Why Not Tax Reform in 2009? Did Obama blow it by shifting to the health care bill in 2009 instead of focusing on the economy? Barney Frank recently suggested as much, and Michael Hirsh amplifies the charge:
it’s now clear, beyond any reasonable doubt, that Geithner and Obama’s other top economic officials badly underestimated the depths of that historic crisis, on housing, income inequality and other fundamental issues. The president took his eye off the ball.
Jon Alter says this criticism is now accepted, not just by Republicans, but by “Democrats, with the benefit of hindsight and speaking sotto voce.” But, as Alter notes, it’s not clear what more Obama could have done, if he hadn’t pivoted, to help the economy get out of its “historic crisis.” He’d passed as big a stimulus as he could get. Congress wasn’t about to pass a second one. He’d was already bailing out Detroit. You can argue that Obamacare’s passage affirmatively hurt the economy, by promoting uncertainty and red tape, and that doing nothing would be preferable. But that’s not the argument Frank and Hirsh are making.
I asked the what-could-he-have-done question to WaPo‘s Jennifer Rubin in our most recent Ricochet podcast, and she had a surprising answer: “tax reform.” It’s certainly clear now that sweeping bipartisan tax reform, cutting loopholes and lowering marginal rates, is a doable piece of legislation. Maybe Obama could have gotten it done in 2009, as part of an economic “focus,” arguing that it would help create jobs in the medium term if not the short term. He might even have snuck in an overall tax increase while he had a Democratic House and a filibuster-proof Democratic Senate majority. And maybe, having accomplished that, he wouldn’t have lost that majority. Sure, this is only clear, if at all, in hindsight. But that’s why we have leaders–to recognize political possibilities that only become clear in hindsight.
One argument against Rubin’s speculation is that, precisely because achieving tax reform before the mid-terms would have helped Democrats, Republicans would have made sure it didn’t happen. But presidents, at least successful ones, have ways of making their enemies cooperate, usually through a combination of reward, intimidation, and theft. Obama would have taken the GOP’s own big idea and run with it–you’d think he could have broken off at least a few GOP votes, in a way he couldn’t with Obamacare. Anyway, Rubin argues, he wouldn’t have needed GOP votes under filibuster-avoiding budget rules. (Remember “reconciliation”?)
A better argument is that a big tax reform will happen in the next few years anyway. It seems to be one of the only means of addressing the budget crisis in a way that’s palatable to Republicans and Democrats. (And it’s a good idea in its own right). Universal health coverage doesn’t have a similar asteroid-bearing-down-on-us inevitablity. If Obama hadn’t pursued his big health bill in 2009 it arguably would have never happened, at least not during his presidency. Even if tax reform got done before November, 2010, Obama wasn’t going to get a bigger Senate majority after that election. Much more likely that he’d lose his 60th vote. Meanwhile the initial good will that any incoming President has would have dissipated.
This isn’t like Bill Clinton’s big 1994 mistake of pivoting from the economy to Hillarycare instead of to welfare reform. Pivoting to welfare would have built public confidence and allowed Dems’ to do bigger things (like Hillarycare) that they couldn’t do until they’d made it clear to voters that they weren’t liberal caricatures who like to spend money heedless of popular values (like work). Tax reform doesn’t really address a similarly fundamental source of popular misgiving–do you worry that Dems will never rejigger the tax system? More likely it would inflame popular doubt–i.e., when Dems called for tax increases under cover of reform. Tax reform just isn’t a confidence-builder in the same way welfare reform potentially was in 1994 (and, in fact, proved to be when it finally happened in 1996). Because of his 1994 mistake, Clinton got neither a health care bill nor welfare reform bill in his first two years. But Obama actually passed his health bill. Whether he did a good job selling it to voters is a separate question, the answer to which is “no.”
Yes, there’s been serious political fallout for Democratic politicians (which seems to be what Frank means when he says “we paid a terrible price for health care.” But–despite Rubin’s tantalizing tax reform counterfactual–Congressional Dems who claim to support Obamacare would seem to be letting their current bleak political self-interest cloud their judgment if they think they would have accomplished more in Barney Frank’s alternate universe.