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Candidate Obama vs. President Obama

One of the challenges for presidential candidates who turn into presidents is finding ways to wiggle out of unaffordable or ill-advised campaign positions without attracting too much notice. President Obama managed to do this twice in his new budget: once explicitly, once by implication. Good for him, because both moves signal a better, more fiscally responsible approach.

The budget made a dramatic, smart and little-noticed pivot from his campaign-trail promise to cut taxes on 95 percent of Americans. Candidate Obama’s original plan -- a plan I criticized at the time as unduly expensive and poorly crafted -- provided for tax credits of $500 per individual or $1,000 per couple; couples making as much as $200,000 annually would qualify for a partial credit. The size of the credits was scaled back in the stimulus package, to $400 and $800. But the big switch came when now-President Obama released his budget last week. The “Making Work Pay” tax credits were there -- but for the first time they were contingent on revenue from auctioning permits in the administration’s proposed cap-and-trade program to alleviate climate change. In other words: no cap-and-trade, no tax credits.

This is extremely clever. A cap-and-trade regime is, in effect, a carbon tax, a penalty on pollution that would be passed along to ordinary Americans. It makes sense to require polluting industries to pay for the impact of their activities, and to give them the incentive to move to less polluting approaches. At the same time, it makes sense to alleviate the costs that would impose on individuals.

In fact, it makes so much sense that this is what Obama envisioned during the campaign. Back then, he promised to devote some cap-and-trade revenue to investing in alternative energy, and to save most of the rest “for rebates and other transition relief to ensure that families and communities are not adversely impacted by the transition to a new energy, low carbon economy.”

So the tax credit that Obama now promises to finance with cap and trade revenue replaces a rebate he already promised. Two proposed tax cuts have, in effect, been merged into one. An expensive tax credit is paid for with a valuable social program. Obama does not get dinged for abandoning an expensive and high-profile campaign promise, but he has managed to disappear a different one.

There was another potential pivot implicit in Obama’s health care proposal. He identified $634 billion in revenue over ten years to pay for the program, but he acknowledged that this would only cover about half the cost of universal coverage. Lawmakers working on the issue would have to come up with the rest.

For the Willie Suttons of health policy, there’s one obvious place to find that kind of money: the expensive, counter-productive, unfair and regressive preference for employer-provided health built into the tax code. Health care offered by employers is not considered part of workers’ taxable wages. This is expensive, costing about $200 billion a year. It is counter-productive because it encourages overconsumption of health care. It is unfair because those who must purchase insurance on their own generally do not receive special tax treatment. It is regressive because higher-income employees, who are taxed at higher brackets, receive a greater benefit from the exclusion.

On the other hand, there is the slight problem that when Republican nominee John McCain proposed to tax the value of employer-provided insurance, and instead to provide tax credits to buy insurance, Obama blasted him for seeking a $3.6 trillion tax hike on American workers, “the largest middle-class tax increase in history.” Hard to now turn around and endorse something similar.

Hence, the dog whistle of the Obama budget when it comes to paying for health care reform: You can't hear him saying "let's think about taxing employer-provided health care" unless your ear is turned to that pitch. Obama's budget does not make that proposal, but it is the predictable consequence of everything he lays out. If (a) health care should be financed in a deficit-neutral way and (b) more revenue is needed, then (c) cutting back in some way on the tax preference for employer-provided insurance cannot be far behind. It’s not exactly a profile in courage for Obama not to say this straight out. Yet the logic of his budget is that it implicitly signals an openness to doing so.

These are both good moves -- even if, in a political season, they might be labelled flip-flops.

By Ruth Marcus  | March 2, 2009; 12:27 PM ET
Categories:  Marcus  | Tags:  Ruth Marcus  
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Comments

Clever? What a stupid statement. Destroying an industry, the one industry where we have more reserves than Saudi Arabia does oil, isn't clever, it's devious. You liberal nitwits applaud it, but there isn't any significant alternative energy, no matter how many disingenuous ads the liberals might run. Why don't you media liars tell the truth just once in a while.

Posted by: LarryG62 | March 2, 2009 1:53 PM | Report abuse

once the newly minted prez takes office he normally gets advice and information he was not privvy to when he was only a candidate. this prez has stuck pretty much to his campaign statements. i don't remember this much scrunity when the previous admininstration was this new in office or ever. let this man do his job, it's hardly a month has gone by, please stop dissecting ever little thing give him and this country time to correct the missteps of the last 8 years, when you reporters were asleep at the wheel.

Posted by: ninnafaye | March 2, 2009 2:21 PM | Report abuse

It is very clever to lie and be supported anyway, I thought lying was bad. It sure was during the dark ages (8 Bush Years).

With a little fairy dust, I might understand how President Obama can complain about Bush's deficits and then double it and say that is fiscal responsibility.

Then the cry rings across the land through the alphabet soup of networks and newspapers, "Bravo, Mr. President!, Brilliant, Mr. President!".

Spreading the wealth around is good for everybody.

Posted by: thelaw1 | March 2, 2009 2:37 PM | Report abuse

Could The Washington Post run an indepth series on exactly what the "Carbon Tax", " Cap and Trade" and all things related entails.Recent reader of the washington Post.

Posted by: wclark40 | March 2, 2009 2:57 PM | Report abuse

Our Government is out of control.

A trillion dollar stimulus passed by scare tactics in 48 hours? At least it took us 18 months to go to war in Iraq!

Then on the heels of that a $410 spending bill with 9000 earmarks?

And twits at WaPo are still debating the finer points of "cap and trade."

The Dems, now tasting unfettered power, are like the Red Army entering Berlin in WWII.

Posted by: pgr88 | March 2, 2009 4:19 PM | Report abuse

"That government is best which governs the least, because its people discipline themselves."
Thomas Jefferson

Posted by: RareCaliConservative | March 2, 2009 4:25 PM | Report abuse

"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not." - Thomas Jefferson

Posted by: RareCaliConservative | March 2, 2009 4:39 PM | Report abuse

A cap and trade policy would be, in effect, a tax passed on to all people in this country. The relatively puny tax credits would only go to most households having at least one person who is working.

No tax credits apparently would go toward those who are retired or not working. This is very unfair, as most of those who are retired have modest incomes and many who are not working are poor or nearly so. Many older people do not have adequate income to pay for their basic medical care, food and energy bills.

The Democrats seem intent upon paying for cap and trade, as well as expanding health care for those who lack health care insurance, on the backs of older people in this country. Where is AARP on these issues?

Posted by: Aprogressiveindependent | March 2, 2009 4:56 PM | Report abuse

So Obama's promised tax cut is actually a tax increase (or, at best, a wash), cleverly wearing an environmental miniskirt. Yaaaaay. And you applaud this?

As to health benefits not being taxed, this does not "cost" the government anything. This bizarre phrasing assumes that our money is the government's property in the first place. Oh, thank you, government, for being so kind as to allow me to keep this tiny portion of my money! You are so gracious to us! Unbelievable.

Posted by: ggraves82 | March 2, 2009 5:13 PM | Report abuse

Good Lord! (can I say that?) Do you think we're all too ignorant to understand that the current regime is hell-bent on taking our money and trying to convince us they are giving us what we deserve????? How about letting us morons decide where we want to invest and build? Not some Marxist, (yes Marxist, and I don't mean Groucho), who has all the answers for my life and my family.

I fear patience will only go so far and very soon all the wallets of the duly fleeced will snap shut..... Probably about the time the ideologues eat the last of our seed corn (private wealth).

Posted by: Spitfires | March 2, 2009 6:15 PM | Report abuse

Clever? Good moves? Good grief! Was not the press intended to be part of the checks and balances of government, to help keep government honest, and to call out politicians when they tried their tricks, double-speak, and slight of hand? The loss of journalistic integrity is so, so sad and depressing.

Posted by: dale9000 | March 2, 2009 6:33 PM | Report abuse

Liberals, if your'e an adult, You missed the boat. If your're say 20-30, you are not a revolutionary-you are not a rebel. you are following the outdated doctrines of politicians and professors from the 60's that are well over the hill. You are not cool-you are of the past. Take a good hard look at those you're following. Maybe they look cool to you as old guys-they're not-they're simply old and going for their last hurrah at your expense. Tjink about your futures.

Posted by: thebink | March 2, 2009 7:26 PM | Report abuse

The Repub trolls are out in force today What's really amazing is that none of them will have to pay 1 cent more in taxes because they all make less than $250K -- almost certainly less than $35K based on these rants I've heard before. I'm happy to pay my share of increased taxes to make sure there is a country for all of us and our children and grandchildren, not just the selfish and self-centered.

Posted by: grclarkdc1 | March 2, 2009 9:37 PM | Report abuse

In other words, Obama lied.

Posted by: pkhenry | March 3, 2009 12:39 AM | Report abuse

President Obama is acting EXACTLY like Candidate Obama! SEE:
http://www.thebutter-cutter.com/Obama_s_Change.html

Posted by: MAJUSMCRET | March 3, 2009 7:35 AM | Report abuse

The Repub trolls are out in force today What's really amazing is that none of them will have to pay 1 cent more in taxes because they all make less than $250K -- almost certainly less than $35K based on these rants I've heard before. ...

Posted by: grclarkdc1 | March 2, 2009 9:37 PM

Perhaps they don't care if THEY pay more in taxes - but they are well aware that increasing taxes on those who achieve more will clearly make those people either not bother working to make so much money - or leave the country to bring their skills elsewhere where they don't have to pay oppressive taxes. You cannot bring people up by knocking the top people down. Um, look at France and see how their economy DOES NOT grow, and how their unemployment rate for young people is sky high - even before the recent economic issues.

Posted by: atlmom1234 | March 3, 2009 8:04 AM | Report abuse

A carbon tax is absolutely the better approach. Not only would it avoid the evasion and market manipulation that are inherent to a cap and trade scheme, but it would also incentivize the creation of new, climate-friendly technology. The only downside is possibly its greatest strength: it's transparent, straightforward and called what it is: a tax.

Posted by: SallyVCrockett | March 3, 2009 8:49 AM | Report abuse

To atlmom: This notion that people will stop trying to make more money if their taxes go up is LOONY NEO CON NONSENSE!Bill Clinton raised taxes on the rich. What Happened? The economy took off and more people could buy product BECAUSE THEY HAD BETTER JOBS!This INCREASED RICH PEOPLE'S INCOME and EVERYBODY ELSE'S.If you make 300,000 and pay 20% tax you tke home 240,0000. BUT....... If you pay 30% on 400,000 you take home 310,000.This idea that only the rich can steer the economy is nuts.Decreasing the deficit creates jobs.Of course giving the wealthy tax cuts makes ONLY THE WEALTHY ,WEALTHIER!!!

Posted by: hughsie48 | March 3, 2009 8:59 AM | Report abuse

Save the Middle Class!

A thriving middle class is what made this country special.

Posted by: RepublicanMamaforObama | March 3, 2009 9:27 AM | Report abuse

If the overall goal of the President's policy is to reduce economic inequality, this is a very dubious approach. The cap & trade systems will always benefit those better off because they will have the wealth necessary to invest in energy-saving technologies and renovations. Why not just tax gasoline and coal-based electricity and be honest about what you are doing? Answer: we have to hide the callousness of our approach to the working people who will suffer when the tax is passed on to them. Typical Limousine Liberalism...

Posted by: cornishpj | March 3, 2009 11:41 AM | Report abuse

To hughsie48:

So let me see if I get this straight. You are saying, the fact that Bill Clinton raised taxes was what led to welfare reform, the internet, and the tech bubble, all of which actually boosted the economy (Or gave the appearance of a boost, which later lead into a recession as the bubble bursted).

Posted by: hughsie48 | March 3, 2009 8:59 AM
This notion that people will stop trying to make more money if their taxes go up is LOONY NEO CON NONSENSE!Bill Clinton raised taxes on the rich. What Happened? The economy took off...

Posted by: GuyP | March 3, 2009 11:50 AM | Report abuse

Regarding hughsie48 | March 3, 2009 8:59 AM:
If you make 300,000 and pay 20% tax you tke home 240,0000. BUT....... If you pay 30% on 400,000 you take home 310,000.This idea that only the rich can steer the economy is nuts.Decreasing the deficit creates jobs.Of course giving the wealthy tax cuts makes ONLY THE WEALTHY ,WEALTHIER!!!


First, the tax system already currently IS a progressive tax system. Go to your 2008 tax books and check out the tax tables...do the math for those making $30,000 a year and those making $80,000 a year. And if your income is off the tax table, you're still hit with an higher %because of the Alternate Minimum Tax. So any so-called "tax cuts" did not mean that the "rich" paid less % tax. They still pay significantly more % of tax than anyone else.

On your specific numbers, you're selling some serious crap about 20% of $300,000 and 30% of $400,000. With the so-called Bush tax cuts, someone making $200,000 already pays 30%, and it goes up from there.

Lastly, put all that together with this crazy $200,000 per couple number, and just about any two working adults in urban, white-collar jobs get screwed! They can barely afford to live in their urban area, yet they're considered "rich".

Posted by: ten-below | March 3, 2009 1:05 PM | Report abuse

hughsie48:

Your blather defies even basic economic theory, and, more importantly, the models that the CBO itself uses to predict income and tax revenues. The marginal tax rate a worker faces is an important factor when he or she determines how much work to do. Sheesh, man, a tax on the supply of ANYTHING reduces its supply. Didn't you go to school at all?

Yes, you will see the economy expand even under higher taxes, but what you are missing is the counterfactual, which is how much the economy *would have* expanded had taxes been lower.

Posted by: Wallenstein | March 3, 2009 1:59 PM | Report abuse

"Candidate Obama vs. President Obama"

Obama still thinks he's a candidate and must still bad mouth Bush and the future. The result is a continued slide into a depression if he doesn't learn to stop campaigning and start being Presidential.

Posted by: ahashburn | March 3, 2009 2:24 PM | Report abuse

Ms. Marcus:

Forgive my bluntness, but are you insane?

"... moves signal a better, more fiscally responsible approach."

Who do you think will pay for a carbon tax. Do you honestly think that industries who are forced to pay for these pollution permits will not immediately pass this on to the consumer. Those very people to whom Mr. Obama wants to redistribute the earnings of the rich are those who will be hardest hit by this carbon tax. Credits? Please....the carbon tax will pervade every corner of every industry and business. Drive to work...pay the tax. Go to your new government mandated health provider....pay the tax. Buy groceries...pay the tax on getting there and producing the food.

It is hard to find even a shred of fiscal responsibility in either the stimulus or the budget, and in a time of depression (let's be honest here), the idea of funding a laundry list of new social programs is unconscionable. In another era, it would have been called treason.

Posted by: caruso838 | March 3, 2009 2:46 PM | Report abuse

Obama's radical agenda was hidden in plain site all along. With an enormous assist from the media, Obama pulled off one of the greatest political scams in history.

Your children will be paying for it.

Your grandchildren will curse you for reducing them to socialist slavery.

Fight back before it's too late.

Posted by: zjr78xva | March 3, 2009 3:00 PM | Report abuse

I am a small manufacturer and compete directly with Chinese firms. Here are the problems I see with the Cap and Trade or Carbon tax.

The system increases my cost, this will make me less competative compared to China. Since I may not then be able to compete the manufacture and the jobs that create our product go to China. This is just part of the problem. Since the Chinese have no environmental regulation they not only take the job they pollute more than my company does. The product still gets made but not in the US and there is more pollution.

At this point we have managed to lose a job and create more pollution. I assume this is not the desired outcome. Sometimes things are not what they appear to be. Well intended bad policy is still bad policy.

Posted by: saw1 | March 3, 2009 5:45 PM | Report abuse

This is the extreme form of nitpicking that intellectually dishonest Marcus is engaging in. I do not recall candidate Obama presenting a budget during the campaign but simply outlining a broad principle and Marcus knows it. Campaigns do not prepare budgets. Marcus should be utterly ashamed of herself. She is acting a right winger without any principles.

Posted by: kevin1231 | March 3, 2009 7:49 PM | Report abuse

Today a number of pundits are beginning to call the economy Obama's mess. That's incredulous. It may be more ridiculous and dangerous than anything that Rush Limbaugh has said about the President. African Americans are accustomed to being failed at the beginning of the semester. And then having the predictor of failure work to make it happen. Opinion-makers are asking America to get ready to give a failing grade even before the 100 day report card is due.

It would be better if we all owned the problem as the President requests.

Posted by: ekinlow | March 3, 2009 11:52 PM | Report abuse

US manufacturers probably won't have to worry too much about a Cap-and-Trade system. It is quite different from a Carbon Tax. Generally they don't generate carbon directly. This means that they can actually get a subsidy by selling the carbon permits that they get to other companies that do produce carbon. This and tax decreases from government C&T revenues should offset any additional expenses they incur from increased electricity costs.

Beyond that, a Cap-and-Trade system is phased in gradually, by slowly decreasing the number and size of carbon permits. Initially, there will be virtually no cost to a C&T, because more permits will be granted than the current US carbon footprint.

Issues of trade imbalance are important to address in policy, but are not intractable. We can add a surcharge to imports that is proportional to the market cost of carbon that is established by our domestic C&T system. This would actually serve to move jobs from polluting countries like China, back to the US, where pollution controls are already stronger.

Most importantly though, sound energy policy is incredibly important. Billions of people could die in the future if we don't deal with global warming now. Lets not let this issue end up like the war in Iraq or this economic crisis or Katrina, where warnings that there were not WMD, or warnings that there was a housing bubble, or warnings that the New Orleans levies are going to break if not maintained are ignored when we are still in front of the crisis and can avoid its consequences. We can't wait until it is too late and then react after the fact like we have for all these Bush-era crises. If we let Global Warming keep going, it will make this economic depressions look like a measly hiccup.

Posted by: zosima | March 4, 2009 2:02 AM | Report abuse

"Nitpicking" "dishonest" "ashamed" Really? First, Ms. Marcus is entitled to her opinion and is afforded the right to publish it thanks to Freedom of Speech. Second, her opinion is heavily supported in fact, something not one of the liberal comments has accomplished. Finally, we don't have the luxury of time to "give him a chance" with the economy, national security or tax policy. He simply can't blame all of the American problems on Bush anymore. Had he not increased the spending by such astronomical amounts, maybe he could still use that argument with some success. Unfortunately, there is no scapegoat for his recently submitted budget.
For more political commentary, visit
http://www.examiner.com/x-2927-Minneapolis-Conservative-Examiner

Posted by: erinhaust | March 4, 2009 4:16 PM | Report abuse

I wish the Post columnists would stop peddling politically biased disinformation under the guise of 'journalism'. A "cap-and-trade" system is NOT the same as a "carbon-tax". Never has been, never will be.

Unfortunately, they put it in the Premium section, so you have to pay to see it, but the best article explaining why this is so is provided by the Economist, at http://www.economist.com/finance/displaystory.cfm?story_id=9337630

Posted by: Syllogizer | March 5, 2009 2:17 PM | Report abuse

Clever? Obama and his henchmen are out of control. Have you researched what cap-and-trade is going to cost? Latest estimates project an initial tax increase of $1100 for the average American household, and that is forecast to rise to $1400 to $2000 during 2015-2030. Obviously, gasoline prices will rise. And the worst--there will be hundreds of thousands of job losses. The fraud perpetuated by Madoff will look minor compared to the cap-and-trade fraud. Finally, consider that CO2 is essential to human, animal, and plant life. Perhaps the Democrats want to eradicate everyone!

Posted by: judithod | March 6, 2009 12:38 AM | Report abuse

"Health care offered by employers is not considered part of workers’ taxable wages. ... It is counter-productive because it encourages overconsumption of health care."

Say WHAT? Encourages overconsumption? If the feds gave me a tax break on my car insurance, would I immediately go out and crash my car? What nonsense is this?

My employer-supplied health insurance is limited to necessities. How would I go about "overconsuming" exactly? And why would I want to? I pay for part of it myself, you know.

And how do you define "overconsumption of health services" anyway? I haul my medical insurance card out about once a year, ususally for a single doctors visit. Am I overconsuming? Must be! I have employer-supplied health insurance!

Posted by: archeopteryx | March 7, 2009 2:33 PM | Report abuse

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