Speaking of class warfare, a blogger at The Economist has a pretty remarkable-in-its-boldness post on Barack Obama and his assertion that he isn’t perpetrating class warfare with his tax plans.

In a speech in Storm Lake, Iowa, Mr Obama pitched his proposals to more heavily tax high earners as a counterbalance to high levels of economic inequality:

Our tax policy has been skewed toward the top 1 percent and away from the middle class, working class in this country. Reversing that would make a significant difference. That’s not trivial. That’s not around the edges.

Mr Obama claims to be on the side of the working and middle-classes, but I would submit that this sort of tax policy is in fact trivial. It’s electoral public relations. The edges are precisely what this sort of thing is around. Our economy is riddled with a multitude of deeply-embedded structural flaws that allow the well-connected to enrich themselves at the expense of the rest of us, but nobody will do anything about it. There is a class war in this country, a war between the subsidy barons, the regulatory arbitrageurs, the patent monopolists and the rest of us. Mr Obama is a class warrior. The trouble is he’s on the wrong side.

Well, there you go. The blogger, W.W., goes on to conclude that both major parties are not on our side – a fairly sensible conclusion that it seems more and more people are coming to.

In no particular order…

It could have been much worse. That it isn’t is a good thing.

Obama is going after Republicans around taxes for the rich. It’s a political issue, though, and it’s not clear that the policy outcome behind it will ever stack up to the rhetoric used to advocate it.

The idea that liberals are celebrating that a Democratic President didn’t choose to gut Medicare, Medicaid and Social Security shows just how far away the Obama administration has been from what many liberals hoped he would be.

The President said this morning that his plan will consist of 2:1 spending cuts to revenue increases. This is the same level of austerity that the British government deployed, to horrible effects. The likelihood is that since this is merely the starting offer from the President, the final result will be worse. Add in that, per Obama, there has already been $1 trillion in spending cuts, we’re really at around 3:1.

I like that the President is fighting Republicans. But that’s just part of the equation. The more important part is fighting for good policy outcomes and putting political pressure on conservatives who oppose them. Jonathan Cohn thinks the cost reductions in Medicare don’t amount to actual benefit cuts and from what I can see, he’s mostly right.

The plan includes a provision which would allow creditors to make collection calls to debtors on their cell phones. This has the remarkable synergy of bailing out both banks and telecoms at the same time, who will surely collect hundreds of dollars per debtor in new mobile phone billing.

More details will come out, so I may have more reactions later.

It was recently announced that President Obama is going to be seeking a new top tax bracket for millionaires. As Aravosis mentioned, it is “politically quite smart to put the Republicans on the defensive regarding tax increases on the wealthy.” A higher tax rate on the people who can most afford is the best way to increase revenues and reduce the deficit.

Unfortunately, as has recently been the case with President Obama, ostensibly good ideas (push for job creation, pay for job creation with tax hikes on the rich and corporations, tax millionaires), are mediated by being pairing to very conservative ideas (cut Medicare & Medicaid, prolong payroll tax cuts). While I think this is a good general direction for Obama to go in, specifics matter. As a progressive, I’m looking not for better optics from President Obama, but better policy solutions that help more people.

While Warren Buffett is certainly a well-regarded figure in the world of finance and an ostensibly less evil Master Of The Universe than we usually get, I still have real problems with the outsourcing of idea creation from the White House to Warren Buffett.

He will call it the “Buffett Rule,” a nod to billionaire investor Warren Buffett, who has criticized a system that allows the rich to pay a smaller portion of their income in taxes than middle- and working-class Americans because wages are taxed at a higher rate than investment income.
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It is unclear how much the new tax rate for millionaires would raise, but it would impact only 0.3 percent of taxpayers, a White House official said.

Like Warren Buffett, the President will not be making a specific proposal for what the new rate on millionaires will be. Will it be Reagan’s 50% rate? Eisenhower’s 91% rate? We don’t know, though I would guess it’s more likely to be in the 35-40% range.

Like Warren Buffett, the President is pushing for cuts to Medicare and Medicaid:

The proposal is expected to include hundreds of billions of dollars in cuts to Medicare, Medicaid and defense programs, as well as a call on Congress to overhaul the Tax Code.

Like Warren Buffett, the President has called for the Super Congress to exceed their $1.5 trillion mandate for cuts and wants to see hundreds of billions of dollars more taken out of the deficit.

Beyond taking very clear cues from Warren Buffett as to what policy path he should advocate for as President, the administration seems to be grossly overestimating the level of support taxing millionaires will garner while simultaneously advocating for cuts to Medicaid and Medicare.

Democrats have balked at the idea of accepting cuts to entitlement programs without forcing Republicans to agree to new tax revenue. The proposal is certain to energize the progressive base, which has wanted Obama to draw sharper contrast with Republicans for defending tax breaks for the wealthy.

I find it very troubling that the administration will provide specific ways that they plan on cutting hundreds of billions of dollars from two of the three major social support programs, while refusing to say specifically how much they want to tax millionaires, and yet they still expect this to be a plan which “energize[s] the progressive base.” Given today’s current political realities, a plan to cut Medicare and Medicaid is almost certain to have a shot at coming into law, while a new tax bracket for millionaires is almost certain to never become law.

I’ve been waiting for President Obama to start pushing towards job creation and forcing the rich to pay more in taxes for a long while. I’m glad that he’s doing these things now. I just am not at all enamored by the decision to pair these genuinely liberal policy objectives with deficit reduction, cuts to our greatest social support programs, and austerity. These don’t have to be paired together and when the climate suggests that the conservative ideas will be actualized while the liberal ideas are tossed aside, the liberal ideas just become a Trojan Horse for conservativism. Not only does that energize me, but it makes me disinclined to support this platform at all.

Update:

Oh well, Robert Reich thinks the President is going to impose a millionaire tax rate around 20%. If that proves true, this is beyond a joke, it’s an assault on Medicare and Medicaid via a feckless attempt to get the rich to chip in.

Update II:

The Wall Street Journal is now reporting that President Obama will not propose raising the Medicare eligibility age. That’s good news and hopefully it’s accurate. We’ll see tomorrow.

Maybe, according to the Wall Street Journal:

“As the president has consistently said, he does not believe that Social Security is a driver of our near- and medium-term deficits,” White House spokeswoman Amy Brundage said in a statement.

Changing the inflation formula so Social Security benefits grow more slowly and raising the Medicare eligibility age were ideas Mr. Obama had been willing to accept this summer, when he was trying to strike a deficit-reduction deal with House Speaker John Boehner (R., Ohio).
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Instead of raising the Medicare eligibility age, the White House is considering recommending cuts to providers and possibly increasing premiums for wealthier recipients, people familiar with the discussions say. It’s also possible the president would propose changing the inflation calculation for other government programs, which currently use the same measure as Social Security does. The White House declined to comment on those discussions.

One of the problems with the President validating the idea that Medicare, Medicaid, and Social Security need to be “saved” through cuts is that it opens the door for very different meanings as to how savings can be achieved. I’m sure there are ways to reduce waste in Medicare and Medicaid that won’t affect the delivery of care. But that’s a very different conversation than one about raising the age people qualify for this care. Opening the door to cuts puts everything on the table and allows Republicans to use the exact same frame as Obama to push ideas which will make more Americans rely on private insurance longer and at higher cost.

I really hope the President doesn’t go down the path of cuts to the Big Three social support programs. But I’m not going to take the word of a White House spokesperson as gospel, as only a few months ago the President himself was calling for the exact same cuts that were reported on yesterday. The proof will be in the proposal the President actually makes to Congress and the text of legislation that he asks them to pass.

The Financial Times reports that President Obama is going to propose cuts to Medicaid, Medicare and Social Security as part of his deficit reduction proposal.

Barack Obama is expected to lay out a plan next week that would cut several hundred billion dollars from Medicare and Medicaid, the large government healthcare schemes for the elderly and the poor, as part of a pitch to cut future deficits by more than $1,500bn.

Senior White House officials said the US president would base a detailed blueprint for fiscal reform, which is to be delivered on Monday, on an earlier speech he delivered in April on deficit reduction.

The announcement could create tensions within the Democratic party, which has traditionally staunchly defended Medicare. Mr Obama’s fiscal proposal will be released just one week after the president unveiled a separate plan to raise more than $450bn to pay for a jobs bill that senior officials said would be the president’s singular focus in coming weeks.
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Mr Obama’s plan could also feature a change in the way the US government measures inflation, switching to a less generous chained-consumer price index. The biggest impact of this measure – which could save between $250bn and $300bn over ten years – would be felt by recipients of Social Security, the retirement scheme.

Obama announced in his jobs speech that he would seek cuts to Medicaid and Medicare, so while that isn’t really surprising, it’s still incredibly disheartening. Cutting Social Security’s COLA benefits is also really destructive.

If a Republican president proposed cuts to Medicare, Medicaid and Social Security, the outcry and opposition from liberal groups would be defining. Democratic members of the House and Senate would fight tooth and nail to stop the cuts. Labor would turn out their members to protest the cuts. The airwaves would be flooded with ads hitting Republicans for this assault on the social safety net and online advocacy groups would bombard the White House with calls, emails, and faxes from outraged members.

But when the cuts are proposed by a Democratic president, the odds of this response seems radically reduced. Labor unions were universally supportive of the President’s jobs speech, praising him for turning towards job creation and infrastructure investment. I don’t hold out hopes that there will be an equally swift outpouring of statements criticizing Obama for trying to pay for tax cuts by cutting Social Security, Medicaid and Medicare.

There are obvious electoral problems with a Democrat leading the charge to cut the Big Three programs. It’s a Nixon going to China moment, only this time it’s a bad thing. But more importantly, these cuts will have a devastating human affect. These are programs that keep people out of poverty. These programs care for sick people. They are crucial to maintaining a middle class in America. The idea that we have to cut these programs to “save” them was treated as a laughable oxymoron by progressives laughed when Republican politicians said it. If Obama goes ahead with these proposals, he should face the exact same response from the left as his ideological predecessors in the Republican Party received.

After the deficit deal passed a month ago, I made this prediction about the jobs pivot:

If I had to put money down, I’d predict that if any jobs bill moves forward, it will consist of more than 50% tax cuts, and probably more likely, a four or five to one ratio of tax cuts to stimulative spending measures.

Of the $447 billion in the jobs segment of Obama’s proposal, we have this breakdown:

O.K., about the Obama plan: It calls for about $200 billion in new spending — much of it on things we need in any case, like school repair, transportation networks, and avoiding teacher layoffs — and $240 billion in tax cuts.

Keep in mind that Obama is rolling out a two-part plan here. First, he previewed the American Jobs Act as a largely job creation piece of legislation. But within that preview, the President also made clear that he will pair this with a deficit reducing agenda that exceeds $1.5 trillion. From the speech:

The agreement we passed in July will cut government spending by about $1 trillion over the next 10 years. It also charges this Congress to come up with an additional $1.5 trillion in savings by Christmas. Tonight, I am asking you to increase that amount so that it covers the full cost of the American Jobs Act. And a week from Monday, I’ll be releasing a more ambitious deficit plan — a plan that will not only cover the cost of this jobs bill, but stabilize our debt in the long run.

Given that the GOP mantra, albeit wrong, has been that tax cuts reduce the deficit, it’s not hard to imagine there being further tax cuts emerging from the Super Committee. So at minimum, I was right about the lower bounds of the jobs pivot being at least 50% tax cuts. But this is just the proposal and what is passed (if anything passes) will likely look very different from what we heard last night. Obviously there’s plenty of time and space for the ostensible jobs bill to end up with an even greater majority going towards tax cuts.

The larger issue is that while I strongly support action around job creation (particularly in infrastructure spending and aid to states), the idea of paying for it by cuts to Medicare and Medicaid, let alone other federal social spending programs, is intensely unacceptable to me. While the President may have delivered the most forceful and passionate speech of his tenure in office, replete with genuine historical praise of past accomplishments of liberal governance, using it as a jumping off point for more deficit reduction and cuts to the social safety net is not only bizarre but dangerous. Cutting Medicare to save it is as intellectually honest and persuasive as bombing for peace or fucking for virginity. It just doesn’t work like that. And I can’t say playing the role of Cassandra makes me feel good, either.