President Obama has often trimmed his ideas to what he thinks he might possibly get from an opposition that intends to give him nothing. So it is a relief to see him demanding that Congress do what the country really needs.
On Sept. 8, Mr. Obama proposed a $447 billion job-creation initiative, and on Monday, he proposed a sensible package of tax increases to pay for it — saying, in essence, that a sane fiscal policy requires more careful government spending now and eventually higher taxes.
Congressional Republicans initially offered a cautious reaction to the jobs bill. But once Mr. Obama talked about taxes, they lost all restraint. For all the caterwauling from Republicans about the budget deficit, the House majority leader, Eric Cantor, said paying for the plan would amount to a tax on “job creators.” The Senate minority leader, Mitch McConnell, said the tax proposals were dead on arrival — his reaction to anything Mr. Obama has proposed since Inauguration Day.
Now it is up to Mr. Obama to sell the public on his approach, something the White House has not done well. It will be a test of whether Mr. Obama will aggressively take on his opposition as the 2012 elections approach.
The president is offering job-creation policies to take effect as soon as Congress passes the bill, paired with tax increases, mostly on the top 2 percent of households that make more than $250,000 a year, starting in 2013.
Broadly, the package offers a weak economy stimulus in the short run and deficit reduction in the longer run. It is also sound in its particulars. By targeting the tax increases on high-end earners, any hit to economic growth can be offset by using the new revenue to pay for programs that have a bigger impact on economic activity than leaving the money in richer Americans’ pockets.
When he laid out his jobs plan last week, Mr. Obama powerfully presented a series of choices — a status quo of high unemployment, deteriorating human capital and crumbling infrastructure or a renewed push for recovery and relief measures to get the economy moving again.
That means choosing between a tax system that coddles the rich or reorienting the code in favor of the middle class. The tax increases Mr. Obama has recommended are a step in the direction of middle-class prosperity.
The largest part would raise some $400 billion over 10 years by capping the value of itemized deductions and other tax breaks at 28 percent. That would mean higher taxes for the minority of taxpayers who will be paying 36 percent and 39.6 percent when the Bush tax cuts expire at the end of 2012. The majority of taxpayers, who pay a top rate of 28 percent or less, would be unaffected.
Republicans can object all they want. But the proposed cap is much less stringent than the ones proposed by prominent deficit reduction panels, including the bipartisan Bowles-Simpson committee.
It is also fair tax policy. Under current law, the largest subsidies go to people who need them least — for such things as mortgage interest and charitable giving — because the value of tax breaks rises as income and tax rates rise. Capping such breaks helps to ensure that subsidies are focused on Americans who need them most.
The other parts of Mr. Obama’s proposed tax increases would raise money while making the code more fair: $41 billion by ending tax breaks for oil and gas companies; $18 billion by not letting private equity partners pay tax on most earnings at about the lowest rate in the code; and $3 billion by curbing breaks for corporate jets.
Mr. Obama’s proposals, including the taxes to pay for them, could not be more urgent. There is a crater in the economy where the job market used to be.
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