The Right Opinion

Herbert Hoover Obama?

By Lawrence Kudlow · Nov. 29, 2012

Once again, President Obama dodged the key fiscal-cliff issues at a campaign rally/press conference Wednesday morning. Campaign-style, he argued that the middle-class tax cuts (below $250,000) must be renewed in order to prevent a $2,200 average tax hike from hitting middle-class folks. He added that a middle-class tax hike would cost consumers $200 billion in spending power.

OK, fine. But no one wants to raise middle-class taxes. That's not the issue. And even if those numbers are right, they dodge one of the key points in the dialogue between President Obama and House Speaker John Boehner – namely, what to do about top income-tax rates, which include capital gains, dividends and inheritance taxes.

The president once again avoided the term “tax rate” in his latest round of fiscal-cliff comments. He basically said: Let's get this done before Christmas in a fair and balanced way. But what is balance?

Speaker Boehner, in a Republican concession, is willing to cap upper-end deductions, a move that would produce several hundred billion dollars in new revenues while preserving marginal-tax-rate growth incentives, including those for successful small-business owners.

Obama did refer to a Senate Democratic bill that would raise top tax rates while leaving everything else in place. Question is: Is Obama rebuffing the Boehner offer? That's key to a fiscal-cliff deal. Higher tax rates? Or revenue-producing tax-deduction caps?

Another key point: Mr. Obama never mentioned spending cuts. Never. Not once. Yet Boehner has argued that the Republican revenue concession depends on some entitlement cuts as well as other spending reductions that would make up the trillion dollars or so in the across-the-board sequestration plan that appears to have been junked by both parties.

Even The Washington Post is criticizing Obama for failing to deliver a specific plan regarding entitlement and non-entitlement spending cuts. And Democratic Sen. Dick Durbin has added that taxing rich people will not overcome the gargantuan entitlement deficit, which some estimate to be $68 trillion over the decades ahead.

Unfortunately, Durbin doesn't want entitlement changes this year. He wants to put them off until 2013. Why does everybody want to put spending cuts off until next year? It doesn't work. It won't persuade the financial markets or the credit-rating agencies. Small, money-saving entitlement reforms, like cost-of-living adjustments and raising the eligibility age, would be a useful down-payment within this year's fiscal-cliff deficit deal.

And herein resides the GOP leverage, if they choose to use it. Republicans should not sign a tax deal that doesn't have a sizeable spending component. And they should argue that a smaller spending share of gross domestic product is actually a tax cut stimulant for the economy, and that it would give confidence to the business and financial worlds as well as the rating agencies that Washington is on the right track. And the GOP should use this leverage to press on with the idea of capping deductions, rather than raising top rates on successful earners, small businesses and investors.

Now, some people argue that Senate Democrats, and perhaps the president, should just let all the tax cuts expire this year. That, of course, would bring on a recession, or at least an even more anemic economy. Just blame the Republicans, it is said.

But I don't buy this. Why? Because the president does not want a second recession during his watch. Herbert Hoover Obama is not the legacy he's after.

And that's why Republicans should hold firm to their principles on spending and tax rates. Then, next year, new efforts for deeper tax and entitlement reforms can proceed in an orderly way.

But no deal will happen until the president unveils his entitlement and spending ideas. It's good that both Obama and Boehner are trying to keep an optimistic tone to this discussion. But so far, the key issues have not been resolved.

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6 Comments

richard ryan in Lamar,Missouri said:

Mr. Kudlow, I think you are wrong and Ann Coulter is right. Let Obama have his way with the tax thing. Republicans will be blamed for the coming crash if they try in any way to put on the brakes. Just let Obama be Obama, and then never miss a chance to put the blame on him where it belongs, when the crash occurs.

Thursday, November 29, 2012 at 1:34 PM

Wayne in Hinesville, GA said:

If the Republicans oppose any part of Odumbo's or the Demorats plan, whatever that is, they will get the blame when the proverbial BS hits the fan. This is one time they should just go along with the idiots.

Thursday, November 29, 2012 at 2:40 PM

JHenry in NYSS, USSA said:

I'm fully on board with the plan. Give Øbamao and his insane leftist cronies everything they want. Let the liberals hang themselves, I and my family will survive.

Thursday, November 29, 2012 at 2:54 PM

JAC in Texas said:

Obozo doesn't talk about his plan because he doesn't have one, other than "raise taxes." His position is "I won, so you have to do what I say." What he says is spending and/or entitlement cuts are not even on his radar screen--only more taxes.

Thursday, November 29, 2012 at 3:25 PM

Tapdaddy in Indiana said:

"But no deal will happen until the president unveils his entitlement and spending ideas."
You can't unveil what you don't have.

Thursday, November 29, 2012 at 3:40 PM

Tod the tool guy in brooklyn ny said:

There will be a double dip recession w/o extensive CUTS to Govmint SPENDING---PRONTO!!! Let the Left wing B##tard Case own His failed utopian policies, then sent him packin', BACK TO JEREMIAH WRIGHT."America's chickens have come home to roost, and they were ridin' 'im dirty, you white deval!"

Thursday, November 29, 2012 at 5:44 PM