NOVEMBER 29, 2012
Republicans on Thursday received President Obama’s proposal on how to avoid the “fiscal cliff” and reduce the deficit. They didn’t like it—not one bit. House Speaker John Boehner said Obama was not serious about spending cuts. Senate Minority Leader Mitch McConnell “burst into laughter,” according to the Weekly Standard's Fred Barnes, because Obama was not offering anything he hadn’t already offered before.
Actually, McConnell was right about the novelty, or lack thereof. Obama’s new proposal is more or less a summary of proposals he’s made previously, via his spring 2012 deficit reduction plan and his proposal for an American Jobs Act. But Republicans have refused to put forward a new plan of their own, so why should Obama be the one to give ground first? He tried that strategy during his first term, in the hopes that shows of good faith would help produce compromises with the Republicans. For his troubles, Obama got obstruction and opposition, on everything from the stimulus to his jobs plan. Not much has changed since that time, except for the political environment and the leverage. Obama just won an election, and got more popular votes, following a campaign in which he promised to raise taxes on the wealthy and protect programs like Medicare from cuts in benefits. In addition, Republicans probably have more to fear from an impasse, since rates on all taxpayers go up on January 1 unless the GOP and Democrats agree on a new tax plan.
But let’s focus on this claim, from Republicans, that Obama only wants to raise taxes and isn’t serious about spending cuts. Here’s an analysis from one senior Republican aide, as relayed to ABC News’ Jonathan Karl:
The White House keeps saying it wants a ‘balanced approach’ but this offer is completely unbalanced and unrealistic. It calls for $1.6 trillion in tax hikes – all of that upfront – in exchange for only $400 billion in spending cuts that come later. Plus, the only entitlement changes they proposed come from the exact proposals in the President’s budget.
The trouble with this analysis is that it ignores history: As part of the 2011 Budget Control Act, Obama agreed to spending reductions of about $1.5 trillion over the next ten years. If you count the interest, the savings is actually $1.7 trillion. Boehner should have no problem remembering the details of that deal: As Greg Sargent points out, Boehner at the time actually gloated about the fact that the deal was "all spending cuts."
And now, with this latest offer, Obama is proposing yet more spending reductions, to the tune of several hundred billion dollars. Add it up and it’s more than $2 trillion in spending cuts Obama has either signed into law or is endorsing now. That’s obviously greater than the $1.6 trillion in new tax revenue he’s seeking. (And that doesn't even take into account automatic cuts from the 2011 budget sequester, which Obama has proposed to defer, or savings from ending the wars in Afghanistan and Iraq.) So, yes, Obama’s proposal is unbalanced—but not in the way Republicans seem to think. If Obama were proposing a truly balanced plan, he’d be calling for even more tax revenue or even less spending reduction.
Yes, I'm serious. As Richard Kogan of the Center on Budget and Policy Priorities has explained, those cuts from the Budget Control Act will take discretionary spending (spending on agencies and programs that Congress must reauthorize every few years) as a share of gross domestic product down to its lowest level since early 1960s, when government first began keep tracking of it. You don’t have to believe government is a model of efficiency to believe that cuts of that magnitude are bound to reduce spending to the point that government services suffer. Meanwhile, solving our long-term fiscal problems will probably require even more revenue than Obama is seeking now. That is why some of us have suggested the ideal solution to the fiscal crisis would be to let all of the tax cuts lapse, allowing middle-class tax relief to continue only on a temporary basis, until the economy is stronger. (Kevin Drum recently floated a new and interesting proposal for how that could be done.)
Is that going to happen? Probably not. Obama’s offer represents the outer boundaries of what’s possible. The final deal will almost surely include fewer tax increases, more spending cuts, or some combination of the two. Still, it’s heartening to see Obama refusing to cede ground pre-emptively—and, by the way, calling explicitly for measures like extended unemployment insurance that will promote growth and alleviate the insecurity so many Americans still feel. This is not how Obama operated in 2011. But conditions have changed a lot since then—and maybe Obama has, too.