As Congress reconvenes, Democrats are insisting that President Obama’s re-election means that House Republicans are going to have to give in to his demands for tax increases on the wealthy. While this will do very little to actually solve the impending budget crisis, the president’s supporters have a point when they claim that his victory means a majority of Americans supported his rhetoric about backing a balanced approach that would involve spending cuts in equal proportion to revenue increases. But as James Pethokoukis writes at AEI Ideas, a close look at what the president is asking for throws any notion of balance out the window.
It may be, as Bill Kristol pointed out on Fox News the other day, that it makes no sense for the GOP to “fall on its sword for a bunch of millionaires.” Speaker John Boehner’s initial offer to raise revenue by eliminating tax deductions for the wealthy was an indication that Republicans are prepared to start bargaining. And as Kristol said, there is an argument to be made that if the House leadership bargains the tax increase cutoff up, it may be good politics. But there should be no illusions that what the president is offering is a balanced plan in any sense of the word.
According to Obama’s math, his “balanced” plan cuts the projected cumulative debt by $4.4 trillion over ten years with 36% of the reduction coming from a $1.6 trillion tax increases — 80% from wealthier Americans, 20% from business. So, basically, $2 in spending cuts for each $1 in tax hikes. “Balanced.”
But once you begin to dig into the numbers, the plan doesn’t look balanced at all.
Talk of mandates is empty rhetoric whether it is meant to undercut the president or bolster his standing. His Electoral College majority is his mandate to govern and certain deference to his re-election is customary. But that doesn’t mean Republicans need to abandon their principles or acquiesce to a plan that does nothing to address the deficit or entitlement reform.
Pethokoukis also illustrates that what the president is calling for bears a greater resemblance to the fiscal follies of Europe than American notions of fiscal austerity such as the Simpson-Bowles plan:
Even if you include interest savings, 60% of the debt reduction comes from tax hikes. Obama is making the exact mistake Europe is making by employing a tax-hike heavy version of fiscal austerity. Indeed, a 2010 analysis by AEI scholars found that successful fiscal consolidations are heavy on spending cuts, light on tax hikes. Even Bill Clinton’s debt reduction plan was 2-1 in favor of spending cuts. The Obama plan is dangerously unbalanced, especially given the weak economic recovery.
The point here is that for all of the Democratic bravado about Obama’s mandate to tax the rich and do as he likes, there is still plenty of room for Republicans to both bargain constructively to avoid the fiscal cliff and to defend their principles. The president has as much if not far more to lose from a standoff that would wreck an already weak economy. Now is the time for Republicans to be smart but not craven.