Republicans and the right-wing noise machine are gearing up to try to seize on income inequality as a popular issue by turning it around on Democrats. Since Obama's state of the union speech, some carefully disingenous arguments are starting to pop up among the usual suspects designed to pull the rug out from under Democrats on this issue.
They go like this: Obama might have argued for more spending on infrastructure and new programs to make community college and preschool more affordable, and to pay for them by taxing the rich, but don't be fooled. Because he's a "corporate liberal," and really after something else instead:
Barack Obama, Corporate Liberal
And secret friend of the one percent.
The corporate liberal offers the following deal: In exchange for greater authority—to tax, to regulate, to distribute—government will dispense benefits to the top and bottom of society. The poor will receive more generous social welfare benefits; the wealthy will be granted special provisions, exemptions, and benefits. Often those at the top get to reap a private profit for distributing benefits on the government’s behalf.
Obamacare is a perfect illustration. The government subsidizes health insurance, but it does so through private companies, which are not forced to participate. Instead, insurers agree to get involved because they believe it will make them better off. The government implicitly guarantees that insurers will profit in the individual marketplace.
Far from being a flaw in corporate liberalism, this is its dominant feature: The welfare state is expanded, and powerful corporate interests are drawn into a web of client-patron relationships. The more interests are drawn in, the more our Madisonian system resists reform, and the more ensconced in power corporate liberalism becomes.
It's an argument that makes actual liberals want to pull their hair out. Bloody Obamacare was designed by the right-wing Heritage Foundation, instituted in Massachusetts by Mitt Romney, and only pitched by President Obama and the Democrats in order to get Republicans to support
some kind of health care reform. What actual liberals and traditional Democrats preferred was single payer - to open the country's existing and popular single-payer system, Medicare, to everyone. A fall-back option would have been to at least include a public option in Obamacare. That was killed when it was clear conservatives in both parties refused to support it.
But like all good propaganda, there is just enough of a kernel of truth in the argument to make it sound plausible, as long as you don't dig too deep or know too much about the issue or the process that shaped policy on it.
He goes on to play the same jujitsu trick on a whole string of issues: food stamps, Medicare, tax reform, Dodd-Frank, and so on.
Here's another sample of the rhetoric, this time pitched to a more middle-of-the-road audience:
Middle-class savings like blood in the water
Obama goes where the money is to pay for 'free' education programs - your savings account.
Bank robber Willie Sutton is said to have explained his career this way: "That's where the money is." Whether Sutton ever really said that, it's an aphorism that, according to Bloomberg's Megan McArdle, explains President Obama's plans to go after middle class assets like 529 college savings plans and home appreciation.
Though millions of Americans have been putting money into "tax free" 529 plans to save for their children's increasingly expensive college educations, President Obama would change the law so that withdrawals from the plans to fund college would be taxed as ordinary income. So while you used to be able to get a nice tax benefit by saving for college, now you'll be shelling out to Uncle Sam every time you withdraw to pay for Junior's dorm fees.
(Obama
dropped his proposal today to change college savings plans after it was greeted by outrage, ginned up and otherwise. Even though out of seven million 529 plans, about 80 percent of the tax benefits go to households above $150,000 and 70 percent go to households with incomes over $200,000, it was able to be painted as a middle-class tax break, and Obama, that secret class warrior against the middle class, wanted to kill it.)
The line of argument that Obama really has you in his sights goes on:
Likewise, Obama proposes to tax the appreciation on inherited homes. When you sell property at a profit, you pay capital gains on the difference between the basis (what you paid) and what you sell it for. (Obama also proposes to increase the capital gains rate). That's not a big issue for most middle class people, because right now if your parents leave you their house, you get what's called a "step-up" in basis.
That means that the basis isn't what your parents paid for the house decades ago, but rather what it was worth when you inherited it. Thus, the appreciation your property experienced while your parents owned it comes to you tax-free. For many families, that appreciation is their biggest inheritance. Now, subject to some exemptions Obama plans to tax those gains, and other gains via inheritance.
Of course he fails to mention
that:
To avoid penalizing the “non-rich,” the proposal would include exemptions for: assets inherited from your spouse, inherited small family businesses, up to $200,000 of inherited asset capital gains per married couple ($100,000 if you are single), up to $500,000 for a home inherited by a married couple ($250,000 if you are unmarried), and certain inherited personal property such as furniture and heirlooms (but not expensive art or collectibles).
As for those who really are rich, the removal of the basis step-up rule would expose inherited capital assets to both the 40% federal estate tax and the federal capital-gains tax, which would be increased to 28% (it’s now 23.8%)
And so on, and
so on.
Why would the White House even consider such a thing? As McArdle observes: "The very fact that we are discussing taxation of educational savings — redistributing educational subsidies downward — indicates that the administration has started scraping the bottom of the barrel when seeking out money to fund new programs....
When a government is desperate for cash, it goes after the middle class, because that's where the money is....
The truth is, in our redistributionist system politicians make their careers mostly by taking money from one group of citizens that won't vote for them and giving it to another that will. If they run short of money from traditional sources, they'll look for new revenue wherever they can find it. And if that's the homes and savings of the middle class, then that's what they'll target.
In other words, when Democrats talk about income inequality and taxing the rich to help the struggling middle class, what they really mean is...they're going to tax the middle class! At least you, middle class white GOP voter! Oooga-booga! Be very afraid!
It doesn't make very much sense, but how else are Romney and company going to run in 2016 as the true class warriors defending the middle class?