The debt ceiling and wrong-way Republicans
Following the dubious lead of their counterparts in Sacramento, congressional Republicans appear poised to reject a broad victory for the cause of fiscal responsibility and limited government in favor of a narrow triumph over higher taxes. At the GOP’s insistence, reducing the deficit has become a precondition for increasing the debt ceiling, something that Congress must do soon to avoid degrading the government’s credit rating and potentially triggering another global recession. But Republican lawmakers have dug themselves in so deeply against any form of tax increase that President Obama seems to be standing tall by comparison.
That’s funny, given Obama’s lack of enthusiasm in the past for closing the budget gap. He all but ignored the recommendations of his own deficit reduction commission, and his budget proposal in February punted on the long-term problems posed by Medicare and other entitlements. Now, however, Obama is calling for a “balanced” approach that would reduce projected deficits by $4 trillion over the coming decade. That amount may not be enough to keep the national debt from growing faster than the economy, budget analysts say, but it would significantly brighten the federal government’s financial picture.
It’s an open question whether a quick shift to governmental austerity is the right tonic for today’s sluggish economy, especially with unemployment rising again and federal aid from the 2009 stimulus package drying up. Agreeing on a plan to shrink the deficit over the next few years, on the other hand, could keep the debt from growing to the levels that have hobbled Japan and crippled Greece. It would also eliminate some of the uncertainty (and the threat of enormous future tax increases) that may be deterring investment and limiting economic growth.
Voting for such a plan would be hard for both sides. To save $4 trillion over 10 years, Congress would have to slow the growth in benefit programs that Democrats cherish. At a news conference Monday, Obama reiterated his willingness to support those cuts, but only if Congress also eliminated at least some tax breaks for corporations and the wealthy in 2013 and later years. That’s a political necessity for Democrats, who are already grumbling about Obama’s proposed deficit-reduction package being tilted much more heavily toward spending cuts than tax increases.
After initially endorsing the idea of an ambitious deficit deal, House Speaker John A. Boehner (R-Ohio) retreated over the weekend, calling for only about $2 trillion in savings. He and other Republican leaders argue that the GOP-controlled House won’t support any increase in revenue, no matter what the source.
That position rules out a deal that would make real progress on the deficit while also achieving some top GOP goals, including curbing the growth of Medicare and Medicaid and simplifying the tax code with lower rates and a broader base. By confusing rigidity with principle, Republicans are letting Obama portray them — accurately — as extremists defending “egregious tax loopholes.” Republicans would do well to remember that this a no-pain, no-gain situation for lawmakers from both parties.