First it was free community college. Then came paid sick leave. This weekend, we finally got higher taxes on the wealthy. Like a movie studio dribbling out teaser trailers for a new, and possibly very dull, feature, President Barack Obama has been trying to drum up excitement for tonight’s State of the Union address by previewing some of the juicier policy tidbits he’ll promote during the speech. The plans may not have a chance of passing our Republican-controlled Congress, but that’s neither here nor there. Obama seems to be thinking about the 2016 elections, and teeing up an economic agenda for the Democratic Party after he leaves office.
And how does that agenda look? In a word, frugal. Call it dollar-store progressivism.
In 2014, Obama plunked down an uncompromising budget that would have increased spending and raised about $1 trillion in new taxes over a decade. The document served as a liberal retort to the Ryan budget, with its trillions in tax cuts and slash-and-burn approach to government programs. For all I know, the White House could go the same route it did last year. But if you look at them one by one, many of Obama’s marquee proposals are starting to look like big ideas with relatively small price tags.
Take the three main tax increases the White House unveiled on Saturday. Obama would like to slightly raise the top capital gains rate, from 23.8 percent to 28 percent, for couples earning around $500,000 or more a year; kill a major capital gains tax break for heirs of large inheritances; and levy a fee on big financial firms based on how much they borrow, partly so they’ll take on less risk.*
These are forceful philosophical gestures. Matt O’Brien of the Washington Post pithily sums them up as “Piketty in an American accent,” because they largely tax wealth and inheritance, rather than labor income. Including the bank tax shows that the White House realizes there’s more work to be done reining in Wall Street. Meanwhile, a little more than half of the new revenue would be spent on tax breaks for the middle class, as well as an expansion of the Earned Income Tax Credit, which essentially boosts pay for low-wage workers. Obama still wants to spread the wealth around, just like he told Joe Wurzelbacher all the way back in 2008.
We are not, however, talking about especially large sums of money. Combined, Obama’s hikes would raise $320 billion over a decade, or $32 billion per year. That’s just a smidge more than 1 percent of last year’s federal tax revenue—more than a rounding error, but not much more. Obama isn’t looking to soak the rich at this point so much as lightly spritz them.
Now, consider Obama’s education platform, which he has touted as a way to encourage economic mobility. Thanks in part to the president’s nudging, universal pre-K and free higher-ed are now considered serious policy ideas in Democratic circles. But they are also fairly small line items. The White House’s plan to expand preschool to all 4-year-olds—one of the big ideas from the 2013 State of the Union—weighed in at just $75 billion over a decade, and would have been funded merely with an increase on cigarette taxes. Obama’s newer proposal to eliminate community college tuition for many students would cost the federal government an estimated $60 billion over 10 years. Wrap them together, and you get just $13.5 billion per year. America spends more than that exploring space. It’s a fairly low price to pay for expanding the meaning of a basic education in this country.
Cheap is good, of course, but free is even better. Requiring that all workers receive paid sick days, as Obama is suggesting, wouldn’t cost the government a dime but would bring the U.S. into line with the rest of the developed world. Raising the minimum wage to $10.10 and indexing it to increase with inflation, as he’s previously backed, would be popular, and probably wouldn’t cost taxpayers much beyond slightly higher McDonald’s prices.
This sort of low-budget economic populism may not sound especially enthralling—especially in a seventh-year State of the Union address, where presidents can pretty much let their imaginations run wild. But it may be the most the left can realistically hope for in the near future. As long as today’s GOP hangs on to at least one chamber of Congress, major progressive reforms to the tax code will remain DOA on Capitol Hill. The same goes for any expensive or especially far-reaching government programs. Whenever a Democratic president does finally luck into a sympathetic Congress, he or she may well have to spend political goodwill passing climate change legislation, at least if we don’t want to fry the planet. Or, it may well fall on the next president to fix Medicare’s troubled finances.
That leaves room for small-budget, high-impact ideas, like moderate tax hikes that affect a small slice of the rich or cuts that benefit a broad swath of the middle class. Or programs, like free college tuition, that might punch above their budget cost. This stuff won’t necessarily even be easy to pass—just imagine the lobbying battle that would ensue if Congress considered taxing bank leverage—but the modest price tag at least means it’s an economic agenda you can believe in.
*Correction, Jan. 27, 2015: This post originally misstated the current top capital gains rate.