The Right Opinion

GOP Strategic Retreat?

By Lawrence Kudlow · Dec. 8, 2012

Republicans are divided. President Obama won't budge. And more and more, it looks like the fiscal-cliff deadline of Dec. 31 will be missed.

It's now clear that Team Obama wants higher tax rates and revenue-raising tax-deduction caps to meet their $1.6 trillion revenue target. Spending cuts and entitlement reforms are vague to nonexistent. In fact, it could be that Obama not only rejects the across-the-board budget sequester, but that he actively seeks to raise spending, not cut it.

I guess it stands to reason that if you puff up his $800 billion revenue increase from last year, and double it to $1.6 trillion this year, the money will be spent. The government will grow larger.

All this should be unacceptable to the GOP.

Sen. Rand Paul, who may have the best idea, told me in an interview this week that he's prepared to pin the tail on Obama's tax-and-spend donkey. “In the Senate,” Paul said, “I'm happy not to filibuster it, and I will announce tonight on your show that I will work with Harry Reid to let him pass his big old tax hike, with a simple majority, if that's what Harry Reid wants, because then they will become the party of high taxes, and they can own it.”

Other conservatives in the Senate and House agree with Paul. And some House members are talking about a “doomsday” scenario, or what might be called a strategic retreat. Just vote present on the Democrats' tax bill to extend middle-class tax cuts and raise tax rates on income and investment.

A couple dozen other Republicans have signed a bipartisan letter suggesting flexibility on tax rates in return for some kind of entitlement reform – perhaps moving the top rate from 36 percent to 37 or 38 percent, less than the 39.6 percent Clinton rate, and possibly raising the so-called rich people's threshold to $500,000 or $700,000 from $250,000. But with a vague and un-budging Team Obama, this sounds like a triumph of hope over experience.

The most valiant guy in this process is Speaker John Boehner. He's still trying to cut a deal that would extend all marginal tax rates, including for the upper brackets (he is absolutely determined to prevent an increase in top marginal tax rates, which would really damage the economy), in return for a cap on tax deductions. That would raise roughly $800 billion in revenues, hitting upper-end taxpayers but leaving the middle class alone.

It's like a halfway tax reform, since marginal rates would not be flattened. But it would do less harm to the economy because tax-rate incentives necessary for growth would not be damaged.

The Boehner plan has stalled. And some conservatives are criticizing the speaker for permitting any tax hikes at all. In an anemic recovery, transferring $800 billion in revenues from private hands to the government will do some damage.

Of course, Boehner is trying to leverage this for significant spending cuts and entitlement reforms. It's a worthy objective, but he's just not making headway.

Conservatives shouldn't be so hard on Boehner. He's trying to deal with post-election realities and sincerely believes voters want a compromise. Worth noting: Prominent conservative House leaders, like Eric Cantor, Kevin McCarthy and Paul Ryan, are standing behind Boehner.

On the other hand, senior House leadership aides are not happy with Senate Republican leader Mitch McConnell. Apparently, McConnell and Majority Leader Harry Reid are ready to do a two-stage deal if the Boehner-Obama talks collapse. The first stage would extend middle-class tax rates and somehow compromise on upper-end rates. Then a process would be set up to produce spending cuts to replace the sequester. But House aides regard this as a nonstarter – one that could even undermine the Boehner-Obama talks.

Here's the really big principle in all this: Why raise taxes at all in the worst economic recovery going back to 1947? Tax hikes and larger government are economic deterrents.

Furthermore, the whole world is talking taxes rather than spending cuts. What happened to the $1.2 trillion sequester? And what happened to the idea of $4 of spending cuts for every $1 of tax revenues? Some scorekeepers believe Obama's plan raises taxes more than it cuts spending. Not exactly what Simpson-Bowles had in mind. Or even Ronald Reagan, who back in 1982 was promised 3-to-1 spending cuts over revenue increases. He didn't remotely get it.

As an old Reagan supply-sider who believes in the flat tax and strictly limited government, none of this makes sense in terms of promoting economic growth, jobs and prosperity. But the key tactical point is that all these machinations seem unlikely to meet the Dec. 31 deadline for tax extensions and sequester budget cuts.

That may not be the end of the world. But it shows how dysfunctional Washington remains.

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17 Comments

Rod in USA said:

Boehner is playing this wrong, in my opinion. I support his position, but his negotiating technique is giving BHO all of the power and prestige. Think about it: He makes a proposal that is reasonable and supported by facts and does in fact compromise where we should be playing handball. The president rejects it and then goes into campaign soon-doctoring mode, casting himself as the valiant protector of the middle class fighting a desperate battle against those evil, rich Republicans. With the uneducated who rely on the MSN for the "truth", the tactic works. The president wants to go over the cliff and blame Republicans and Congress. Eventually, he will stoke up such a fervor over it and class warfare to boot, that he can expand his dictatorial powers. This is a dangerous game and I don't think he knows it.

Saturday, December 8, 2012 at 6:51 AM

Rod in USA replied:

Sorry... should have been "spin-doctoring"

Saturday, December 8, 2012 at 6:52 AM

Tod the tool guy in brooklyn ny said:

We need a bold, brassy Speaker of the House to go eyeball to eyeball with the leftist b@st@rd kase! No new spending--period. Americans don't punish prosperity, rather, we encourage upward mobility with Regeanesque cuts on taxes/regs!!!

Saturday, December 8, 2012 at 6:53 AM

Wayne in Hinesville, GA replied:

Tod, You were right about Americans not punishing prospertity until this administration came along. Now its a crime to make money and not share it with the parasites who live off that prosperity. Now its take from those who get up everyday, go to work, and pay taxes and give it to those who have decided that working is for those stupid enough to do it. It's easier to sit on their asses than to have enough pride to take responsibility for the choices they made. Welfare programs and government's reckless spending is going to be the downfall of this country.

Saturday, December 8, 2012 at 9:03 AM

d.w.hudson in Michigan said:

Shut.....it.....down. Shut the government down. No increase in taxes. No budget deals. No increase in the debt ceiling. Constitutionally authorized spending only. Shut it down. The People's HOUSE, has the financial authority. If they only had the integrity. Shut it down.

Saturday, December 8, 2012 at 8:06 AM

Doktor Riktor Von Zhades in Western KY replied:

I wish we had a like button

Saturday, December 8, 2012 at 11:17 AM

Tony in Texas replied:

Mr Hudson I stand with you, shut it down. Our founders told us this would happen. Don't participate. The 51% has spoken. Let um have it.

Saturday, December 8, 2012 at 2:14 PM

Gregory in Yakima Wa. said:

Lawrence Kudlow predicted a big Romney win. That's because he only sees, hears and understands what he wants to see, hear and understand. Blinding oneself by belief is the danger of being emotionally involved.

Conservatives didn't just lose an election, they lost credibility and an election. John Boehner knows he has already lost the argument, he is trying to save face. Barack Obama will help Boehner with the conservatives public relations when the victory is announced. Helping the defeated from obvious humiliation is the gentlemanly thing to do.

Many conservatives have come to grips with the facts but they want to dress the new paradigm with the old banner to prevent further fragmenting the not-so Grand Old Party. Health care, gay rights, immigration reform that includes citizenship for illegal immigrants is a certainty.

Smart conservatives won't continue to fight a war they have lost. Smart conservatives will accept the facts and try to convince voters they led the fight and won. That's what Boehner, Cantor and Rand Paul are doing: pretending to give what has already been taken away.

Saturday, December 8, 2012 at 12:03 PM

Kevin from Arkansas in USA replied:

If Republicans has lost credibility then why do they control all three branches of government in 26 states and the legislative branches in three others? Let's not forget the American people left them in control of the House.

Saturday, December 8, 2012 at 7:22 PM

Capt. Call in New Mexico replied:

"Lawrence Kudlow predicted a big Romney win. That's because he only sees, hears and understands what he wants to see, hear and understand. Blinding oneself by belief is the danger of being emotionally involved."

Why, that is the same thing that you are doing! You deliberately blind yourself to the Truth of God, because of your pride. Although
you know that God exists, [Romans 1:18, 19] your pride will not let you see the Truth of the Word of God. Even as the Apostle Paul said in his letter to the Romans:
"Professing to be wise, they became fools, and exchanged the glory of the incorruptible God for an image in the form of corruptible man and of birds and four-footed animals and crawling creatures." [Romans 1:22]
Please, do not allow your pride to keep you from eternal life.

Sunday, December 9, 2012 at 1:14 AM

wjm in Colorado replied:

Blinding oneself by belief is the danger of being emotionally involved.

You describe your insanity quite well Gregory. You post and display an aberrant insanity. Thanks for letting all who read here see the complete ignorance of marxist statist insanity. You would do the world a favor to die you treasonous waste of skin.

Sunday, December 9, 2012 at 11:14 AM

NormalGuyAZ in Surprise, AZ replied:

The only reason I ever read Greg's convoluted and confused posts, is that I quickly get my fellow Patriots responses. Keep it up wjm, sarge and Mac. We may have may lost a battle, yet we have not lost the war. Keep up the good fight. That goes double for Mr. Alexander and the entire crew at "The Post"

Tuesday, December 11, 2012 at 1:40 AM

Wayne in Hinesville, GA said:

Better look out everybody, Greggy has messed his diapers again and is spewing his usual liberal nonsense. His infantile mind can't grasp the concept of economic collaspe due to overspending in order to take care of the parasites in this country. According to his irrational thinking, the folks who work owe the ones who don't a living. "FORWARD TO DISASTER' should be the Demorats slogan.

Saturday, December 8, 2012 at 1:00 PM

Tad Petrie in Westerville, OH said:

Mr. Kudlow,
In this article you said the following, “The most valiant guy in this process is Speaker John Boehner. He's still trying to cut a deal that would extend all marginal tax rates, including for the upper brackets (he is absolutely determined to prevent an increase in top marginal tax rates, which would really damage the economy), in return for a cap on tax deductions.” You also said, “Prominent conservative House leaders, like Eric Cantor, Kevin McCarthy and Paul Ryan, are standing behind Boehner.”
First of all, John Boehner is anything but valiant! John Boehner is INCOMPETENT and a COWARD! Since becoming Speaker, he has displayed his utter INCOMPETENCE by doing NOTHING except COMPROMISE with the President and his liberal sycophants! Boehner has also proven that he is a COWARD by his refusal to IMPEACH the President, despite the fact that the President has committed MULTIPLE violations worthy of impeachment! Instead of standing up to the President, Boehner pushed for the passage of BCA 2011, and now we are facing tax increases and unacceptable cuts in the defense budget. Now Boehner is pushing for “revenues” in seeking a deal. “Revenues” in Washingtonspeak are TAX INCREASES, whether it comes from higher tax rates or “closing loopholes”, the net effect is the same, people will pay MORE money to the IRS, this will accomplish NOTHING! Boehner was NOT elected to RAISE TAXES, he was elected to stand up for the American people and fix the damage that the President and his liberal sycophants have INTENTIONALLY done to our country! So now, because of Boehner’s INCOMPETENCE, we are now facing the largest tax increase in our history! Boehner, McConnell, and the rest of the Republican leaders should be removed from the Congress and replaced with men and women who are true conservatives that are willing to stand up and fight for the people of this country!

Monday, December 10, 2012 at 11:19 AM

Tapdaddy in Indiana said:

"Why raise taxes at all in the worst economic recovery going back to 1947? Tax hikes and larger government are economic deterrents."
This is all, Barry O's.

Monday, December 10, 2012 at 1:06 PM

p3orion in Midland, Georgia said:

As much as I hate to say it, I've been saying for weeks that we DO need a strategic retreat on the tax hike on the "rich." Not because it's a good idea, but because we already LOST that fight long ago, when the "fiscal cliff" was set up during the talks over the debt ceiling.

It was a lousy deal, since unless we cave in and give the Democrats what they want, they get it anyway: tax increases. All the argument now is doing is allowing them to blame the GOP for it. And then THEY will get to step in a "rescue" America with new reductions for all but the top 2%. Will we REALLY fight THAT?

We need to give the Democrats and obama EVERYTHING they want, right now. Say it's "because we value our nation more than our position" or whatever populist bullshit spin we can put on it to salvage some vestige of good will from the public.

THEN, when things still go to crap anyway, we can rightly point to the Democrat policies that made it happen: "We gave you what you wanted and it didn't work; now let's try OUR way..."

Monday, December 10, 2012 at 1:33 PM

Greg in Uvalde, TX replied:

I ABSOLUTELY agree! We can put this all on the DEMS if we have the guts to just vote present in the House... Split the Bush taxes into 2 bills, so we can vote for the 98%. Then, let the second bill to extend the rates for higher earners fail, 200-199 (or something like that) and the rest of the GOP vote PRESENT. Obama loses his leverage, and the DEMs get credit for the econimic hit. But, the GOP has to message this. That's the BIG problem!

Monday, December 10, 2012 at 4:16 PM