Mr. Obama’s re-election to a second term is heavily dependent on his ability to deal effectively with the fiscal mess. He could try to push a big tax hike, like a value-added tax, through a lame duck Congress after the November election. But that’s very much a long shot. Besides, higher taxes—on top of those from expiration of the Bush tax cuts—could infuriate voters all the more.
For Mr. Obama, serious spending cuts are the only sensible means of dealing with a potential debt crisis or at least an unsustainable fiscal situation. However, he may not be able to rely on reductions in military spending, as liberal Democrats usually prefer. Mr. Obama has already included deep defense cuts in his budget, and Republicans are unlikely to go along with even deeper cuts.
Mrs. Pelosi won’t be any help. She’s committed to enacting the Democratic Party’s entire liberal agenda, and next to the president she is the most powerful person in Washington. When the president flirted with scaling back his health-care bill last January, Ms. Pelosi stiffened his spine, and the bill passed. As long as she is House speaker, bucking her would be painful, especially if Mr. Obama proposes to eliminate a chunk of the spending she was instrumental in passing in 2009 and 2010.
But if Republicans win the House, everything changes.
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