The unemployment rate is at 5.6 percent and still falling, and the deficit is on track to be around 3 percent of gross domestic product in the 2015 fiscal year, hardly a scary number. A combination of spending cuts, tax increases and some success reducing growth in health care costs is paying dividends that are shifting the fiscal policy debate elsewhere.

So with those battles calming down, the question is what will replace them. And this proposal is the president’s whack at an answer.

It is constructed to sidestep those old debates over the size of government; it creates no new programs, instead working entirely through the tax code. It fully pays for itself.

The trade-off embedded in the plan is straightforward. It would raise taxes on people with investment income and large inheritances, and on giant banks that rely on borrowed money. It would lower taxes on working parents, including a $500 tax credit for families in which both parents work, and change existing child care tax incentives to reduce taxes for families with young children up to $3,000 per child. And it would further tweak the tax code to try to help college students and encourage the middle class to set up retirement accounts.

The White House will surely be accused of class warfare, of pitting the interests of the affluent directly against the working class. But if other Democrats (particularly the party’s nominee for president in 2016) seize on this basic framework, of higher taxes on capital in exchange for lower taxes on labor, it will help offer a clear vision of what the Democratic Party stands for after the Obama years.

For Republicans, it creates an interesting challenge. In his opening steps toward a presidential run, for example, former Gov. Jeb Bush of Florida has spoken of rising inequality as being real — and the way to reduce it being rooted in entrepreneurship and free enterprise. Some Republicans will support aspects of the president’s plan, particularly an increase in the earned-income tax credit to reduce taxes on low-income workers, but Republicans uniformly find the idea of paying for it with tax increases on the wealthy to be anathema.