Call His Bluff

· Friday, July 15, 2011

WASHINGTON -- President Obama is demanding a big long-term budget deal. He won't sign anything less, he warns, asking, "If not now, when?"

How about last December, when he ignored his own debt commission's recommendations? How about February, when he presented a budget that increases debt by $10 trillion over the next decade? How about April, when he sought a debt-ceiling increase with zero debt reduction attached?

All of a sudden he's a born-again budget balancer prepared to bravely take on his own party by making deep cuts in entitlements. Really? Name one. He's been saying forever that he's prepared to discuss, engage, converse about entitlement cuts. But never once has he publicly proposed a single structural change to any entitlement.

Hasn't the White House leaked that he's prepared to raise the Medicare age or change the cost-of-living calculation?

Anonymous talk is cheap. Leaks are designed to manipulate. Offers are floated and disappear.

Say it, Mr. President. Give us one single structural change in entitlements. In public.

As part of the pose as the forward-looking grown-up rising above all the others who play politics, Obama insists upon a long-term deal. And what is Obama's definition of long-term? Surprise: An agreement that gets him past Nov. 6, 2012.

Nothing could be more political. It's like his Afghan surge wind-down date. September 2012 has no relation to any military reality on the ground. It is designed solely to position Obama favorably going into the last weeks of his re-election campaign.

Yet the Olympian above-the-fray no-politics-here pose is succeeding. A pliant press swallows the White House story line: the great compromiser ("clearly exasperated," sympathized a Washington Post news story) being stymied by Republican "intransigence" (the noun actually used in another front-page Post news story to describe the Republican position on taxes).

The meme having been established, Republicans have been neatly set up to take the fall if a deal is not reached by Aug. 2. Obama is already waving the red flag, warning ominously that Social Security, disabled veterans' benefits, "critical" medical research, food inspection -- without which agriculture shuts down -- are in jeopardy.

The Republicans are being totally outmaneuvered. The House speaker appears disoriented. It's time to act. Time to call Obama's bluff.

A long-term deal or nothing? The Republican House should immediately pass a short-term debt-ceiling hike of $500 billion containing $500 billion in budget cuts. That would give us about five months to work on something larger.

The fat-cat tax breaks (those corporate jets) that Obama's talking points endlessly recycle? Republicans should call for urgent negotiations on tax reform along the lines of Simpson-Bowles that, in one option, strips out annually $1.1 trillion of deductions, credits and loopholes while lowering tax rates across the board to a top rate of 23 percent. The president says he wants tax reform, doesn't he? Well, Mr. President, here are five months to do so.

Will the Democratic Senate or the Democratic president refuse this offer and allow the country to default -- with all the cataclysmic consequences that the Democrats have been warning about for months -- because Obama insists on a deal that is 10 months and seven days longer?

That's indefensible and transparently self-serving. Dare the president to make that case. Dare him to veto -- or the Democratic Senate to block -- a short-term debt-limit increase.

This is certainly better than the McConnell plan, which would simply throw debt reduction back to the president. But if the House cannot do Plan A, McConnell is the fallback Plan B.

After all, by what crazy calculation should Republicans allow themselves to be blamed for a debt crisis that could destabilize the economy and even precipitate a double-dip recession? Right now, Obama owns the economy and its 9.2 percent unemployment, 1.9 percent GDP growth and exploding debt about which he's done nothing. Why bail him out by sharing ownership?

You cannot govern this country from one house. Republicans should have learned that from the 1995-96 Gingrich-Clinton fight when the GOP controlled both houses and still lost.

If conservatives really want to get the nation's spending under control, the only way is to win the presidency. Put the question to the country and let the people decide. To seriously jeopardize the election now in pursuit of a long-term small-government Ryan-like reform that is inherently unreachable without control of the White House may be good for the soul. But it could very well wreck the cause.

(c) 2011, The Washington Post Writers Group


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Comments

Army Officer

"If conservatives really want to get the nation's spending under control, the only way is to win the presidency."

That may be true, but please define the word "conservative" as it's used in this sentence. It CANNOT be synonymous with "Republican" - Republicans are scarcely better than Democrats in this regard. Even when they control all the levers of power the wheel turns the same way, albeit a little slower. Look at the Bush-43 years: even factoring out the economic impact of 9/11 and the dubious proposition that 10 years of war was the proper response, everything else grew as well when a Republican was at the helm and Republicans called the shots in Congress. Why is the NEA still in existence, bigger than ever? (Just one example among thousands.)

Republicans TALK a good fiscal game - when there is absolutely no chance their prescriptions will actually take place. Let's face it: the average voter doesn't want our government to be fiscally responsible. Unless and until that changes we'll continue the Rep/Dem budget kabuki dance. Only when the system crashes - REALLY crashes - will there be change. And it WILL crash, maybe soon, and it will be ugly. We're already well past the point where this can end with a soft landing.

Sadly, it is likely that there will be blood. I'm not happy about it - just calling it as I see it after studying history all my life.

Posted July 15, 2011 at 8:51:46 AM


Jeremy

Excellent, excellent points. I don't know why the Republicans have negotiated for this long, when there is nothing to be gained. Obama has played them for fools. The Republicans should have long ago taken the lead and passed something, forcing Obama to play catch-up. Instead, they dither while Obama (and his fans in the press) put them on the defensive. The only way that congress can actually speak with one voice is to pass something.

Of course, one risk here is that the Senate won't pass anything and Obama (and his apologists) will continue to claim he's blameless. Worse than that, the Republicans in the Senate might go for some grand "compromise" that effectively gives Obama what he wants.

If the Republicans lose this battle, it will rank as one of the worst political defeats of all time---not to mention the dire consequences for the country. In my view, things started to go bad with the extension of the Bush tax cuts. At that time, the Republicans should have insisted on real budget cuts, say, equal to the size of the cost of continuing the Bush rates. Obama would have not have gone for it, stimulus 3.0 would have been avoided, and the upcoming election would be all about lower taxes versus higher spending. That is, Republicans could have offered some sweetener (lower taxes) to soften the bitter pill of real cuts. Now, the story line is all about the Republicans offering the nasty medicine of budget cuts and Democrats being the "responsible" party. It's totally absurd, of course, but that looks like the way it's going to play out.

Posted July 15, 2011 at 10:52:04 AM


Kevin

Plan A is what the House should do - Rep's w/ Tea Party attitude need to take a deep breath and take a long run approach.

Reality is, as Mr. Krauthammer states, the republicans only have the House, with the Senate and WH in Democrat control.

Passing Plan A in the House puts the Senate & Obama in a pickle.

Call his bluff.

Posted July 15, 2011 at 11:36:08 AM


Robert A. Hall

Great column; I will link to it from my Old Jarhead blog. We are clearly sliding towards the abyss. The GOP political leaders too often get caught up in the heat of the moment, they can’t see the long term results of their actions. Impeaching Clinton instead of letting him hang there damaged was a classic example (as though facing an incumbent President Gore in the 2000 election would have been a good thing).

Robert A. Hall

Author: The Coming Collapse of the American Republic

(All royalties go to a charity to help wounded veterans)

Posted July 15, 2011 at 11:59:01 AM


Abu Nudnik

Not a bad idea, Charles!

Posted July 15, 2011 at 1:35:03 PM


karl anglin

Call his bluff!

Sounds great to me!

Posted July 15, 2011 at 3:55:47 PM


SJvet

Even the conservative pundits don't get it. There should be NO raising of the debt ceiling! The country has already spent too much, and the way to get things under control is not by allowing more to be spent. The Repubs are about to raise it by 2.5 trillion! I don't care how many fictitions cuts in spending they come up with, there's no reason to raise the debt ceiling because the country is not in jeopardy of default.

Posted July 15, 2011 at 4:16:40 PM


Don Davison

I like your short-term debt-ceiling hike with $500 Billion in budget cuts. We need to respond in a much more mature fashion to this entire quagmire and we need some more time to do that. And let us remember:

To raise the debt ceiling or to lower the debt ceiling is the question. Keeping it as it is would be an impossibility. All things move and we must move according to our own kind.* There are several things that we need to consider: We have yet to define the real goals of our debt. It has been an ad hoc effort for some time. It does not reflect any reasoned ownership by the citizenry as a whole. It does not reflect the current century into which we have been pushed, pulled, run wildly, fallen, - add whatever you wish. The time has long since passed when we should have been presenting reasonable alternatives to the ever-creeping budgetary bloat. As a whole, we have been dishonest with our responsibility to maintain an informed consent so that those elected representatives would have to follow the dictates of the electorate or suffer the consequences. Yes I know that is the way it is supposed to happen. We allowed for a gross distortion of our representative process to occur. Politicians were elected and then they chose to “colonize” their turf by buying a supportive constituency. When we took their money (really our own and our neighbor’s) we let them lie and we lied right along with them. Whatever happened to stealing and bearing false witness?

*Rules #6 The Game of Life: A Player’s Manual for Executives and Others

Posted July 15, 2011 at 5:16:31 PM


ChuckL

Wrong answers. If Obama insists on a tax program then let's give him one. Try this one:

Replace the whole tax code.

The solution is a "Flat Tax". This is a term for an income tax plan that has a single rate for all incomes. Properly applied it covers income from all sources. Legitimate expenses in generating the income would be excluded. Those persons who have only income from employment would have no record keeping expenses as they would have the current end of year income statements from their employers which show all of their income.

The "Flat Tax" can easily be made progressive by the inclusion of a single personal exemption which requires NO record keeping. That exemption should be not less than the annualized minimum wage and should be expressed as a multiple of the minimum wage. Poverty Level could be substituted for Minimum Wage, however I do not recommend this. Tying the exemption to minimum wage would provide an incentive to limit the inflation and unemployment caused by increases in the minimum wage. It would be necessary to prevent tax increases by reducing the minimum wage, possibly by requiring that the multiple be increased to prevent a reduction in the exemption dollar amount. Please note that this tax is geometrically progressive as the amount of tax follows an asymptotic curve towards the rate, but never actually reaches the rate because of the exemption amount.

This "Flat Tax" could also be used for business taxes. All expenses must be accounted for at the time of payment. The personal exemption would be replaced with a profit exemption of 5%. (or whatever % is determined to be a "fair" profit) Remuneration, whether wages, bonuses, or stock options would be limited in total to a set amount for listing as “business qualified exemptions”. Any amounts over the limit would not be prohibited, but would be considered to be profit above the exemption level and therefore subject to the business tax. Payment of the business tax would NOT exempt the recipient of the funds from income tax. This may promote a more even distribution of wages and benefits within corporations.

This “Flat” tax would greatly ease compliance, and should therefore greatly increase compliance.

This flat tax greatly reduces record keeping and would allow reduced government intervention and therefore costs.

FINALLY : Only the FLAT TAX provides a method to provide a business subsidy which has no direct cost against the Federal Treasury. This can easily be done with a time limited exemption, or partial exemption, or increase in the standard exemption, from the tax on income. This subsidy method must be used for all subsidies. Please note that this will promote an increase in personal wages, which will still increase the total tax revenue.

There you have a complete revision of the tax code that will fit on many fewer than 8000 pages. This should take less than 5 pages for the complete tax code.

As for the needed cuts, that is easy. If any existing department, subsidy, or other expense, is not clearly authorized in the Constitution, without redefinition of words, it goes away.

Posted July 15, 2011 at 7:15:34 PM


Army Officer

ChuckL,

You're onto something, but I would add a caveat: the tax rate for businesses should be 0%. Businesses do not pay taxes - they merely collect them for the Treasury in the form of higher prices. This has the perverse effect of making it appear that the tax burden is a LOT less than it really is.

If business taxes dropped to zero (which they actually are anyway, since those taxes are simply built into the cost of every product / service we buy: prices would drop, as would tax revenues as the hidden tax would not longer be hidden. This would have to be offset by one of four ways:

1) MASSIVELY increasing the flat rate (unpopular, and would kill the economy - if not cause a revolution). But which might lead to...

2) Cutting government spending (unpopular, but ultimately the only way out).

3) Going further into debt (which will soon become impossible as creditors shy away from debt backed by the U.S. Treasury).

4) Running the printing presses (which would cause hyperinflation).

Ultimately there is no substitute for a majority of the electorate growing up and acting like adults with the national checkbook.

It won't happen until it's too late.

Posted July 15, 2011 at 11:30:04 PM


ChuckL

Army Officer, I agree. I have been saying that for over 10 years, but this is something that can easily be changed after the code is replaced, The problem would be causing massive and unwarranted profits simply because of a monopoly product. To keep this from happening it would also be necessary to cut the time limit on patents and copyrights to less than 3 years after development and simply release them to public domain if they are not developed.

Eliminating all of the expenses that are not authorized by the Constitution would greatly reduce the costs of government. The defense expenditure is regularly reported as close to or under %5 of GDP and of the current government expenditures, and it is the only one that is required. All of the current subsidies are violations. Most of the federal government expenditures are only authorized to the states.

In either case "Patent Trolls" must be prevented.

This was the only way that I could suggest that actually acts as an "excess Profits" tax that would be likely to pass muster with the typical Congressman or Senator who just does not understand that no successful business pays any taxes. Taxes are simply a cost that must be added into the product cost before applying the markup to the selling price. This effectively forces the business to make a profit on the taxes that they collect.

Now you try explaining that to any of the Democrats that you know. I suggest that you wear earplugs.

Posted July 16, 2011 at 12:57:44 AM


pete

>"Republicans should have learned that from the 1995-96 Gingrich-Clinton fight when the GOP controlled both houses and still lost."<

It wasn't clinton that beat them, it was the media, and until such time as the U.S. media can become the information messenger it is intended to be as opposed to the liberal pep squad and cheer leaders they are, the GOP doesn't stand a chance.

Posted July 19, 2011 at 3:42:32 PM


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