Why Obama is Winning on Taxes

I said relax. I got this.

Something is happening during this Presidential campaign that I never thought I'd see: a Democrat both wanted a debate on taxes and is so far winning it.

It took a few long steps to get there, but it started last year when President Obama began focusing like a laser on Paul Ryan's budget and on the issue of fairness in the tax code. Mitt Romney obliged by running further to the right than he probably needed to in the primary, resulting in him putting out a revised tax/budget plan that was very similar to the Ryan plan.

In 2010 the Republicans re-took the House mainly due to three issues:

1) the distortion on the Medicare "cuts" in Obamacare
2) the deficit/spending cuts
3) the economy

The first was a result of an older whiter electorate and the second was driven by the energy created by the Tea Party and the cynicism of the GOP caring about deficits only when Democrats are President. And the third was expected given the high unemployment rate and the Democrats controlling the entire government. David Frum pointed out, the Republicans cynically won back power without understanding why and then overestimated the electorate's support for their "real" agenda.

.@ingrahamangle 1) 2010 was an election w ~40% turnout, weighted to older whiter voters. Bad model for 2012.
— davidfrum (@davidfrum) September 18, 2012

.@ingrahamangle 3) The 2010 platform was basically a defense of retirees' Medicare expectations - party won w/out understanding Y

— davidfrum (@davidfrum) September 18, 2012

So it was a bit of a gift that one of the first major economic or budget visions the GOP put forth after winning the House was a budget that cut taxes on the rich, ended Medicare as we know it, and still didn't balance the budget for 40 years. In one House vote the Republicans lost credibility on the Medicare and deficit issues. And with no plan to create jobs and address this particular economic situation and not the one they wished existed, they began losing support on the economy as well.

Obama and the Democrats spent months earlier this year hitting Romney on Bain and creating narrative that Romney was a heartless CEO unconcerned about the plight of middle class Americans. As Jonathan Chait noted, then Obama began moving to phase 2 earlier in the summer, which was talking the Romney/Ryan budget and tax code fairness. If voters didn't feel Romney really understood and cared about their problems, they'd be more willing to accept Obama's argument about the choice between the two competing visions for the country.

Obama knew the GOP couldn't very well admit that they don't really care about deficits. So he was able to put Romney in a box over his tax plan. If he did indeed want to cut taxes on rich people above all else and since any plan has to be absolutely deficit-neutral, lest he want to annoy the Tea Party and the Randians, then there is no other way to make that plan work without deep spending cuts to popular programs, increasing taxes on the middle class, and/or eliminating or reducing many middle class tax deductions and tax credits through some type of comprehensive tax reform plan. It is now September 20th, and Romney has still yet to reveal any details about how this plan would work.

The Obama campaign deftly called the GOP's bluff on their fake concern over deficits and contrasted it with their overarching goal of lowering taxes on the rich. And they were able to show how there was no way to achieve both of those goals without screwing the middle class. With Romney's lack of credibility with his base he had no room to maneuver or nuance this issue, so he was stuck defending a plan that either can't work or will screw the middle class. All that doesn't fit on a bumper sticker, unfortunately, but the groundwork was laid for months. And enough voters apparently have come to understand this argument. As President Clinton said, it's arithmetic.

Did Clinton's Response to the Medicare Attacks Win the Election for Obama?

(CBSNews)

We still won't really know what kind of post-Convention bounce Obama will get until early next week. But one essential goal in this convention was for the Democrats to clear up any confusion over the Medicare issue. Since the 2010 Midterm elections the Republicans have hammered the Dems over the "cuts" to Medicare in the Affordable Care Act (ACA) and in the process drove up support among voters 50 and over. When your base is old white people, this issue was teed up for them.

Of course President Obama was never going to win a majority of voters in this demographic, but he had to close the gap that opened up 2 years ago. Let's face it, older white voters typically lean Republican anyway. And when you add the race factor, it was always going to be an uphill climb for Obama with these voters. They were preconditioned to believe the distortions about the "Medicare "cuts" with Obama, more so than they'd be with President Clinton for the same reason that a lot of older white women put both hands on their pocketbooks when they see a black guy walking down the street.

But much like Republicans always have a built-in edge with voters on matters of the military and foreign policy, Democrats have always enjoyed a historical "trust" edge with voters on health care, particularly Medicare. This is for good reason, since the Democrats created the Medicare beneficiary program and have defended it from Republican attempts at cuts and privatization for over 40 years.

Some voters may not remember, but President Clinton "cut" Medicare in the 1990's. In exchange for slight benefit cuts (i.e. higher premiums for seniors, most of which were directed at the more well-to-do seniors), Clinton reduced the rate of growth and plowed the savings back into the Medicare trust fund to extend the life of the program.

The ACA essentially did the same thing. It reduced the rate of growth and cut payments to providers and insurance companies, which was estimated to save $716B over 10 years. And then it used that money to close the Medicare prescription drug donut hole (created by a bill Paul Ryan voted for, by the way) and extend the life of the program. Providers and insurance companies agreed to the Medicare payment cuts in exchange for the millions of new customers they will now be getting as a result of what the ACA does to provide access to insurance for people who are under the Medicare eligibility age. You have to look at the ACA in its entirety and not just the Medicare portion to understand how it all works.

Anyway, Clinton explains it better here:

Now, there were two other attacks on the president in Tampa I think deserve an answer. First, both Governor Romney and Congressman Ryan attacked the president for allegedly “robbing Medicare” of $716 billion. That’s the same attack they leveled against the Congress in 2010, and they got a lot of votes on it. But it’s not true.

Look, here’s what really happened. You be the judge. Here’s what really happened. There were no cuts to benefits at all, none.

What the president did was to save money by taking the recommendations of a commission of professionals to cut unwarranted subsidies to providers and insurance companies that were not making people healthier and were not necessary to get the providers to provide the service.

(APPLAUSE)

And instead of raiding Medicare, he used the savings to close the donut hole in the Medicare drug program.

(APPLAUSE)

And -- you all got to listen carefully to this. This is really important -- and to add eight years to the life of the Medicare trust fund so it is solvent until 2024. So...

(APPLAUSE)

So President Obama and the Democrats didn’t weaken Medicare. They strengthened Medicare.

(APPLAUSE)

Now, when Congressman Ryan looked into that TV camera and attacked President Obama’s Medicare savings as, quote, “the biggest, coldest power play,” I didn’t know whether to laugh or cry...

(LAUGHTER)

... because that $716 billion is exactly to the dollar the same amount of Medicare savings that he has in his own budget!

(APPLAUSE)

You got to give one thing: It takes some brass to attack a guy for doing what you did.

(LAUGHTER) 

It’s important, because a lot of people believe this stuff. Now, at least on this issue, on this one issue, Governor Romney has been consistent. He...

(LAUGHTER)

He attacked President Obama, too, but he actually wants to repeal those savings and give the money back to the insurance company.

(BOOING)

He wants to go back to the old system, which means we’ll reopen the donut hole and force seniors to pay more for drugs, and we’ll reduce the life of the Medicare trust fund by eight full years.

(BOOING)

So if he’s elected, and if he does what he promised to do, Medicare will now go broke in 2016. Think about that. That means after all we won’t have to wait until their voucher program kicks in, in 2023, to see the end of Medicare as we know it. They’re going to do it to us sooner than we thought.

(APPLAUSE)

Now, folks, this is serious, because it gets worse. And you won’t be laughing when I finish telling you this. They also want to block grant Medicaid and cut it by a third over the coming 10 years. Of course, that’s going to really hurt a lot of poor kids.

But that’s not all. A lot of folks don’t know it, but nearly two-thirds of Medicaid is spent on nursing home care for Medicare seniors who are eligible for Medicaid.

(APPLAUSE)

It’s going to end Medicare as we know it. And a lot of that money is also spent to help people with disabilities, including...

(APPLAUSE)

... a lot of middle-class families whose kids have Down’s syndrome or autism or other severe conditions.

And, honestly, just think about it. If that happens, I don’t know what those families are going to do. So I know what I’m going to do: I’m going to do everything I can to see that it doesn’t happen. We can’t let it happen. We can’t.

And then he dropped the mic.

Not only did he set the facts straight on Medicare, he also reminded everyone that Medicaid isn't just a program for poor people (as noted by Alec MacGillis on Twitter), that seniors and people with disabilities depend on Medicaid too.

Wow. Medicaid spends 5x as much on each senior in long-term care as on each poor child. This was WJC's point: M'caid cuts will hit seniors.
— Alec MacGillis (@AlecMacGillis) September 7, 2012

And the cuts Romney-Ryan want to make to that program would devastate many families.

Recall, even with a booming economy in 1996, Clinton only managed to get 49% of the vote. With Ross Perot running again, he was still able to win an easy re-election partially by convincing many seniors that Newt Gingrich, Bob Dole, and the Republicans in Congress would follow through on their long stated goals to "let Medicare wither on the vine and die." Voters trusted Clinton and Gore on Medicare even after the cuts because Dole was stuck defending a more radical plan. Most voters believed that Clinton really did want to strengthen Medicare because that is what Democrats have always done. And most voters believed that Republicans really wanted to dismantle the program because that's what they have always tried to do.

Sound familiar?

If the Obama campaign doesn't end up using snippets of Clinton's comments in campaign ads this fall, they are really missing out on a golden opportunity. With post-Presidential approval ratings hovering around 70%, Clinton is the closest thing we have in this divided country to a statesman who most people like and trust.

With a slow recovery and unpredictable job growth, Obama is going to need to emphasize Medicare, foreign policy, and tax code fairness, among other things, the next few months. And Clinton may have helped him enough with seniors in states like Florida and the swing states in the Rust Belt in November, to allow Obama to make the closing argument on protecting Medicare, Medicaid, and ultimately the ACA.