President Obama professes to be proficient at simple algebra. While speaking to students at Florida Atlantic University this month he even invoked his math skills to denigrate the Republicans’ budget plan. “This is not an exaggeration. This is math,” Obama said while mischaracterizing Republican’s plan for lower taxes.
One wonders whether the President has run the numbers on his own plan.
To be fair, there isn’t much of a plan to run the numbers on. Sure, he’s listed some nice-sounding generalities about rebuilding our infrastructure or investing in education, but when it comes to the details of a plan that actually makes the difficult choices necessary to balance the budget Obama is nowhere to be found.
But he does have one idea. Well, he has borrowed one idea, to be more exact: the so-called Buffett Rule. Although the details are still being worked out (sound familiar?) the idea is to impose a minimum 30 percent effective tax rate on anyone who earns more than $1 million per year. The idea, according to President Obama, is to use the new revenues to reduce the deficit.
“Warren Buffett’s secretary shouldn’t pay a [higher] tax rate than Warren Buffett,” Obama said when he introduced the plan in September. “And that basic principle of fairness, if applied to our tax code, could raise enough money [to] . . . stabilize our debt and deficits for the next decade.”
“This is not politics; this is math,” he joked.
Firstly, let’s be clear that the underlying assertion is factually untrue. As common sense dictates, rich people pay a significantly more taxes than the lower class. According to the latest research from the Congressional Budget Office the rates, from lowest-income quintile to highest, were 4 percent, 10.6 percent, 14.3 percent, 17.4 percent and 25.1 percent.
But, even if we set that reality aside, it’s clear that for all of Obama’s preaching about math, he forgot to put them in a calculator for himself. As Charles Krauthammer writes in the Washington Post:
“Okay. Let’s do the math. The Joint Committee on Taxation estimates this new tax would yield between $4 billion and $5 billion a year. If we collect the Buffett tax for the next 250 years – a span longer than the life of this republic – it would not cover the deficit for 2011 alone.”
The CBO’s revenue projections on the Buffett Rule proposal make for an even more farcical deficit reduction scenario. Here’s Mark Steyn in the OC Register:
“According to the Congressional Budget Office (the same nonpartisan bean counters who project that on Obama’s current spending proposals the entire U.S. economy will cease to exist in 2027) Obama’s Buffett Rule will raise – stand well back – $3.2 billion per year. Or what the United States government currently borrows every 17 hours. So in 514 years it will have raised enough additional revenue to pay off the 2011 federal budget deficit. If you want to mark your calendars; 514 years is the year 2526.”
Stripped of the notion that it is a credible revenue stream, the Buffett Rule is revealed for what it is – a cheap political stunt. It harnesses the power of class warfare, filters it through the false lens of a made-up system in which the wealthy don’t pay as much taxes as everyone else, and then aims his new weapon directly at Republican candidates in the 2012 elections.
But as Sebastian Mallaby writes in the Financial Times, “a clever campaign gambit is a poor substitute for a serious proposal.” Of course, Obama likely knows that. But one thing he apparently doesn’t know? How to do math.