Jacob Heilbrunn

Why Does Obama Keep Trying to Raise Taxes?

One of the charges hurled at President Obama from sympathetic Democrats is that he is a compromiser. But this indictment does not hold true when it comes to tax policy. Obama has consistently advocated one approach when it comes to taxes: raising them. Again and again, Obama has insisted that taxes need to go up. When he announced his jobs program before Congress, he said it would all be paid for. A day later the answer of how that feat would be accomplished was divulged by Obama: he wants to raise taxes.

In pursuing this policy, Obama is trying to redistribute wealth. He unequivocally states that the rich—those couples earning $250,000 or more in his definition—must pay more to help finance government programs and, in theory, reduce the debt (though historically Congress has simply taken the money and run with it). If America were flush, Obama's espousal of higher taxes might make sense (though $250,000 goes a lot longer in Dubuque than it does in Boston, which is one reason why Obama's definition of the rich is questionable). A prosperous America could rescind the Bush tax cuts in toto—so that everyone, not just the wealthy, contributes to what has become a tax system that relies disproportionately on the contributions of a slender portion of the tax bracket. But the broader problem is this: who on earth would want to impose higher tax rates during what amounts to a new Depression? The result would almost certainly be to further depress economic activity. Today's Wall Street Journal points to what it terms a looming "2013 tax cliff" that the country is about to run over.

There is a strong case for redoing the tax code—for, in fact, lowering marginal tax rates (and a case as well for lowering the payroll tax temporarily, as Obama suggests). This could be accomplished by genuine reforms that would purge the tax code of all sorts of distortions in the form of various exemptions. Perhaps the congressional super-committee will come up with a sweeping proposal to accomplish that. In fact, the Bowles-Simpson commission already went some ways toward accomplishing that mission.

But the Obama administration has even more urgent problems when it comes to the economy. For one thing, the Washington Post today provides new and disquieting details about the administration's rush to approve a half-billion-dollar loan to Solyndra, a manufacturer of solar panels that just declared bankruptcy. This is perilous territory for the White House, uniting as it does the administration's backing for unproven, green technologies, economic stimulus and, at best, a carefree approach to taxpayer dollars. It appears that the White House bullied federal reviewers into approving the loans so that vice president Joe Biden could make the announcement in September 2009:

One e-mail from an OMB official referred to “the time pressure we are under to sign-off on Solyndra.” Another complained, “There isn’t time to negotiate.”

“We have ended up with a situation of having to do rushed approvals on a couple of occasions (and we are worried about Solyndra at the end of the week),” one official wrote. That Aug. 31, 2009, message, written by a senior OMB staffer and sent to Terrell P. McSweeny, Biden’s domestic policy adviser, concluded, “We would prefer to have sufficient time to do our due diligence reviews.”

Now taxpayers are on the hook for $535 million. How will Obama reconcile this with his claim of reducing government waste and focusing on creating new jobs?

Voter discontent seems clear. In New York a conservative Republican, Bob Turner, has won a congressional seat that the GOP has not held in almost one hundred years. Yet the Republican presidential field has largely been mired in abstruse debates about whether or not Social Security is a vital government program or simply a Ponzi scheme that can be tossed overboard as so much useless ballast.

The most pressing issue America faces is job creation. Without economic growth, the deficit will never be reduced. Income is declining. One in six Americans now lives in poverty, according to the Census Bureau.

But it's highly questionable whether Obama's jobs plans will reduce those numbers. The outstanding issue—the one Obama does not touch—is the issue of debt from mortgages that went bellyup. Obama may depict raising taxes on the sliver of Americans—the top 1 percent, which has seen a rise in income—as a panacea for a nation that seems to be experiencing structural decline, but it is no solution at all. Instead, it is hard to avoid the impression that the president is campaigning not to save the economy but his own job.