It’s been exhilarating to watch. In less than two months, Obama has turned around his political fortunes. A bumper sticker in Toronto says proudly “Barack Obama is back.” Americans seem ready to listen to him again—not merely to respond to applause lines, but alter their expectations of what can be done.
The stage has been set for another audacious run at the status quo. Next week’s State of the Union address provides the occasion.
A fair outline of the risks he may be preparing to take is laid out in The New York Times by Christina Romer, former chairwoman of Obama’s Council of Economic Advisers, a Democrat and economics professor at the University of California, Berkley. She was a centrist in the White House and is arguing that a bold plan to reduce the long-run federal deficit is urgent. The US, she warned, could become the “Argentina of the 21st century.”
Not only did she put the leadership challenge squarely on the White House, she argued that the recommendations of the National Commission on Fiscal Responsibility and Reform provide a good foundation for the president’s response.
“Finally, the president has to be frank about the need for more tax revenue. Even with bold spending cuts, there will still be a large deficit. The only realistic way to close the gap is by raising revenue. Some of it can and should come from higher taxes on the rich. But because there are far more middle-class families than wealthy ones, much of the additional money will have to come from ordinary people. . .
“AGAIN, the fiscal commission has made sensible proposals. It recommended broad tax reform that lowers marginal tax rates and cuts tax expenditures — deductions and exemptions for mortgage interest, employer-provided benefits, charitable giving, and so on. Such tax reform cannot be revenue-neutral — it needs to increase tax receipts. . .”
As a loyalist practiced in thinking about and recommending policy initiatives that are possible, it’s significant that Romer told the president, in lurid detail, to be frank about the need for more tax revenues. She’s probably reasonably confident that he will be.
Candour may or may not be politically rewarding, but it would be of immense value to the economy. Talking in the abstract about a consumption tax is a lot easier than raising the retail price of gasoline. However, the prospect of a tangible, legislated set of tax and entitlement reforms would restore confidence in the richest and most productive major economy in the world.
Romer agrees that 2011 is not the year to impose austerity and new taxes. Rather, it is time to thrash out the politics of restoring fiscal balance as the economy gets closer to its potential. This has been done by mortals before.
The question for the president is whether Washington still has the ability to get hard things done.
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