If you held a contest to pick the worst thing a politician could be called at this moment, my nomination would be “Wall Street Liberal.” The label has everything.

I personally despise the way the noble liberal idea has been devalued, but face it: Conservatives have had great success in discrediting liberalism, to the point that most liberals dare not call themselves by their own name. And what institutions are held in lower esteem right now than those represented by the words “Wall Street”?

The Left has always disliked Wall Street. Populists of all stripes have gone after financiers since the days of Andrew Jackson. And the Right can cast Wall Streeters as the recipients of Washington’s largesse. Oh, yes, and they were the highfliers who tanked the U.S. economy. Put “Wall Street” together with “liberal” and: bingo! About the only more unpopular combination I can think of is high-cholesterol broccoli.

If you want to understand why President Barack Obama’s standing in the polls is not where it used to be—and also why the populist-sounding Tea Party movement has gained so much traction—consider that some significant part of the American voting population has come to see his administration as both too liberal and too tied to Wall Street. Never mind that Obama is not really all that liberal (read any of the liberal bloggers if you doubt this), and never mind that Wall Street is fighting Obama on financial reform, particularly on his excellent proposal to create a financial consumer protection agency. The fact is that the Wall Street tag is sticking, and Obama was always going to battle the L-word.

This is why the president’s January 14 announcement of new fees on the biggest banks—to recoup the costs of the financial bailout—comes just in time. And so does the idea now floating around Congress to pay for a reduction in the proposed tax on so-called Cadillac health-care plans by applying the Medicare tax not only to wage income, but also to investment income. Financing Main Street benefits through Wall Street taxes makes sense—and not just for political reasons.

Obama is finally trying to address what has been an enormous distortion in our political debate. Many Washington voices are raised to decry the large budget deficit, and independent voters are said to worry about the red ink, too. In the short run, deficits make sense to boost the economy. But in the long run, they will have to be dealt with. Some keep pushing the tired notion that the deficits can be cured if we just reduce “entitlements,” which I put in quotation marks because I’m weary of people using this highfalutin word to avoid saying directly that they want deep cuts in Medicare and Social Security.

Actually, health-care reform is designed in part to contain the long-term growth of Medicare costs. The savings that can be wrung out of Social Security are limited. In the end, if you care about fiscal responsibility, you have to favor raising taxes.

But whose taxes? The truth is that we’ve had a large income and wealth shift in the United States, in favor of not just the rich in general but the financial sector in particular. We are overtaxing wage and salary income relative to investment income, and overtaxing the manufacturing and service sectors relative to the financial industry. It’s why Warren Buffett has said he’s taxed at a lower rate than his receptionist.

Moving the tax burden toward the financial sector is thus a matter of both justice and political necessity. The best thing that could happen to Obama would be for him to have a fight or two with Wall Street and the big banks on behalf of balancing the budget. It is precisely the way to shake off both ends of the Wall Street Liberal tag.

It would also have the benefit of challenging the Tea Party movement to come clean as to whether it really is populist, or merely using populist rhetoric to pursue the same old low-tax, low-regulation agenda that got us into this mess in the first place. Will the Tea Party crowd come out against taxes on banks and on the finance industry in the name of their libertarian principles? If they do, what kind of populists are they?

After a year in which progressives played defense, it’s time to call some bluffs.

© 2010, Washington Post Writers Group

E. J. Dionne Jr. is a syndicated columnist, professor of government at Georgetown University, a senior fellow at the Brookings Institution, and a contributing writer for Commonweal. His most recent book is Code Red: How Progressives and Moderates Can Unite To Save Our Country (Macmillan, 2020).

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