How Obama's Deficit-Reduction Plan Could Backfire
Danielle Kurtzleben

Democratic defections and taboo tax hikes could hurt President's plan for reducing the deficit

Politicians have been arguing for three years about how to fix the economy. And the president's new deficit-reduction plan, which makes little attempt to appease congressional Republicans, ensures that fight won't end any time soon.

The president proposal aims to reduce the deficit by $3 trillion over the next decade as a companion to his $447 billion American Jobs Act, introduced earlier this month. Half of the plan's savings would come from changing the tax code, including increasing taxes on the wealthiest Americans.

In many ways, the plan appears to have the ingredients for garnering significant public support. For example, a CBS News/New York Timespoll released Friday shows that 56 percent of Americans believe taxes on incomes over $250,000 should be raised to reduce the deficit. Likewise, $1.1 trillion in savings in the president's new plan is expected to come from winding down missions in Iraq and Afghanistan, both of which, polls suggest, have fallen off of the national radar in terms of importance during harsh economic times.

Given that the president's deficit-reduction plan has only a slim chance of passing Congress in any recognizable form, its importance may be as a political statement as much as a fiscal wish list, forcing Republicans to defend large corporations and the wealthiest Americans. While that seems like a winning fight politically, no battle is easy in this political and economic climate. Below are three ways in which the president's deficit-reduction measures could backfire politically.

Wayward Democrats

Some congressional Democrats have already voiced opposition to the American Jobs Act on a variety of counts. Louisiana Sen. Mary Landrieu, for example, has said that she opposes taking tax benefits away from the oil industry, which is prominent in her state. The president's renewed push today to "cut wasteful loopholes and tax breaks" may thus put Democratic members of Congress in a difficult position, says Republican pollster Jon McHenry. "Any Democratic senator or congressman who thinks that going on record supporting tax increases isn't going to show up in an ad in September is kidding themselves," says McHenry. Support of tax increases of any kind, it seems -- no matter on how small a share of the population -- can be used as a powerful political weapon.

A Tax Increase is a Tax Increase

Aside from closing loopholes, the president has proposed allowing the Bush tax cuts to expire and has also introduced the "Buffett Rule." Named for Berkshire Hathaway CEO Warren Buffett, who has repeatedly asserted that his tax rate is, unfairly, lower than his secretary's, the rule says that people earning $1 million or more annually "should not pay a smaller share of their income in taxes than middle-class families pay."

Whether or not the president gains broad support from congressional Democrats on tax increases, Republicans are sure to fight back on this point. Before the president had even begun his remarks today, Republican super PAC American Crossroads released a statement lambasting Obama's tax reform proposals in particular as "a class-warfare re-election stunt that would clobber American jobs." The argument is a continuation of the conservative argument that any tax increase hurts economic growth.

With the presidential election approaching, the question of the "fairness" of higher taxes versus the potential economic effects is particularly salient. "This is the big debate of 2012 that the president has basically created with his speech today. The question is how tolerant will people be of tax increases for higher-income individuals?" says Steven Schier, professor of political science at Carleton College in Northfield, Minn. Republican presidential candidate Mitt "Romney has already said tax increases are already job-killers. Obama's argument is going to be, 'Better them than you,' and also that it's fair. Whoever wins that argument probably wins the election."

Failure to Pick a Fight

The first step is done; the president has laid out what he wants. Now, says Democratic pollster Celinda Lake, he has to stand firm. "He needs to pick a fight here. ... I think he's laid out the basis for it. [But] I haven't seen him pick the fight yet." And while the president has vowed to veto any deficit-cutting plan that includes no tax increases, Lake believes that taking up this fight will require more direct action, such as rallying a substantial number of congressional Democrats to sign on to his proposal in a show of solidarity. This, says Lake, would "lay the groundwork the idea that we are ready to move now."

If the president fails to show that kind of resolve, says Schier, it could undermine even his firmest political support: "That's what his base believes: 'Alright, you talk tough, but you cave.' And he's got to demonstrate that he won't cave in order to keep his base in line."