Will House Speaker John Boehner commit Republicans to raising $1 trillion in taxes as part of President Obama’s last-minute push for as much as a $4 trillion debt reduction deal? Obama and the GOP meet Sunday evening, but things continue to develop quickly:
1) Various news accounts Saturday morning made it sound as if Boehner was flirting with some convoluted deal where some taxes would be raised – including the high-end Bush tax cuts – but lowered later as part of major tax reform, with maybe some of the savings from fewer deduction going to reduce debt.
2) Then on Larry Kudlow’s radio show this afternoon, the WSJ’s Steve Moore said his paper’s reporting was accurate and the GOP were being “tempted” by this offer.
3) Then I got this from a GOP congressional source later in the afternoon:
WH is demanding major, unambiguous tax hikes. To get spending caps & entitlement tweaks, greater economic pain appears to be the WH’s asking price. It is increasingly likely that we aren’t going to see a ‘big’ deal if the WH doesn’t budge. Speaker looks to be holding strong. …
Their fierce insistence on higher taxes is beyond bizarre.
After months of demanding ‘clean’ increase to avert economic calamity (default), WH threatens economic calamity (default) unless they get economic calamity (trillions in tax hikes). No wonder these guys are governing over an economic calamity (9.2% & growth malaise), w an economic calamity on the horizon (debt explosion as mapped out in president’s budget).
[Update 7:39 PM] Appears that the basic framework for future tax reform could not be resolved.
The bipartisan consensus on tax reform (broader base & lower rates) was championed by President’s fiscal commission, and yet now is being rebuked by the President. Lowering top rates that would help make America more competitive was too large a leap for a true class warrior.
That Team Obama wants higher higher taxes is not news. But the growing GOP allergic reaction is. I think these comments gives good insight into how the GOP perceives the evolving deal. And I hope that second part is true. Tax reform should only be done in the context of lowering marginal tax rates, especially if Democrats aren’t offering entitlement reform that would move things toward a more market-based system such as the one outlined in Rep. Paul Ryan’s bold and visionary Path to Prosperity.
I also doubt whether the spending cuts being offered by the Obamacrats are largely legit and not a manipulation of the CBO baseline by a) cutting defense spending that was never going to happen and b) pushing cuts to Medicare providers that Congress will later undercut. My best guess remains a smaller spending cut deal + no tax increases + a hike in the debt ceiling.
This is Obama in his weekly radio address today:
Both sides are going to have to step outside their comfort zones and make some political sacrifices,” Obama said. “And we agree that we simply cannot afford to default on our national obligations for the first time in our history.
Obama says he wants a big deal, maybe because he needs an economic win to counter the faltering economic recovery and deprive the GOP of the “big spender” line of attack in 2012. Maybe he is finally listening to Tim Geithner and Jack Lew. It all reminds me of President Ronald Reagan and Soviet leader Mikhail Gorbachev at the 1986 arms control summit in Reykjavik, Iceland. Reagan walked away from a deal that would have eliminated nuclear ICBM’s in a decade because it would hobbled research into the Strategic Defense Initiative. Reagan was right to walk away then, and Boehner would be right to do the same now.