of congress from both parties to take the initiative in hammering out a framework and building support on the Hill. If such a thing happens, the White House should of course try to play a constructive role. But jumping all over the issue and a creating a dynamic where tax reform becomes “a key priority for the Obama administration” that opportunists on the right want to kill for the sake of a political win would not be a constructive intervention.

That is food for thought (and I've ordered Lee's book). In rebuttal, I would point out that political vets seem in any case to be assuming that getting a tax overhaul enacted will be at least a three-year process, and that while "polarizing" the debate early by "presidentializing" it may slow that process, doing so may also a) help Obama politically, and b) improve the ultimate outcome, since his approach to revenue-raising, federal spending, and tax burden distribution is far more reality-based than the Republicans'.  Not that I'm saying Yglesias is wrong - who am I to game out political strategy?

I do think that Lee's observations go a long way toward explaining Obama's policymaking approach up to this point, however.  Obama's abdication of bully pulpit "leadership" at key moments has been so pointed that I think there's got to be a method behind it. The battle of the Bush tax cuts is the most recent example. Ever since the news of Obama's deal with the Republican broke, and I took in the list of stimulative goodies for the nonwealthy piled up on Obama's side of the ledger, I've suspected that the president may not have wanted the tax cuts for the top 2% to sunset right now. His silence when effectively invited to promise a veto of any bill extending those cuts has been deafening at least since September 9, when George Stephenopoulos asked him four times, and he demurred four times. Ever since the Republican landslide become a strong likelihood Obama may have been desperate to buy whatever stimulus he could while he could -- and the sunsetting tax cuts were his only currency.

Bipartisan glimmers

This is very good (if unsurprising) news:

President Obama is considering whether to push early next year for an overhaul of the income tax code to lower rates and raise revenues in what would be his first major effort to begin addressing the long-term growth of the national debt.

Not surprisingly, given the emphasis of the deficit commission, the administration's nascent tax planning focuses on reducing "tax expenditures," i.e. the huge array of targeted tax breaks such as the mortgage deduction or, say, College 529 plans. Doing so would enable increasing revenues while lowering rates. (Obama suggested that he would eventually want to do this with corporate tax rates way back in June 2008.)

The chief contribution of Obama's deficit commission was to demonstrate that there is at least some potential to get some Republicans to sign onto the idea of raising revenue while cutting rates by reducing expenditures. Conservative senators Tom Coburn and Michael Crapo voted for the plan.

What may defang the idea of raising revenue somewhat for at least some conservatives is the possibility of considering tax expenditures to be what the name suggests they are -- spending.  As I noted while the commission's ideas were being floated, conservative commentator Heather MacDonald referred to cutting out tax breaks as cutting spending:

Two directions on tax reform

Demolishing AEI president Arthur Brooks's claim in today's WSJ that Americans do not favor progressive taxation, Jonathan Chait cites a public opinion snippet that raises a fundamental question about tax reform (my emphasis):

The Quinnipiac University poll found that 60 percent of Americans among both major political parties think raising income taxes on households making more than $250,000 should be a main tenet of the government's efforts to tame the deficit. More than 70 percent, including a majority of Republicans, say those making more than $1 million should pay more.

The question is: leaving aside the precise optimal level for the top marginal income tax rate, why is the highest bracket fixed at a mere $250k in family income?  Matt Yglesias and Nate Silver batted this question around in March '09. Silver:

 What the discussion over the top marginal tax rate ignores, however (and what Ygelsias picks up upon) is that this rate has been assessed at very different thresholds of income. In 1940, for example, the top marginal tax rate was 81.1 percent -- but this rate only kicked in once you made $5,000,000 or more in income, which is equivalent to about $75,000,000 in today's dollars.

Bracketing up: HCR, income redistribution and tax reform

David Leonhardt  points out today that the health care bill represents a significant check to the growth of income inequality over the past generation. This point about its tax impact triggered a memory:

A big chunk of the money to pay for the bill comes from lifting payroll taxes on households making more than $250,000. On average, the annual tax bill for households making more than $1 million a year will rise by $46,000 in 2013, according to the Tax Policy Center, a Washington research group. Another major piece of financing would cut Medicare subsidies for private insurers, ultimately affecting their executives and shareholders.

The memory was this: lefty blogger speculation at the dawn of the Obama presidency as to whether Obama would seek to reengineer tax brackets. Nate Silver:

What the discussion over the top marginal tax rate ignores, however (and what Ygelsias picks up upon) is that this rate has been assessed at very different thresholds of income. In 1940, for example, the top marginal tax rate was 81.1 percent -- but this rate only kicked in once you made $5,000,000 or more in income, which is equivalent to about $75,000,000 in today's dollars.

But today, the threshold where the top tax bracket kicks in isn't $75 million, or $5 million, or even $1 million ... it's a mere $357,700. The progressivity of the tax code stops there....

Clive Crook is off-kilter on Obama

I don't think the FT is going to publish this one, so I'll let it fly here:

While alleging that unforced errors have undermined support for President Obama's domestic agenda, Clive Crook asserts with regard to the health care reform bills in Congress that "the administration has not yet credibly accounted for the costs or said how it will meet them."

Come again? The CBO has scored both House and Senate bills as deficit-reducers. Obama has stressed cost control throughout the process, and the Democrats' fiscal responsibility in crafting this bill stands in dramatic contrast to Republicans' ramming through the deficit-financed Medicare drug coverage bill in 2003 (not to mention their reckless tax-cutting in war time).

Mr. Crook simply has not faced up to the effect on public opinion of the Republicans' relentless lying about the health care reform bills. And still, after witnessing Republicans' bad-faith stonewalling on both the stimulus and health care reform, he dreams that Obama might work with a coalition of Republicans and centrist Democrats on tax reform. If he thinks that Republicans would join with centrist Democrats to work with Obama on anything he is truly a brother from another planet where American politics is concerned.

Obama is "remoulding" America, as Mr. Crooks suggests he might if he'd only follow Mr. Crook's prescriptions. No one ever said it would be easy. His poll numbers will go down as Reagan's did until the economy unmistakably turns around and the effects of passing health care reform sink in. Then watch the battleship turn.