Government: The tax trap for Democrats
Reports that President Obama and House GOP leaders were closing in on a deficit-cutting deal Thursday that wouldn't necessarily increase tax revenues led Democrats to erupt like Mt. Vesuvius, Sen. Barbara Mikulski (D-Md.) told the Washington Post.
Never mind that the deal would raise the debt ceiling, averting a potential economic disaster when the federal government started withholding payments from some of its creditors, or that projected deficits would be slashed by $3 trillion to $4 trillion over the coming decade. A deal that does those things without collecting more in taxes, the Democrats seemed to be saying, was simply unacceptable.
That's, umm, not a compelling message to take to voters.
Polls showed that the public was souring on Republicans because they were seen as uncompromising and reckless in the debt-ceiling negotiations. But if Obama strikes a deal with the House GOP leadership that Republicans support, Democrats run the risk of appearing just as uncompromising and reckless if they don't climb on board. Holding out for a deal with more tax revenue isn't exactly a crowd-pleasing stance.
Details are scarce, but reports suggest that the deal would call for a tax overhaul by the end of 2012 that junks the George W. Bush tax cuts in favor of a broader, flatter tax code. As with the tax proposal from the Gang of Six, such a change would look like a tax increase from one perspective (the one that assumes Congress would keep extending all the Bush tax cuts and other tax breaks) and a tax cut from another (the one that assumes Congress would let at least some of those breaks expire).
Such a deal would be particularly appealing to Obama because it would respond dramatically to public concern about deficits and the national debt (although the plan's main impact would be in future years). Having addressed the budget mess, the president could turn his attention to the more pressing tasks of combating unemployment and growing the economy -- for example, by pushing for more spending this year on infrastructure.
But congressional Democrats worry that the White House is caving in to GOP demands to close the budget gap with spending cuts, not tax increases. It's understandable why Democrats want the deficit-cutting plan to increase revenue in addition to cutting spending. The more you can do the former, the less you'll have to cut the cost of Medicare, Medicaid, student loans and other top Democratic priorities. And the promise of a tax overhaul in the future may offer too little assurance to satisfy lawmakers on the left, just as those on the right have balked at promises of future spending cuts.
So if Obama and the House GOP leadership actually agree on a deficit-cutting deal with $3 trillion in cuts and no meaningful increase in revenue, Democrats would probably focus their ire on the amount that would be cut from popular federal programs -- particularly from Medicare and Social Security benefits. They would argue that the deal rewarded millionaires and billionaires with lower tax rates while working-class and vulnerable Americans picked up the tab.
Maybe that would be an effective message. But the public might also blame a new impasse not on excessive GOP cuts but on Democrats' demands for higher taxes.
The Democrats looked more reasonable than Republicans when the latter were refusing to consider any form of revenue increase, even if it was nothing more than ending tax breaks for corporate jets or oil wells. But if the GOP lines up behind a deal with Obama, the public may well believe that the Republicans have met the reasonableness test.
Of course, that assumes House Republicans would accept a deal that Speaker John A. Boehner (R-Ohio) and Majority Leader Eric Cantor (R-Va.) strike with Obama. Given their track record, that's not exactly a safe assumption.
-- Jon Healey
Photo: Senate Majority Leader Harry Reid (D-Nev.). Credit: J. Scott Applewhite / Associated Press