Obama's Latest Plan: Real Deal or Political Football?

Negotiating usually entails two opponents taking divergent positions on an issue and working incrementally toward a common goal.

The question is whether President Obama has picked a realistic position from which to start negotiations on a plan for job creation and deficit reduction. Or is he merely picking a political fight with his opponents by making demands he knows are untenable to virtually every Republican member of Congress (and more than a few Democrats).

For some the answer is obvious.

On Monday the president introduced a deficit reduction plan he says will slash more $3 trillion from the U.S. debt over the next 10 years. Half of that -- $1.5 trillion will be paid for by raising taxes.

A centerpiece of the plan has been dubbed the Buffet Rule for billionaire investor Warren Buffett. Its essentially a tax hike on the top tier of American earners with the goal of leveling tax rate playing fields by removing loopholes that favor the rich.

Its a campaign document as much as anything else, said Howard Gleckman, a resident fellow at the Tax Policy Center, a non-partisan Washington, D.C., think tank. He knows it isnt going to pass. I dont think anyone thinks its going to pass.

Gleckman said the plan is not legislatively viable, but politically well find out in 2012 if it was a good idea.

House Speaker John Boehner said last week Republicans want to reduce the deficit by the same amount but without raising any taxes.

A trillion and a half is a long way from zero, said Gleckman. Theyre talking past each other.

Indeed, Republicans promptly dismissed the White House plan as at best a thinly disguised campaign speech, at worst class warfare. Whatever it is, it isnt a starting point for negotiations, they say.

Hes not negotiating. His plan is pure social warfare, said Richard Zuendt, a conservative political activist in New Jersey.

The forthcoming debate is almost certain to devolve into another corrosive standoff similar to the battle over raising the U.S. deficit over the summer, a clash that led directly to the U.S. losing its AAA credit rating.

Obama is clearly playing to populist sentiment by asking wealthy Americans to pay more taxes to cover the costs of his $477 billion jobs program and help reduce the massive U.S. deficit. And having the likable and almost universally-admired Buffett on board as a virtual spokesman helps to enforce the message of perceived unfairness.

In the past Buffett has claimed that he, one of the richest men in the world, is taxed at a lower rate than his secretaries, and he willingly allowed the Obama administration to insert his name squarely into the middle of this battle.

Its only right that we ask everyone to pay their fair share, the president said during a press conference at the White House. Middle-class Americans shouldnt pay a higher tax rate than millionaires.

Its not clear how many taxpayers would be affected by such a tax or how much revenue would be generated. The White House has estimated that as few as 22,000 households would be impacted, those with annual incomes of more than $1 million but which pay less than 15% of their income in taxes.

The tax would be far more expansive, however, if it was applied to all households with incomes over $1 million. Even so, with those households paying an average of $845,000 in taxes, the governments take would be just $19 billion a year, according to the Wall Street Journal, which cited the Tax Policy Center.

Gleckman took a broader view. The Buffett Rule is a concept, he said. The U.S. tax system is generally fair, but there are some people at the top who are able to take advantage of loopholes in the system and (Obama) would like to stop that.

The White House has also tied its deficit reduction plan to job creation, saying an uneven tax system makes the U.S. less competitive and places an unfair burden on the middle-class.

To that end, the administration wants to let the Bush Era tax breaks for upper income earners expire, limit deductions and exclusions for households that earn $250,000 or more, and close various unspecified loopholes.

One of the loudest arguments against raising taxes on the wealthy, however, is that it stifles investment and risk.

Zuendt echoed many opponents of the tax plan by suggesting that setting the tax threshold at $250,000 punishes the very people who are in a position to create jobs.

Thats your typical small businessman -- a small retail store owners or a doctor. Those arent super rich people, theyre middle class. And whats the incentive for starting a business if the government is just going to take it away. The more a company can make money and keep it the more the government collects in taxes, said Zuendt.

And of course the entire effort is meaningless if the idea of raising taxes on wealthy Americans is anathema to Congressional Republicans needed to pass such legislation.

Which it is.

Boehner (R-Ohio) issued the following statement shortly after Obama announced his plan: Pitting one group of Americans against another is not leadership & This administrations insistence on raising taxes on job creators and its reluctance to take the steps necessary to strengthen our entitlement programs are the reasons the president and I were not able to reach an agreement previously, and it is evident today that these barriers remain.

Zuendt said hes less concerned that the White House and Congress will deadlock on the issue than he is that Congress will cave in to tax increases to avoid accusations they are cutting popular entitlement programs such as Medicare.

The bitter debate this summer over deficit reduction ended meekly with the creation of a super committee to make hard decisions on budget cuts that eluded Obama and Boehner in July.

With that memory still fresh, Zuendt said hes skeptical either side is really committed to cutting government spending. Somebodys got to draw a line in the sand, he said.