2012 Tuesday: With Buffett Rule, Obama ignores economics and leans on ‘fairness’

A lot of commentary about Barack Obama’s re-election campaign focuses on what’s different from 2008. But there’s one clear way in which it’s exactly the same.

In 2008, when ABC’s Charles Gibson asked Obama during a debate why he favored raising the capital-gains tax rate when the evidence suggests doing so would only reduce government revenues, Obama answered, “Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.” (Amazingly, except to those who have noticed Obama’s tendency to try to have things both ways, he went on to talk about the need to spend more money on health care and education — without disputing Gibson’s premise that raising capital-gains tax rates would instead lower revenues.)

Now, in discussing the so-called Buffett Rule, which would require Americans making at least $1 million in a year to pay at least 30 percent of their income in federal taxes, we’re back to the argument of fairness, economic and fiscal logic be damned.

Obama described the Buffett Rule during his State of the Union speech as part of a “sense of shared responsibility. That’s how we’ll reduce our deficit.” Well, maybe if by “that” he meant, “The Buffett Rule and about 200 other things”: The White House’s own study of the rule’s fiscal impact puts it at less than $5 billion a year during the next decade. The projected deficit for this fiscal year is more than 220 times as much. Heck, the deficit last month alone was almost 40 times as much. To save the same amount of money on the other side of the ledger, Obama and Congress would have to cut just 0.13 percent of this year’s federal budget. That’s how insignificant $5 billion a year is in Washington.

Thus, the Obama campaign is back to playing the fairness angle. Here’s campaign manager Jim Messina on Monday: “The Buffett rule will help make our system reflect our values as all Americans play by the same rules, do their fair share and get a shot at success.”

Now, it is the opposite of true to say instituting a special minimum tax rate for a certain group of people amounts to ensuring “all Americans play by the same rules.” But more to the point, Team Obama seems to be abandoning the idea of dealing with Washington’s actual problems of deficits and debt, and instead wants the general-election conversation to be about what’s “fair.” As defined by them.

In any case, the outrage about “unfairness” is based on anecdotal evidence — Buffett’s allegedly lower tax rate than his secretary — belied by the statistics. (I say “allegedly” because, when people began wondering how much money Buffett’s secretary would have to make in order to pay a higher tax rate than him, Buffett became suddenly shy about airing her tax information.) The data demonstrate not only that the current tax code is plenty progressive already, but that the average effective tax rate for people making more than $1 million is already greater than 30 percent.

So, we have a president who wants to spend valuable election-season time talking about a policy that:

a) would amount to tenths of a percentage point of the federal deficit; and

b) purports to address a “problem” that covers a subset of a subset of the population; but

c) doesn’t actually address the “problem”; all while

d) distracting from the larger problem of our out-of-control federal budget.

Ah, but it also e) brings attention to the wealth of Obama’s likely GOP opponent, Mitt Romney. And that’s the only truly relevant factor here. The Buffett Rule is a club for Obama to swing at Romney, nothing more.

Anyone who falls for it, thinking it will lead to one iota of improvement for their own lives, will deserve what they get. Or don’t get, as the case may be.

– By Kyle Wingfield

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