Doubling down on 'middle-class' economics
Which does the public care about more: Cutting spending? Or âmiddle-class economicsâ? Those are the battle lines for the next year, starting this week. In the budget heâs releasing Monday, President Barack Obama is betting that Americans prefer âmiddle-class economicsâ to reducing the federal deficit. Since short-term deficits are down, the logic goes, most Americans will be less worried about them â and more interested in middle-class tax breaks and more spending on new benefits like free community college. Story Continued Below Heâs also sure that Americans hate the automatic budget cuts known as the âsequesterâ as much as he does, and will rally to his call to get rid of it â especially if they can have the middle-class goodies instead. Republicans in Congress, however, are betting that most of the public is still more worried about long-term spending problems â especially since the deficits will start rising again in a few years â and that they can beat back all the catchy middle-class economics talk with tried-and-true promises to cut spending and fight tax hikes. Obamaâs $4 trillion budget would produce a $474 billion deficit for fiscal year 2016, rising to $639 billion in 2025. But itâs designed to keep annual deficits stable in relation to the nationâs economic output. The deficit would amount to about 2.5 percent of the Gross Domestic Product in 2016, and it would end up in the same place in 2025 even though the dollar amount is higher, according to a source familiar with the budget details. And the budget would reduce the long-term debt slightly compared to the economy: It would start at 75 percent of GDP in 2016 and ease down to 73.3 percent in 2025. Obamaâs budget will provide the first detailed look at his proposals to help working spouses, parents with child care needs, and families with college costs â as well as a plan to use taxes on foreign earnings to help pay for the nationâs infrastructure needs. It will also spell out how heâd use $74 billion in extra spending to boost support for national priorities like manufacturing, defense and medical research. Heâs been rolling it out piece by piece, just like he did with his State of the Union proposals a few weeks ago. The latest details emerged Sunday: a one-time 14 percent tax on foreign earnings, and a 19 percent tax on future corporate profits overseas, to help pay for $478 billion in infrastructure repairs over six years. In case you didnât hear him talk about his new slogan enough in the State of the Union, the budget is where Obama will start shouting âMIDDLE CLASS ECONOMICS,â with a bullhorn. But will his side prevail? Thereâs certainly some risk for Obama, as he found when he got pounded by Republicans over his now-abandoned plan to get some of the money for his proposals by taxing â529â college savings plans. And he has to make sure he doesnât turn off moderate swing voters by playing down deficits too much as he fires up the Democratic base. That doesnât make it a good fight for Republicans to have, though. Some are warning that the GOP will have to respond by promoting its own middle-class proposals â like the ones outlined in a âreform conservativeâ book called âRoom to Growâ â and not just talk about slashing spending. âThe Republican Party institutionally has a problem with the middle class, and they need to deal with it,â said Pete Wehner, a senior fellow at the Ethics and Public Policy Center and a leader of the âreform conservativeâ movement. âI donât think they should jettison their concern for fiscal sanity. I just think theyâve got to broaden their message, their bandwidth, a lot.â White House officials are confident that Obama will have the upper hand. They say the new budget will still address the long-term fiscal problems â and even bring down the debt in the later years of the budget â because the math will still work out between the spending and the new tax revenues Obamaâs proposals would raise. Thatâs an approach they say theyâve used in Obamaâs past budgets, and theyâll do it again this year. Independent pollsters say there are no public surveys that test a head-to-head match-up between middle-class economics and deficit concerns, but the recent polls that have been taken suggest that neither party should feel too cocky. The public may be less concerned about the deficit than it was during the height of Obamaâs budget battles with House Republicans, but itâs not as if Americans donât care about it anymore. A Pew Research Center poll in January found that 64 percent of Americans say the budget deficit is a top national priority, down from 72 percent in 2013, when public concern over the deficit reached its peak. Yet Obama did well when he outlined his middle-class proposals in the State of the Union address. According to a CNN/ORC poll taken after the speech, 61 percent of the public thought his proposals to help middle-class Americans would be very or somewhat effective; just 37 percent thought they would be ineffective. That doesnât mean everyone buys into the focus on the middle class, though. A Fox News poll released after the State of the Union found that 61 percent of Americans prefer to improve the economy for everyone, while just 35 percent want to target the middle class. White House officials insist Obamaâs budget isnât going to present middle-class economics and deficit concerns as an either/or battle. In fact, Obama is suggesting that heâll find ways to pay for the higher spending so it doesnât just create more deficits. âIf Congress joins me, we can make sure that ending sequestration is fully paid for by cutting inefficient spending and closing tax loopholes,â Obama wrote in a Huffington Post op-ed. Still, Obama and his aides clearly have been shifting their spotlight to middle-class concerns, and theyâre happy to spike the football on the declining short-term deficits, which are about to drop to their lowest level since 2007. Democrats say the easing of the deficits gives Obama an opening to argue that thereâs no need to keep squeezing domestic spending. âThe reason theyâre so low is that weâve been underinvesting in Americaâs priorities,â especially infrastructure, education and scientific research, said Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee. âShortchanging those investments is bad for the middle class.â