Good Tone, But False Assumptions
by Deacon Blues
I admit that I've come around to Steve's way of thinking about Obama and the way forward on the debt deliberations. I watched the president's press conference this morning, and was glad to hear his toughness.
"I've been hearing from my Republican friends for some time it is a moral imperative to tackle our debt and deficits in a serious way," Mr. Obama said. "What I've said to them is, let's go."
The president said today he would not accept a smaller, short-term deal. "We might as well do it now," he said. "Pull off the band aid. Eat our peas."
He's being clear as well about the GOP's refusal to make the wealthy and corporations pay more. But as Steve said this morning, Obama and his political team still this late in the game misread the ability of the GOP to vote for tax increases and survive the election. They can't, just like the Democrats could never agree to make major changes to Medicare and Social Security before the election.
"I have bent over backwards to try to work with Republicans" on taxes, Mr. Obama said. He said he doesn't favor tax increases, but wants to end a series of loopholes for oil and gas companies and the wealthy. Republicans have said ending tax subsidies and tax breaks amounts to tax increases. He said he is also willing to overhaul the tax code so long as it is "sufficiently progressive."
Yet Obama thinks that having the changes take effect after the election would somehow innoculate GOP incumbents from the political consequences?
Mr. Obama rejected criticism by Republicans that his party is eager for "massive, job-killing tax cuts" that will harm the economic recovery. He noted that any tax increases would only go into effect after (the election).
"No one is talking about raising taxes right now," the president said. "I have bent over backwards to work with the Republicans that comes up with a formulation that doesn’t require them to vote sometime in the next month to increase taxes."
That's silly. No GOP incumbent wants to go home and campaign for reelection in red districts and face hostility about tax increases to come. This isn't the first time Obama's political team has misread the situation, and it reminds me of their botching of the stimulus debate period, when the economic team wanted to go bigger but lost the argument to the political team. We know how that turned out.
What both sides are left with is the Biden package of spending reductions and corporate tax loophole closings. Even though Boehner and Cantor want to prevent even those from being in the mix, the public doesn't support letting corporations off the hook given how well they've done the last two years. And Cantor can't defend giving corporations a free pass when it is revealed what the Biden deal involved.
The meeting Monday afternoon was expected to focus on agreements reached earlier in negotiations led by Vice President Joe Biden that resulted in tentative understandings on cuts to farm subsidies, student aid, federal workers' pensions and domestic agency budgets, among others. But the Biden group was bitterly divided over taxes, as Republicans including House Majority Leader Eric Cantor of Virginia repulsed Democratic demands to shut down tax breaks for oil and gas companies and deductions enjoyed by the wealthy. And Republicans resisted Democratic attempts for a mechanism to guarantee the Pentagon would contribute to cuts.
So the Biden deal plus the loophole closings, tied to a debt ceiling extension beyond the election is where this is headed, regardless of what Cantor wants. He'll get to crow that he avoided giving up the Bush tax cuts now, which Obama will simply (and smartly) just allow to expire after the election, thereby resolving a large part of the debt problem (as the CBO said). Democrats will get the loopholes closed and make Corporate America start paying what they should. Yes, programs and budgets will be cut, at least on paper, but Obama and the Democrats will simply reverse those decisions with a new Congress in 2013 within the context of the Bush tax cuts going away. As for Obama, he can say he tried to do the "big thing" but was stopped by those who really just wanted to protect the Top 2%. He'll come back to this when he does tax and entitlement reform during the second term.