Revenue neutral corporate tax reform: what could go wrong?

President Barack Obama is expected to use his budget proposal to call on Congress to overhaul the corporate tax system in a way that doesn’t generate additional revenue, a move that is sure to anger liberal Democrats in the Senate.

The White House didn't respond to requests for comment on the expected language, which several sources said would be included in the fiscal 2014 budget proposal that will be unveiled Wednesday.

Beyond calling for revenue-neutrality, it’s not clear how deeply the president’s budget will wade into the choppy waters of corporate tax reform.

The budget move is a concession of sorts by Obama, who released a framework for corporate tax reform last year that would have raised $250 billion over 10 years.

But it likely will not be enough to entice Republicans who want individual and corporate tax reform, with no overall revenue increases, done as a package. And liberal Democrats — already fuming over the administration’s plan to change the way Social Security benefits are calculated — aren’t pleased.

“Corporations are not overtaxed in America,” Sen. Tom Harkin (D-Iowa) said Tuesday. “Let’s be frank about that. We need to close a lot of loopholes and we need to raise some revenues — bottom line.”

Since the beginning, the Obama administration has seemed eager to gain the approval of the grownups — the sensible people who will reward efforts to be Serious, and eventually turn on those nasty, intransigent Republicans as long as Obama and co. don’t cater too much to the hippies.This is the latest, biggest version of that strategy. Unfortunately, it will almost surely fail. Why? Because there are no grownups — only people who try to sound like grownups, but are actually every bit as childish as anyone else.

After all, if whoever it is that Obama is trying to appeal to here — I guess it’s the Washington Post editorial page and various other self-proclaimed “centrist” pundits — were willing to admit the fundamental asymmetry in our political debate, willing to admit that if DC is broken, it’s because of GOP radicalism, they would have done it long ago. It’s not as if this reality was hard to see.

But the truth is that the “centrists” aren’t sincere. Calls for centrism and bipartisanship aren’t actual demands for specific policies — they’re an act, a posture these people take to make themselves seem noble and superior. And that posture requires blaming both parties equally, no matter what they do or propose. Obama’s budget will garner faint praise at best, quickly followed by denunciations of the president for not supplying the Leadership (TM) to make Republicans compromise — which means that he’s just as much at fault as they are, see?

Last August, at the Democratic National Convention in Charlotte, I sat in on a meeting between several top current and former Obama officials and a few dozen executives whose support they were trying to enlist in the upcoming fight over the fiscal cliff. (The terms of my being allowed in the room were that I not publish anything until after the election.) Much of the meeting was given over to a question-and-answer session, and one of the first questioners wanted to know why going over the cliff would be such a bad thing. It would, after all, achieve the tax increases Democrats were seeking.

Jon Carson, a top White House official, replied that the $1.2 trillion sequestration cuts that were part of the fiscal cliff worried him and other officials. Not only the cuts to social programs, but also the cuts to the military budget. “They’re too deep,” he said. Although sequestration was delayed until March 1, those cuts ultimately were not averted. The Pentagon budget will be cut by $500 billion over the next decade (an additional $100 billion in deficit reduction comes from interest savings). While it may have troubled the White House, many Democrats regarded this as a huge gift—military cuts were something many of them desired but few would actually argue for. Sequestration delivered more than they could have imagined.

Guess what? The White House still doesn’t like those cuts. And Obama’s new budget, released today, makes this clear. Although the White House doesn’t advertise this fact in the six-page budget overview it put out this morning, the new budget eliminates nearly all of the cuts that sequestration imposes on the Pentagon. Instead of $500 billion in cuts, Obama proposes only $100 billion, and you have to look closely to spot it (“$200 billion in additional discretionary savings, with equal amounts from defense and nondefense programs”).

Along with the well-advertised cuts to Medicare and Social Security benefits, this is something that should appeal to the GOP. “It’s another one of the peace offerings in Obama’s package to Republicans,” Robert Litan, the director of research for Bloomberg Government and a former official of the Office of Management and Budget, told me.