President Obama’s much hyped budget address in front of a George Washington University audience Wednesday has been widely viewed as the first speech of the 2012 presidential election campaign. One could be forgiven for forgetting that Mr. Obama was addressing the nation as a president seeking reelection and not as a first term junior senator from Illinois, as it was the 2008 campaign that the speech recalled.
The president’s favorite bogeyman, President George W. Bush, featured prominently, just as he has for most of President Obama’s major speeches. The class warfare rhetoric was back in full force Wednesday too, as the president argued that all of the country’s financial woes would simply vanish if only those heartless Republicans would agree to rescind the Bush tax cuts of 2001 and 2003 -- the same tax cuts Obama himself agreed to extend less than six months ago.
If the president and his advisors think that they can win a second term by dragging the same old tired rhetoric and petulant political attacks before the voters again like raw steaks before the pride, they may find the lions less hungry for the offering this time around. Mr. Obama’s one-two punch strategy of tax the rich and bash Bush just doesn’t stand up to the numbers.
According to the most recent IRS data from 2008, the top one percent of income earners paid roughly $390 billion in income taxes on income of approximately $1.6 trillion, for an average effective tax rate of 23%. If the Bush tax cuts were repealed today, and the top tax rate went back up to the Clinton-era 39.6%, it would be reasonable to project that the average effective tax rate for the top income filers would only go up to where it was in 2000, 28%. Under those conditions, the government could only expect an additional $58 billion in tax revenue this year. That’s hardly more than a rounding error in a budget with a deficit of $1.6 trillion.
Even if President Obama argued for a return to the pre-Reagan top tax rate of 70% -- which when last seen in 1979 carried an effective tax rate of 37% according to the Tax Policy Center -- the government would realize just over $200 billion in additional revenue, or a little more than a tenth of this year’s deficit. Of course, none of this takes into account the consequences of tax hikes, reduced economic activity and correspondingly shrinking incomes for those in the top one percent of tax filers. The real take from increasing taxes at the top rates is likely to be much lower. Despite the rhetoric, President Obama simply can’t balance the budget on the backs of the rich.
The other pillar in Mr. Obama’s apparent reelection strategy, bashing Bush, similarly does not survive closer scrutiny. In 2008, President Bush was a deeply -- if unfairly -- disliked president. With his approval ratings mired in the low thirties, Bush was shunned even by his own party’s nominating convention. Mr. Obama’s election narrative was as much a referendum on Mr. Bush as a choice between himself and Sen. McCain.
Much has changed. The former president has enjoyed a surge in his approval ratings, as most former presidents do. In Mr. Bush’s case, this has been aided both by his respectful silence on matters of national policy and his openness in interviews conducted during the launch of his highly successful memoir. A recent Gallup poll showed the former president with an approval rating of 47% at the end of last year. While that result places Bush ahead of only Richard Nixon among the former presidents the poll tested, it is a far cry from the 36% approval he held at the end of his presidency and equals Mr. Obama’s approval rating in the most recent Gallup survey.
Worse for Mr. Obama, the voting public’s perception of him when compared to Mr. Bush is not flattering. Democratic pollster Douglas Schoen recently asked likely voters whether Obama had been a better president than Bush. The results were surprising. Just 43% said Mr. Obama had been a better president while 48% favored Mr. Bush. A majority of 56% said that Mr. Obama did not deserve a second term. Mr. Bush’s increasing popularity coupled with Schoen’s results show that the voting public is much less inclined to pay attention to attacks against Mr. Bush this time around. Running another referendum on Bush could end up backfiring on President Obama.
For a man ostensibly focused on winning the future, President Obama spends a disproportionate amount of his time fighting the battles of the past. But the American public is not looking back at what prior presidents did; they are looking toward the current president for leadership and solutions on the big challenges facing the country. As a policy address, President Obama’s budget speech failed miserably to provide either. The numbers show that as a campaign speech, it wasn’t much better.