The news that President Obama has upped the ante in the talks over extending the nation’s debt limit has to leave most observers wondering, who’s bluffing? Is the president seriously considering House Speaker John Boehner’s idea of a major overhaul of the tax code that would close loopholes and therefore raise revenues in exchange for substantial spending cuts in entitlement spending that would include hitherto sacred cows such as Medicare, Medicaid and Social Security?
If so, then we may be on the brink of a historic compromise that will not only represent a major step toward fiscal sanity but also fairness. Simplifying the tax code has long been a Republican goal although not one energetically pursued. This would eliminate a great many loopholes and raise a considerable amount of revenue, but if it is accompanied as the GOP insists, by lower rates, it could be sold to their party’s rank and file as a blow to big government rather than yet another measure that will only feed the monster.
If the president agrees to such a deal, it would deprive him of some of his favorite hobbyhorses, such as his incessant complaints about special treatment for owners of corporate jets, but it would also mean he could go to the country next year as a man who acted to cut the deficit and created a simpler and fairer tax code. The odds are such a record would play better with the independent voters who will decide the 2012 presidential election.
Some Republican hardliners, such as Rep. Michele Bachmann, who has pledged never to vote to raise the debt limit, may resist the compromise, but it’s likely Boehner could still carry the vast majority of his caucus. But if the Obama-Boehner deal passes, it will do so without much Democratic support.
Congressional Democrats would have few reasons to buy into this far-reaching accord. Most Democrats have little interest in tax simplification and none at all in the drastic cuts in entitlement spending the deal would mandate. Indeed, having spent the last few months doing their best to demonize Rep. Paul Ryan and the rest of the Republicans for their ideas about reforming Medicare, it is going to be hard for them to step back and buy into the cuts they had previously said were unthinkable.
Even worse for the Democrats, the Obama-Boehner deal would take this issue off the table in 2012, since big cuts in Medicare and other programs would be just as much the responsibility of the president as the Republicans. Democratic strategists probably were over-optimistic about their chances of re-taking the House of Representatives next year. But a budget compromise that would make it difficult to engage in the sort of demagoguery on Medicare that won the special election in New York’s 26th congressional district in May for the Democrats would effectively kill such hopes. Instead of talking about the Republicans throwing the nation’s grandmas over the cliff, Democrats may be forgiven for seeing a budget compromise as Barack Obama throwing them under the proverbial bus.