It’s not the economy, stupid: Obama pivots to tax in attempt to wedge Romney

President Obama outlines his tax policy at the White House on Monday. EPA

On Monday afternoon, President Obama delivered what sounded like a speech on tax policy. In reality, though, the speech dispensed more politics than policy - politics carefully crafted to secure Obama re-election in November.

The policy itself was familiar: extend the Bush tax cuts for those making under $250,000 a year, while allowing tax cuts for wealthier earners to expire. Nothing new here - Obama has been advocating this since 2008. Nor is the issue pressing. Chris Cillizza, election analyst for the Washington Post, notes that “there is a zero per cent chance that President Obama’s tax proposal will become law before this fall.”

What Obama’s speech aimed to do was not to promote new policy or push legislation forward. Rather, it was meant to re-frame the election as the campaign enters the crystallisation period, when voters’ impressions of the candidates begin to harden. Obama wants to ensure that the image fixed in voters’ minds is that of an out-of-touch, intransigent Mitt Romney versus a feels-your-pain, defender-of-the-middle-class Obama.

But why tax policy? Wouldn’t something like a jobs bill or major infrastructure package be more appropriate, given the bleak job reports of the past few months? Such bills appeal to Obama’s liberal base, but it’s his tax policy that positions Obama to win the up-for-grabs voters in the middle.

First, the policy allows Obama to play the role of deficit hawk. Stimulus programs come with hefty price tags, allowing Republicans to attack Obama as a classic big-spending liberal. The middle-class tax cuts come at a cost, too - $150 billion over the next year. But Republican tax policy costs even more. Extending tax cuts for those making over $250,000 tacks another $60 billion to the overall bill. Extend the cuts for ten years, and the GOP plan adds nearly a trillion dollars to the deficit.

Obama, sounding more like a debt-obsessed Republican than a tax-and-spend Democrat, seized this point in Monday’s speech. “The money we’re spending on these tax cuts for the wealthy is a major driver of our deficit,” he argued.

Mitt Romney’s wealth and record in corporate America will come under sustained attack in coming months. EPA/Michael Reynolds

Second, focusing on tax policy enables Obama to paint Romney as part-and-parcel with the intransigent (and unpopular) GOP. Over the past few decades, Republicans have left themselves little wriggle room when it comes to taxation.

Tax hikes are off limits, no matter what the fiscal circumstances. Indeed, in an August debate, all the party’s 2012 candidates said they would reject a budget deal that offered $10 in spending cuts for every $1 in tax increases. Not only does Romney insist on an across the board extension of the Bush tax cuts, he has called for lowering taxes an additional 20%.

Fiscally irresponsible? Absolutely. But Romney has nowhere else to go. Proposing even the smallest of tax increases is rank heresy among the GOP base and congressional leadership.

Third, Obama’s support for tax increases on the over-$250,000-a-year crowd helps him paint Mitt Romney as a wealthy businessman out of touch with the middle class. When asked in an October 2011 poll whether they supported raising taxes on those making over $250,000, 68% of respondents said yes - including 54% of Republicans. Given the tax hike’s popularity, refusing to support middle-class tax cuts in order to defend the remaining 2% of high earners could spell disaster for Romney in November.

Republicans, of course, did not accept this narrative. They immediately responded to Obama’s speech, arguing it was tantamount to class warfare. But Obama had an answer for this as well.

In his speech, he drew attention to the consequences of the Bush tax cuts, which “benefited the wealthiest Americans more than anybody else.” Rather than acting as a rising tide that lifts all boats, as trickle-down economists like to argue, Obama observed that Bush’s economic policies led to sluggish job growth and high deficits.

While the wealthiest Americans’ assets grew, incomes for the rest of Americans stagnated or declined. If there was a class war going on, Obama seemed to argue, it wasn’t against the rich - it was on their behalf.

The president made this point lightly to avoid positioning himself as a class warrior. In the speech he never used the phrase “fair share,” a staple of his earlier speeches which Republicans denounced as code for socialism and redistribution. Instead, he focused on the middle class, a phrase he deployed fourteen times in his brief comments.

For Obama to win in November, the election cannot be a referendum on his first term. It has to instead be a choice between two competing visions of America. On Monday, the president made it clear what he believes those visions to be: a government that protects the vast middle class from continued economic loss, or one that sacrifices it for the top two percent.

If he can convince voters those are the stakes, Obama will secure himself a second term.