Targeting the rich, Obama takes Democrats back to their roots

President Obama’s $3 trillion debt plan, unveiled on Monday, refocused Congress’s debt debate on two of the most divisive questions in politics: Who is rich? What is fair?

In a sense, these issues are elemental to any tax-and-spend issue in Congress. But by hitting them so directly – and challenging voters to side with him in the debate – Mr. Obama is taking Democrats to a place they have have largely avoided since the 1984 presidential election, when President Reagan routed Walter Mondale.

Not only is a presidential election again in play this time, but a new, congressional "supercommittee" charged with trimming $1.2 trillion from the deficit is just getting started, raising the stakes further. How the debate plays out could play a central role in whether the joint committee can find common ground or whether it descends into stalemate.

“It’s been a key argument of liberals that sacrifice should be shared, especially when times are hard,” says Julian Zelizer, a congressional historian at Princeton University in New Jersey. “Since Walter Mondale got in trouble in 1984, you’ve heard a lot less of it.”

The argument revived somewhat during debate over the Bush tax cuts, and “President Obama is talking about it a lot more now,” he adds.

In a Rose Garden address on Monday, the president challenged Republicans to defend a tax code that requires middle-class families to pay higher taxes than millionaires and billionaires.

“Explain why somebody who’s making $50 million a year in the financial markets should be paying 15 percent on their taxes when a teacher making $50,000 a year is paying more than that, paying a higher rate,” he said.

On Tuesday, lawmakers and interest groups across the political spectrum offered their answers. The din of competing voices signaled how difficult it will be for 12 lawmakers – six Republicans and six Democrats – to come up with a plan that can first win a majority on the supercommittee, then majorities in the House and Senate.

House majority leader Eric Cantor (R) of Virginia said lawmakers eyeing the tax code needed to consider jobs. “Investment capital is what is needed right now to get an economy going again,” he said. “When you raise taxes on capital, you impact workers. We are all in this together.”

Sen. Pat Toomey (R) of Pennsylvania, a member of the deficit panel, had a similar response. “One of the most fundamental drivers of economic growth is capital formation,” he said, commenting off the Senate floor. “We have long acknowledged that in our tax code by differentiating between capital gains and other earnings, and taxing capital gains at lower rates.”

“My own personal preference would be lower still – and certainly not higher rates on capital, because it would only choke off economic growth,” he added.

Meanwhile, on the Senate floor, Sen. Barbara Boxer (D) of California challenged Republicans for claiming that such questions amounted to class warfare. “Is it class warfare to say to a millionaire or billionaire that they should pay the same tax rate as their secretary?” she said. “Why the tears? These are not the job creators.”

The themes of wealth and fairness have waxed and waned in US politics. In the New Deal and Depression era, conservatives attacked liberals as engaging in class politics. Liberals attacked conservatives and business for going after workers and the middle class.

During the Obama presidency, the definition of who counts as rich has shifted. Early on, the president focused on incomes over $250,000 as the cutoff for policies targeting the rich. Recently, the White House and congressional Democrats refer most often to millionaires and billionaires.

“Fairness is in the eye of the beholder,” says Sen. Ben Nelson (D) of Nebraska. “People want shared sacrifice. What’s rich in some places is not rich in others.”

“I can’t tell you what rich is, but it’s clear to me,” says Sen John Rockefeller (D) of West Virginia. “It depends on what people are facing: $250,000 isn’t enough to cover college costs, so rich may be $500,000 or $1 million.”

GOP strategists say that Americans are wary of attacks on the rich, because they hope for success in their own lives. “There is not the resentment of success in America that there is in Europe and other countries around the globe,” says GOP pollster Whit Ayres. “Democrats never seem to learn that lesson.”

Sixty-five percent of American voters say that “the maximum percentage that the federal government should take from any individual’s income should be 20 percent or lower,” according to a recent poll by Resurgent Republic, a Republican polling consortium. Other polls, worded differently, find support as high as 72 percent for increasing taxes on the richest Americans.