Analysis: Obama tiptoes on proposed tax hikes

[April 14, 2011]  WASHINGTON (AP) -- With his striking choice of words, President Barack Obama clearly outlined the greatest perils for Republicans -- and for Democrats -- in the nation's high-stakes debate over spending and social programs.

Obama used vivid, populist language in a forceful speech Wednesday to denounce the GOP plan for cutting spending and revamping Medicare and Medicaid. The Republicans, he said, have concluded that "even though we can't afford to care for seniors and poor children, we can somehow afford more than $1 trillion in new tax breaks for the wealthy."

But the president's language was tortured and opaque when it came to one element of his own proposal: raising taxes for certain Americans, mostly high earners. Obama said he wants "to reduce spending in the tax code." That code, he said, is "loaded up with spending on things like itemized deductions."

By any measure, "spending in the tax code" is a curious phrase. It likens tax revenue to a source of money that "spends" down its total when tax cuts are enacted and conversely "reduces spending" when taxes go up, including cases in which temporary tax cuts are ended.

Long gone are the days when Democrats employed frank language on taxes, as presidential nominee Walter Mondale did in 1984. "Mr. Reagan will raise taxes, and so will I," Mondale said in accepting the nomination. "He won't tell you. I just did."

Obama left no doubt he believes some taxes should go up. But he couched it in careful terms designed to distance himself from proverbial "tax-and-spend Democrats" almost as much as he distanced himself from what he suggested are heartless Republicans.

Throughout his 43-minute speech, Obama portrayed himself as a fair but frugal leader willing to trim popular agencies, including the military, and to raise taxes only on wealthy people who have benefited disproportionately in recent years. It's part of a broader appeal to independent voters, who swung dramatically from Democratic candidates in 2008 to Republicans in 2010 and who hold the key to his re-election hopes next year.

Americans are showing increased alarm at the fast-growing federal debt. It's coupled with concern, along with sometimes conflicting emotions and beliefs, about the nation's biggest social programs, Medicare and Social Security.

Both parties face political opportunities and risks as they confront these issues. And both parties are seeking phrases and slogans to best exploit their openings while minimizing their weaknesses.

House Republicans plan this week to pass an ambitious 10-year plan that would convert Medicare to a voucher program and turn Medicaid into a state block grant program, saving the government billions of dollars. The bill would reduce tax rates for corporations and high earners, while ending some tax-avoidance loopholes.

Democrats feel the GOP is overreaching, chiefly in its proposed changes to Medicare, the rapidly expanding federal health care program for older Americans and the disabled. They think voters will recoil at the notion of higher medical costs for the elderly, especially if income tax rates are falling for high earners.

Obama ripped the Republican plan. "It's a vision that says America can't afford to keep the promise we've made to care for our seniors," he said. "It ends Medicare as we know it."

Republicans, meanwhile, have virtually perfected their attacks on any Democrat who suggests a tax increase of any kind. Several top Republicans criticized Obama's long and multilayered speech on that topic alone.

Obama "doesn't get it," said Mississippi Gov. Haley Barbour, a likely presidential candidate. "The fear of higher taxes tomorrow hurts job creation today."

"The real problem is that Washington spends too much, not that it taxes too little," said Sen. Lamar Alexander, R-Tenn.

Numerous bipartisan and nonpartisan analysts say it is almost impossible to solve the nation's debt problem without some combination of tax increases, spending cuts and substantial changes to Medicare and Social Security.

After calling for an array of spending cuts Wednesday, Obama made the case for targeted tax increases, albeit in roundabout language.

Because Medicare and Social Security are popular with both parties, he said, "and because nobody wants to pay higher taxes, politicians are often eager to feed the impression that solving the problem is just a matter of eliminating waste and abuse, that tackling the deficit issue won't require tough choices."

He said he would not repeat last year's decision to extend Bush-era tax cuts -- now scheduled to expire before 2013 -- for families earning more than $250,000 a year. "We cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire," the president said.

He renewed his call for limiting itemized deductions "for the wealthiest 2 percent of Americans." Such deductions apply to money spent on mortgage interest payments, charitable gifts and other items.

Obama described such goals as "reducing tax expenditures."

"I think it was very, very smart" to use such unfamiliar and indirect language, said Matt Bennett, vice president of Third Way, a Democratic-leaning think tank that praised Obama's speech. "Why not put it in those terms?" he said in an interview. "It's what the Republicans' Frank Luntz would do."

Luntz is a GOP adviser known for pushing carefully crafted political terms, such as referring to levies on estates as the "death tax."

Bennett said Republicans have demonized even reasonable and necessary tax increases to the point that "it's a gigantic problem" for solving the nation's fiscal woes. If a "term of art" will blunt GOP attacks, he said, it could help Obama advance his agenda and give political cover to Republican lawmakers who believe some element of tax increases must be part of a deficit-reduction drive.

In his closest brush with an explicit call for tax increases Wednesday, Obama chastised the most insistent Republicans.

"Some will argue we shouldn't even consider ever, ever raising taxes, even if only on the wealthiest Americans," the president said. "It's just an article of faith for them. I say that at a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more."

It fell far short of Mondale's candor. But it was enough to unleash a barrage of GOP criticisms, certain to resound through the fall of 2012.

[Associated Press; By CHARLES BABINGTON]

Charles Babington covers Congress and politics for The Associated Press.

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