Simpson, Bowles think Republicans will agree to hike taxes next year

In my column on Sunday, I reported conflicting advice to voters from Alan Simpson and Erskine Bowles, the co-chairmen of President Obama’s commission on reducing the national debt. Simpson, a Republican and a former senator from Wyoming, said he thinks GOP candidate Mitt Romney is more likely to succeed at forging a long-term budget compromise than Obama. Bowles, a Democrat who served as Bill Clinton’s White House chief of staff, said he thinks Obama is more likely to succeed.

But let’s assume for a moment that the polls are right and that Obama is about to win a second term. Won’t he run into a stone wall of opposition from Republicans in Congress, who have made resistance of tax hikes the core doctrine of their party?

Not necessarily, Simpson and Bowles told me. They’ve been working quietly with members of Congress from both parties, and they think a compromise that includes increased tax revenues is possible.

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“We’ve got 48 senators from both parties meeting on it,” Simpson told me. “We’ve talked with something like 150 House members, about 70 Democrats and 80 Republicans.”

“I’ve seen an increasing number of Republicans come forward and publicly state that there have to be revenue increases,” Bowles said. “And we’ve seen movement on the part of Democrats, in the form of greater acknowledgment that we have to slow the rate of growth of healthcare spending.”

Are they whistling in the dark? Not entirely. In the past few weeks, several Republicans have stepped forward to say they would agree to increased tax revenues if that was the price of avoiding deep cuts in defense spending. “Everybody knows what the solution is, and that’s Simpson-Bowles,” Sen. John S. McCain (R-Ariz.), the party’s 2008 presidential nominee, said on Bloomberg television last month.

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On the other side of the aisle, the Senate’s second-ranking Democrat, Sen. Dick Durbin (D-Ill.), has also said the Simpson-Bowles proposal is the logical starting point for the fiscal deals Congress will have to make after election day. Durbin, a member of the Simpson-Bowles commission, voted in favor of the proposal that would have slashed long-term spending and increased tax revenue.

Easier said than done, of course. But the Simpson-Bowles proposal does offer Republicans an exit route from their insistence that taxes cannot be raised: It offers lower tax rates on ordinary income, even as it eliminates or cuts a slew of preferential tax rates and tax deductions.

There will be titanic battles over all the details, especially the Simpson-Bowles proposals to end the preferential tax rates on capital gains and dividends and to limit tax deductions on mortgage interest and charitable contributions. But even before the presidential election, cracks in the Republican wall of resistance to tax increases have begun to appear.

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