White House: When we said tax revenue figures were ‘just math,’ we meant ‘politics’
posted at 5:11 pm on December 5, 2012 by Mary Katharine Ham
As you saw Erskine Bowles say this week, a lot has changed since we were negotiating with John Boehner in 2011, including an election in which the American people spoke on the need for a balanced approach that protects the middle class and asks the wealthiest Americans to pay slightly higher tax rates. Moreover, even in the 2011 negotiations Speaker Boehner agreed that if tax reform did not work out then there would be decoupling with the middle-class tax cuts made permanent and the rates for high-income households rising.
Since the 2011 negotiations we have taken a hard look at the numbers and the math and there’s simply no plausible and desirable way to achieve the kind of deficit reduction we need without hurting our economy and sticking it to the middle class unless we ask for slightly higher rates for the wealthiest individuals. The math simply doesn’t add up. We are willing to do tough things and compromise to find a solution here. But the fact remains that there’s one thing standing in the way of achieving a deal and that’s the Republicans’ refusal to ask for slightly higher rates for the wealthiest individuals. We are hopeful that they’ll come to the table on this so we can find a solution that has balance and is good for the economy.
The fact that politics have changed is a reasonable assertion, but politics changing didn’t make the math change. Either the president was wrong when he said the “raising revenue” route could result in $1.2 trillion ($400 billion more than Republicans suggest is possible) then or he’s misleading now.
The Boehner suggestion of the Bowles pitch, which was written up by even Talking Points Memo as reasonable at the time of its proposal, doesn’t become mathematical “magic beans and fairy dust” simply because the President won, and the press shouldn’t pretend it does.
This is part of a larger tactic by the Left to polarize any plan that doesn’t stay in deepest, deep denial about entitlement spending. Please see a Fix the Debt event yesterday in which the coalition group embodying the Simpson-Bowles proposal and chaired by the Beltway’s most “reasonably reasonable” men themselves was heckled by disruptive liberal protesters. The press normally fetishizes bipartisan committee findings like Simpson-Bowles and Republicans who are willing to speak at such conferences, but who got the coverage yesterday? Demagoguing protesters painting Simpson-Bowles as radical, not the people reasonably talking about the debt. (Full disclosure: My husband does some advising on Fix the Debt, but I’m not involved aside from noticing liberals trying to make even Simpson-Bowles a pariah policy.)
Philip Klein offers a good criticism of Simpson-Bowles and S-B-inspired plans, saying Republicans “shouldn’t give bipartisan legitimacy” to the “revenues” euphemism. The point about dynamic scoring is important:
There’s been an ongoing debate over what counts as new “revenue” under this formulation. For instance, conservatives would be fine with the federal government collecting more revenue if the increased flow was the result of a more efficient tax code that boosted economic growth. But as I’ve noted, Bowles does not favor the use of dynamic scoring, a practice that accounts for growth-generated revenue. So that means if Republicans were being faithful to Bowles, the dollar value of the loopholes and deductions they’d be eliminating would have to exceed — by $800 billion — the lost revenue resulting from any reduction in tax rates. And that would be a clear tax increase.
If Republicans agree to raise taxes, they should just own up to it. They should argue that the best deal that they could get with an intransigent Obama still in office was to extend the rates on lower brackets, and they should express regret that they couldn’t prevent tax hikes on those with higher incomes. This would no doubt be a political defeat. But an even worse outcome would be for Republicans to negotiate a weaselly compromise in which they keep the rates the same, but get rid of $800 billion in loopholes and deductions, and then go around arguing that they merely agreed to “new revenue” rather than higher taxes.
Byron York says the closest Republicans will get to a win is relinquishing on upper-bracket tax increases and demanding commitments on entitlements in return:
Of course, raising taxes on the top bracket will not produce anywhere near enough money to avert a debt crisis down the road. Nor will cuts strictly in discretionary spending, although some should be made. The most important thing is reining in entitlement spending. So a deal would be: Republicans agree to raise the top tax rate while Democrats agree to cut entitlements.
“You need about $4 trillion over the next decade to stabilize the debt,” says former Congressional Budget Office chief Douglas Holtz-Eakin. “I would happily go from 35 percent to 39.6 percent in exchange for a trillion each out of Medicare, Medicaid, and Social Security. That has to be the nature of the deal. Republicans give on taxes, and Democrats have to give on entitlements.”…
A Republican offer to allow a top rate increase in exchange for entitlement cuts would turn the spotlight on the Democrats’ entitlement dilemma. If President Obama takes the position of many in his party — AFL-CIO chief Richard Trumka, for example, has written, “NO to cuts to Social Security, Medicare and Medicaid and YES to fair taxes on the wealthiest 2 percent”– there will be no deal. But that would not stop the Republicans from saying right now: While we do not support raising taxes on anyone, especially in this weak economy, we will accept the president’s top-bracket rate increase in exchange for trillion-dollar cuts in the big three entitlement programs.
Doing that would forestall the Democratic attack that the GOP will not bend on tax rates. Instead, it would be the president who’s not bending. Of course, Obama — and many in the media — would find other grounds to attack Republicans. But since the GOP is ultimately going to relent on the top tax rate, why not do it when it has some benefit?
Sure, but we’ve seen this play before, in which hikes are agreed to but cuts mysteriously never materialize. Even if Obama did “commit” to some movement on entitlements, you’re likely to end up with the press dressing up Kabuki as some kind of responsible progress, and Republicans left with their cave and little else.
Sadly, it’s just a testament to how bad this political situation is for Republicans that that may be the only “win” they can wring from it. Head asploding.
Breaking on Hot Air