Playing to the base, Obama risks a bill on Nov. 2

The post-partisan Barack Obama has left the building. For the midterm congressional election campaign, the Democratic President is stirring his base with a staple of the liberal left: class warfare.

By promising to raise taxes on the wealthy and attacking Republican favouritism toward “millionaires and billionaires,” Mr. Obama has set the tone for a divisive campaign that will ultimately be refereed by the middle class.

But persuading Americans that he really is on the side of suburban double-income households remains a heavy lift. So far, more voters think the President’s economic policies are hindering an economic recovery rather than helping one along. That may just make him the worst salesman for a tax increase, even one that targets only the richest 2 per cent of Americans.

On Wednesday, Mr. Obama travelled to Ohio, a bellwether state racked by a 10.3-per-cent unemployment rate, to unveil his plan to extend income-tax cuts for the middle class that were initially adopted under George W. Bush in 2001. But he proposed letting the so-called Bush tax cuts expire at the end of this year on households earning more than $250,000 (U.S.). The top marginal tax rate would jump to 39.6 per cent from 35 per cent on Jan. 1.

Republicans, and even Mr. Obama’s former budget director, have warned against a tax increase now, arguing that it could sap the already fragile confidence of consumers. The President retorted that the impact of his proposals on economic growth would be slight, while the additional tax revenue would help tame the unwieldy U.S. budget deficit.

“They would have us borrow $700-billion over the next 10 years to give a tax cut, of about $100,000 each, to folks who are already millionaires,” Mr. Obama said of the Republican opposition.

Still, Mr. Obama’s plan would deprive federal coffers of between $2-trillion and $3-trillion in tax revenue over the next decade. Peter Orzag, who stepped down as Mr. Obama’s budget director in July, this week advocated leaving tax rates alone until 2013, then raising rates to pre-2001 levels for everyone. The White House was not amused by this friendly fire.

In Cleveland, the President directed his attacks at John Boehner, the Ohio GOP congressman who is set to take over as Speaker of the House of Representatives if Republicans win a majority of seats in the lower chamber. He mentioned Mr. Boehner seven times in his speech, calling on the current House minority leader “not [to] hold middle-class tax cuts hostage any longer.”

Congress must approve any tax overhaul. But Mr. Obama’s biggest challenge is not overcoming GOP opposition. It involves persuading recalcitrant Democratic incumbents who are staring disastrous polls in the face.

“They’re not enthusiastic about the President’s proposal,” Wendy Schiller, a political science professor at Brown University in Providence, R.I., said of endangered Democrats whose seats are on the line in November. “It’s too hard to explain. And if the American voter has bought into the idea that any tax increase at all will slow the economy down, it will be very hard for the President to change voters’ minds between now and election day.”

So, why risk stoking class warfare at all? The answer lies with the Democratic base. The liberal left had hoped for more clearly redistributive policies from Mr. Obama out of the starting gate. Without a sign from him that he is willing to pursue them, those voters may stay home on Nov. 2.

By proposing to extend the Bush tax cuts for everyone, including the wealthy, “he might have alienated or disillusioned his base even further,” Prof. Schiller offered.

Playing to his base, Mr. Obama has spurned the post-partisan pitch of his 2008 presidential campaign. On Monday, he told a Milwaukee crowd that Republicans “talk about me like a dog.” His proposal the same day to create a state-owned bank to finance infrastructure projects was similarly directed at the base. More government intervention is a tough sell with everyone but hard-core Democrats.

For balance, the President’s proposals to renew and expand research tax breaks and allow companies to write off 100 per cent of plant and equipment spending in 2011 are aimed at spurring private investment and dispelling criticism that Mr. Obama is “anti-business.”

Republicans have simplicity on their side. On Wednesday, to counter Mr. Obama’s plan, Mr. Boehner proposed a two-year freeze on all federal income taxes. It would, the GOP leader insisted, “help small businesses who have no clue what the coming [Obama] tax rates are going to be.”

At the very least, a tax freeze has the virtue of being understandable. Everything about Mr. Obama suggests nuance and complexity, and his tax proposals are no exception. That could make all the difference on Nov. 2.