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Robert Kuttner Headshot

Touch of Class

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OBAMA BUDGET
AP

President Obama did two things in his Wednesday address at George Washington University that he has been loath to do throughout his presidency. He spoke like a progressive partisan. And he spoke of that great unmentionable in centrist Democratic policies -- the injuries of class.

Among the inspired zingers:

"They [the Republicans] want to give people like me a $200,000 tax cut that's paid for by asking 33 seniors to each pay $6000 more in health costs? That's not right, and it's not going to happen as long as I'm president."

And this:

"I will not allow Medicare to become a voucher program that leaves seniors at the mercy of the insurance industry, with a shrinking benefit to pay for rising costs. I will not tell families with children who have disabilities that they have to fend for themselves. We will reform these programs, but we will not abandon the fundamental commitment this country has kept for generations. That includes, by the way, our commitment to Social Security."

President Obama also raised the issue of class when he insisted that taxes on the wealthy had to be part of any deficit reduction deal:

"[A]t 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. I don't need another tax cut. Warren Buffett doesn't need another tax cut. Not if we have to pay for it by making seniors pay more for Medicare. Or by cutting kids from Head Start. Or by taking away college scholarships that I wouldn't be here without. That some of you wouldn't be here without."

Well done, and long overdue! This isn't about fiscal responsibility. It's about Republicans using needless tax cuts for the rich to justify massive cuts in the social compact for everyone else. And with some presidential leadership, the progressive framing of the issue is the overwhelming majority position. It could blow the Republicans back to the fringe, minority position they were in when the financial collapse occurred and Obama won election.

That's the good news. And given the immense gift of Paul Ryan's blundering assault on Medicare, it would have been a travesty to have done anything less.

(I few weeks ago, on Huffington Post, I challenged President Obama to give a speech along these lines. Among the words I put in my imaginary president's mouth were: "I am here to say tonight that we are not going to balance the budget on the backs of kids, or elderly Americans, or sick people, or working families." Note to speechwriter Jon Favreau: call anytime.)

Just kidding.

But there is also plenty of worrisome news. Four things in particular.

First, there is far more deficit-cutting in Obama's proposed budget than fiscal circumstances warrant. The president proposes roughly two dollars in cuts for every one dollar in taxes. Most of these cuts will have to come out of the very areas Obama proposes to defend -- education, health, the environment, kids, and aid to the poor -- since only about 15 percent of the budget is domestic discretionary spending and most of that is social outlay.

Though Obama was too polite to say so, virtually all of the increase in the ten year deficit that is now the object of fiscal fetishism was the result of three things -- the Bush tax cuts, the military buildup, the recession itself with its effects on reduced revenues and increased payouts from automatic stabilizers. Fix these, and you fix the deficit.

Additional optional federal outlays via the February 2009 stimulus package contributed just three percent of the ten year increase in the cumulative deficit.

Second, and closely related, Obama's welcome change of tone had almost nothing to say about jobs and recovery. In that respect, he played into the hands of the fiscal right by reinforcing the mantra that the deficit rather than the economic recovery is the prime challenge.

As Nobel laureate Joe Stiglitz said on Friday, speaking at a conference at the AFL-CIO, the recession caused the deficit, not vice versa. Fix the economy and restore a normal tax code, and most of the deficit problem is solved. Fail to fix the economy, and austerity only produces more austerity as falling purchasing power keeps bumping the economy downward -- as the British government is finding out.

In that regard, one particularly unhelpful passage in Obama's speech reinforced the "belt-tightening" frame: "To meet our fiscal challenge, we will need to make reforms. We will all need to make sacrifices."

No, Mr. President, that's dead wrong. About 90 percent of Americans have already sacrificed in advance. Median income is now below where it was in the late 1990s. Young people are burdened with college debts, or can't afford college at all, and see the dream of joining the middle class evaporating. Tens of millions of Americans have lost jobs. Why on earth declare that we "all" need to sacrifice?"

Third, Obama has made too many concessions to the right already. The previous deal of April 7 that cut the 2011 budget by some $38 billion now becomes the left pole of the new normal. Obama's new progressive rhetoric begins practically in his own end zone.

Fourth, there is more mischief ahead. While Obama pointedly said he'd defend Social Security, the "Gang of Six", the bastard bipartisan spawn of Obama's own Bowles-Simpson commission, is talking about a grand bargain that would include cuts in Social Security as well as increases in taxes. And of course, these are not "increases" in taxes at all, but merely a tax code closer to that of the Clinton era, a period when the economy boomed and slightly higher taxes on the rich did not prevent them from increasing their share of the national income and wealth.

And if the Gang of Six, three of whom are Senate Democrats, agrees on a deal that includes Social Security cuts, the pressure will be overwhelming for both houses to pass it and Obama to sign it. And it will definitely be worse than what Obama proposed Wednesday.

As Obama himself said, his new posture of ostensible toughness in defense of what's left of America's social compact, "I don't expect the details in any final agreement to look exactly like the approach I laid out today. I'm eager to hear other ideas from all ends of the political spectrum."

No, Mr. President, you are not eager to hear what the Republicans have to offer. You just called them out as a bunch of elitist stooges for the right. You can't very well have it both ways.

Why do Democrats like Obama, Kerry, Gore, and Clinton embrace class only as a last resort? In part because they fancy themselves unifiers, but more importantly because the financial elite that underwrites their campaigns detests talk of tax-the-rich, and discourages any kind of broader populist rhetoric that might remind ordinary voters who crashed the economy and who exports their jobs.

At various points going back to the 1984 candidacy of Walter Mondale, Democratic candidates who spoke of the injustices of class were warned by their money men to tone it done. In Mondale's case the message came from Robert Rubin personally. When John Kerry talked about "Benedict Arnold CEOs," he was warned by some of those CEOs to drop the phrase. And he did.

Three days after Obama demonstrated a touch of class in his address at GW, he spoke at a gala fundraiser in Chicago where the big donors were treated like the royalty that they are in American politics.

It was the White House political team, according to my sources, who injected the class themes into Obama's Wednesday speech, because they are such winning politics. This tension will continue between now and November 2012.

Let's hope, if only for reasons of survival, that Obama continues to identify with the aspirations and frustrations of ordinary Americans against the delusions of the far right rather than the elite conceits about fiscal discipline.

If he does, he will be the early front runner and both the deficit and the campaign finance will take care of themselves.

Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His latest book is A Presidency in Peril.

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