Baseball Crank
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October 15, 2012
POLITICS: Have Obama and Biden Overinvested In The Middle Class Tax Argument?

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Every campaign involves strategic choices about where to attack your opponent. One of the major points of attack leveled by the Obama-Biden campaign against Mitt Romney is the Democrats' claim that the Romney-Ryan tax plan would raise taxes on the middle class. There is evidence that this attack has done a good deal of damage to Romney, but it is beginning to look as if it is now blowing up in the Democrats' face at just the wrong time. There's a lesson there - similar to the lesson of the Democrats' 2004 obsession with George W. Bush's national guard service - about overplaying your hand in national elections.

The Romney Tax Plan: Rollout

As you may recall, Romney's original tax proposal called for keeping income tax rates where they were (basically, just making the Bush tax cuts permanent) while cutting taxes on business and investment (the corporate and capital gains taxes). Under fire from conservatives in the primary for not advancing a bolder pro-growth agenda, Romney rolled out a revised plan calling for a 20% reduction in rates across the board, to be offset by eliminating or reducing deductions. The plan's main emphasis is as much on simplifying the code as it is on cutting taxes - depending how the deductions are restructured, some upper-income taxpayers may see their taxes actually go up - but it is clearly also intended as a tax cut. Consistent with his message of restoring fiscal responsibility and to reassure deficit hawks, Romney simulataneously pledged that the tax plan would be revenue-neutral, that is, it would not reduce the government's overall revenues as compared to just leaving tax rates where they are.

Romney's handling of the tax plan, like so many aspects of his campaign, was less than a model of good political communication. Whereas George W. Bush in 2000 rolled out a detailed tax plan and made it the centerpiece of his campaign message, Romney offered only a framework of principles. Where even a bare-bones campaign like Herman Cain's had made 9-9-9 a household word, Romney spent the bulk of his time talking about the economy, spending, Medicare and regulation. If you followed the Romney campaign, its coverage in the mainstream media and the sympathetic precincts of conservative writers and talkers over the summer, you would not have come away with the conclusion that individual tax rates were a major focus of the campaign.

The Democrats Attack

Liberal pundits and the Obama campaign and saw things differently. The pundits, seeing the world solely through the lens of Joint Committee on Taxation budget scores, saw an opportunity to argue that it was not possible for a tax plan to be revenue-neutral if it cut rates, ever, under any conceivable circumstance. This is an old familiar liberal argument, and it's one on which the battle lines are extremely entrenched: conservatives argue that tax cuts can produce economic growth that offsets the reduction in nominal tax rates, liberals basically argue that it's impossible to estimate the amount of growth - or argue that such growth is illusory - and issue budget scores that don't account for the possibility. (Personally, I've long thought that all sides are way too quick to treat future projections as "facts" when in actuality they are just projections, based on easily-gamed assumptions; there are never any consequences for the CBO, the JCT or the think tanks if their projections don't pan out in the real world). That topic is beyond the scope of one blog post to resolve; the point is that simply arguing that Romney's tax cuts would add to the deficit would have been the usual and expected line of attack.

But the Obama camp had to go one step further: relying almost entirely on a report from a liberal think tank (the Tax Policy Center), Obama's campaign argued that because Romney (1) had pledged to keep his plan revenue-neutral and (2) was proposing broad outlines that TPC did not believe would be revenue-neutral, he would need to come up with additional revenue somewhere, and the result would be (3) a hidden, super-secret Romney plan to raise taxes on the middle class. Never mind that Romney had never discussed anything of the sort, or that no Republican Administration would survive proposing such a thing, or that no Republican Congress would ever vote it into law; armed with the fig leaf of the TPC's study, Obama could claim that Romney really planned to raise taxes by some $2,000 on middle class families.

The attack was rolled out in scores of TV ads across Ohio and other battleground states claiming, as if it were a fact, that Romney planned to raise taxes on the middle class. Here's Joe Biden angrily asking how Romney could justify such a plan:

To give the Obama campaign credit, this was an incredibly audacious assault, like Hannibal crossing the Alps: Republicans, long accustomed to pressing for tax cuts at every level of government and getting pushback from tax-hiking Democrats, never expected or planned for a counterargument that their candidate was actually more pro-tax-hikes than Barack Obama (an attack that was also coordinated with the attacks on Romney's own tax returns). It was obvious that the Romney campaign was caught by surprise and blindsided by this attack, and slow to respond to it, with damaging results:

Over the past couple of months, the Obama campaign has unleashed a barrage of TV ads that contain the same specific and potent attack: Mitt Romney will raise taxes on middle class families by $2,000 in order to cut taxes for the rich. The claim is false, but the Romney campaign hasn't really responded.

And the attacks have been working. As the Wall Street Journal reported on September 17: "At least four polls in recent weeks have found Mr. Obama holding an edge over Mr. Romney on who would best handle the issue of taxes." The Romney campaign's pollster Neil Newhouse told reporters last week that Obama's advantage on the tax issue is simply a function of Obama's convention bounce. But Romney actually lost his edge on taxes before the conventions. "A Gallup poll in late August found Mr. Obama holding a nine-point lead on the issue of taxes, after Mr. Romney led in July," the Journal noted.

This was one of the major reasons why Romney looked like he was on the ropes by early September following the Democratic convention. A Republican candidate who doesn't have the edge on keeping taxes low is no Republican at all; it's the single most unifying issue in the entire party, running across every ideological and demographic faction and every geographic region. People vote Republican so they can keep more of what they earn.

The Attack Backfires

In politics, as in war, audacity in the attack can produce every general's dream: the coup de main or "shock and awe" assault that paralyzes, overruns and demoralizes the opposition. The problem is, it can also involve outrunning your supply lines, leaving you overextended, isolated and surrounded. Hannibal, after all, lost the war. And Obama may now be facing a similar problem.

At the policy-wonk level, the TPC study has been shot full of holes, resulting in the need for numerous backtracking revisions. (See here, here, here, here, and here). And it's also given the Romney campaign the opportunity to point out why Obamacare's tax hikes plus Obama's spending record mean that Obama remains the high-taxes candidate.

That battle is obviously still underway, but here's the thing: voters can listen to the he-said-she-said of dueling economic experts, and are likely to tune them out. But Obama's side of this argument has five basic problems that run deeper than any think tank study can fix.

One, it depended on voters only hearing one side of the story. Romney has finally started running ads fighting back, and an enormous audience of over 70 million people were confronted with Romney in the debate stating flatly that "[m]y view is that we ought to provide tax relief to people in the middle class...I will not under any circumstances raise taxes on middle-income families. I will lower taxes on middle-income families. " And far worse for Obama, the President had to explain that he wasn't talking about something Romney had actually proposed, but was relying on studies interpreting Romney's plan and assuming what he would do if it didn't work: "independent studies looking at this said the only way to meet Governor Romney's pledge of not reducing the deficit or -- or -- or not adding to the deficit is by burdening middle-class families. The average middle-class family with children would pay about $2,000 more."

Obama can argue until he's blue in the face that his magic decoder ring lets him tell you what Romney is really planning to do, but historically, voters tend to assume that while politicians may or may not keep their promises, they are still usually a better guide to their own proposals than their opponents. All Romney has to do is show up at the debates and explain that he has no intention of raising taxes on the middle class, and people are apt to suspect that maybe Obama had been selling them a bill of goods on the issue. And after four years of Obama's promises and claims, he doesn't have a ton of remaining credibility with the voters to spend on this.

Two, it's counterintuitive. It's easy for Republicans to be sincere about not wanting to raise taxes, because Republicans exist to keep taxes low, and everybody knows that Romney is surrounded by Republicans who have pledged to oppose tax hikes. Even the now-notorious 47% video shows Romney painting the electorate as a contest between taxpayers and non-taxpayers, and taking the side of the taxpayers, while Joe Biden is out there proudly touting how Obama will raise a trillion dollars in new taxes by letting the Bush tax cuts expire. When people stop to listen to the candidates, it's hard to avoid the conclusion that the last thing Romney or Ryan would sign off on is a big middle-class tax hike.

Three, it's the harder argument to make. Romney, having proposed a framework, just has to demonstrate that it's possible to design a tax plan that could end up being revenue-neutral at lower rates. Obama has the burden of proving that it is not possible under any circumstances, and moreover that Romney actually believes it's not possible under any circumstances, and that Romney would respond to that problem with a middle-class tax hike rather than by scaling back the tax cuts or accepting at least a short-term revenue shortfall before he can convince anyone that there's a secret plan to raise taxes on the middle class. If even one part of Obama's argument is less than 100% certain - or even if voters just think there's a good-faith disagreement among economists - the whole contraption collapses.

Four, it's the pessimistic argument, and you never want to be the guy making the pessimistic argument. Obama is stuck making the assertion that Romney's plan won't work because it projects economic growth that's just impossible. But the last place the President wants to be right now is telling the voters to forget about economic growth. Romney is proposing doing something different from what Washington is doing right now, and the more the two sides grapple over the tax plan, the more voters are apt to grasp that fact and wonder if maybe a different approach to the one we have now might help.

Five, it's out of character for Romney. Romney's many changes in his positions over the years make him easy to tag as a flip-flopper, yet Obama has tried instead to paint him as a rigid ideological extremist, a transparently false picture. Romney's proposals are even advertised as, more or less, starting points for negotiation with Congress. He is absolutely the last guy who is going to take on the suicide mission of proposing a massively unpopular middle-class tax hike out of an inflexible refusal to alter his campaign platform. Voters who take the measure of the man will recognize that even if they don't trust his word.

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The lesson here is that good tactics don't always make good strategy, and campaigns built on a fiction can only survive if they have money and time advantages working against exposure of that fiction. To the extent that Obama's lead in August and September was built on winning the argument against middle-class tax hikes, it was bound to evaporate if the voters came to realize that Romney was not actually running on a platform of middle-class tax hikes. Obama's challenge now is to decide whether he is going to spend yet another debate Tuesday night trying to put the Humpty Dumpty of the tax hike argument back together again, or move on to something more plausible. If it turns out that the voters on Election Day don't believe Romney is trying to jack up their taxes, Obama may look back and wonder if perhaps he spent a whole lot of time and money trying to get an argument off the ground that turned out to be yet another overweight, flightless bird.

Posted by Baseball Crank at 4:00 PM | Politics 2012 | Comments (3) | TrackBack (0)
Comments

I agree with a couple of points. First, neither Romney in the early going, nor Obama, lately, have handled communications well. Second, both sides over-simplify the basic relationship between cutting taxes and revenue impact.

But, by following your usual tactic of constructing a strawman -- that Obama claimed Romney's plan would have to raise taxes on the middle class in ALL circumstances -- you position the argument in a way that makes your point easier to make. Not correct or persusaive, but easier to make.

Romney is in a box of his own making by claiming that he can reduce income tax rates and maintain revenue neutrality, without causing the taxes paid by the middle class to rise. The other element is that he not only will not cut the defense budget, he intends to raise it. Until he explains in clear language that his plan must drastically reduce if not eliminate the most popular deductions (mortgage interest, health care costs, charitable contributions, etc.) his claim of revenue neutrality must assume "supply side revenue" increases, precisely the type of critical assumption, you admit is easy to game.

Oh, and for all the Reagan necrophilia on the right, there is no proof whatsoever that the supply side hokum works.

Posted by: Magrooder at October 15, 2012 4:45 PM

One quibble (well probably more than one, but one that comes to mind): certain republicans (Bachmann among others) have absoulutely advocated raising taxes on the middle class, or at least those in the middle class who don't currently pay federal income taxes for whatever reason - the "minimum tax" or the idea that everyone, regardless of circumstance, should pay *something* in federal income taxes. Part of what makes the 47% kerfuffle so utterly confused and confusing.

Posted by: Jeremy at October 15, 2012 6:19 PM

A few points:


-I'd also have expected the Dems to accuse Romney of exploding the deficit rather than go after the tax hike angle. And it's going to be difficult to make headway in the debt/deficit without broadening the tax base, even in a nominal way, as Jeremy mentioned.

-I'm also a little skeptical of how Romney is going to remain revenue-neutral with his tax cuts.

-I expect the complaints of small businesses helped to motivate Romney to propose the 20% cut for personal income taxes. One of their complaints was that if the corporate tax was cut and deductions were eliminated, their effective tax rate would be higher because they don't pay corporate taxes to begin with. They'd just lose the deductions without any corresponding decrease in personal tax rates.

-This, by the way, is what frustrates me a little about tax policy. I'm open to a sensible way to end the blurring of personal and corporate income for small businesses. I'd like personal income tax rates to only affect individual people and not businesses.

Posted by: MVH at October 16, 2012 10:11 PM
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