A Weekend to Remember — the Biden Gaffe Plus Tax Hikes are Back on the Table

Insights and Market Perspectives

OPINION POLLS PLAY AN ENORMOUS ROLE in Washington, and they had a huge impact this past weekend as Joe Biden went off script on Ukraine, as his new budget called for taxing the rich — both reflecting what the polls are showing in this election year.THE UKRAINIAN GAFFE: Biden was lambasted last August for the inept U.S. pullout from Afghanistan, and public opinion has embraced a view that he hasn’t acted quickly enough to support Ukraine. Thus his speech on Saturday in Poland, ripping Vladimir Putin, showed plenty of testosterone.

PERHAPS SOMEDAY THE ADDRESS may be viewed as similar to Ronald Reagan’s “tear down this wall” speech in Berlin in 1987. But Biden’s ad lib that Putin “cannot stay in power” was instantly walked back by the White House, where aides had painstakingly won NATO unity.

U.S. ALLIES WERE ANGRY AND BLINDSIDED by Biden’s assertion, just as they were blindsided on Afghanistan, and by four years of enduring Donald Trump’s erratic behavior. And Russia now can claim that the West wants to remove Putin. Did Biden’s unscripted remarks show resolve or did he simply reinforce growing doubts about his mental acuity?

IN THE MEANTIME, THE MOST ENCOURAGING STORY of the weekend was the apparent decision by Russia not to focus on capturing Kyiv, a battle that Moscow can’t win. Russian troops — from generals to conscripts — are in retreat in much of the country.

BUT THE SHELLING CONTINUES in many cities, as Mariupol faces a grave humanitarian crisis; Volodymyr Zelensky will have to compromise. A deal, brokered by Turkey, is coming into focus; it would give much of eastern Ukraine to the Russians while abandoning a goal of NATO membership for Ukraine.

ZELENSKY ALSO HAS TO WORRY ABOUT PUBLIC OPINION: The terms of a possible deal may spare Kyiv and other cities from obliteration, but considering the sacrifice by the Ukrainian people, the terms of this deal may be a bitter pill for them to swallow.

EVEN PUTIN HAS TO WORRY about public opinion, as the death toll soars for Russian troops — and generals — and the Russian economy spirals downward. He can’t jail all the dissidents in Moscow.

AN UNSATISFACTORY DEAL for all parties seems likely, although we don’t rule out a rout on the battlefield, as Russians quickly retreat from the Kyiv region. But Zelensky doesn’t have the weapons he needs; Biden’s rhetoric doesn’t match his policies on arming the Ukrainians.

A PARTITIONED UKRAINE seems likely, sparing Kyiv, with a guerrilla war persisting indefinitely — as all parties ask increasingly relevant questions: are U.S. officials on the same page? Or are they skittishly reacting to opinion polls on everything from gasoline prices to regime change?
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WITH BIDEN’S JOB APPROVAL barely at 40% positive, the White House needs a diversion, so tax hikes on very wealthy Americans are back on the table. This also is poll-tested — the public wants to tax the rich; even a majority of Republicans think the uber-wealthy don’t pay enough taxes.

SO THE 2023 BUDGET PROPOSAL, out today, will call for a 20% minimum tax rate on families worth more than $100 million. The well-polled title of this plan is the “Billionaire’s Minimum Income Tax.” Significantly, it would contain a tax on unrealized gains; even some Democrats are leery of what would be labeled as a “wealth tax.”

THIS COMES AS SEN. JOE MANCHIN indicates a willingness to compromise, but a tax hike as the economy slows will be an uphill fight. And there’s no indication that Democratic Sen. Kyrsten Sinema will go along; she opposes any new taxes — and she could single-handedly kill this proposal in the 50-50 Senate.

BUT IT’S A CAMPAIGN ISSUE: Even if the White House can’t get this enacted, Democrats have something to stir the party’s base this fall. But the revenue allegedly raised would be $360 billion over ten years, a relative pittance in this era of trillion dollar deficits.

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