Time only for small ball

In retrospect, the notion of a grand bargain that included a reset of the debt ceiling, profound structural changes to federal spending, tax reform, and a rethinking of American military doctrine within a two-week period was fanciful at best, and more likely delusional, as I argue in my column for The Week. The Big Deal already ran aground on the shoals of tax hikes because the time frame didn’t allow for a better approach that would have allowed all sides to claim some victory in a comprehensive reform package. And that doesn’t even begin to include entitlement reform or Pentagon spending:

 Not only would the grand bargain need to resolve all of these issues, Congress and the president would have to solve them in a matter of days. With the debt ceiling deadline generally accepted as August 2, all sides want a resolution early enough to pass the bill and have it signed before that date to keep the markets from getting spooked. Even if the negotiators managed to agree on the particulars of perhaps the most complex fiscal reform attempted in decades within that period of time, Democrats and Republicans in Congress would want a full debate on structural changes that would be so extensive as to dwarf ObamaCare.

Obama would love to get the Republicans to provide cover for tax hikes, both to get them passed and to protect himself in the next election cycle. But in order to give them a reason to buy into changes that close targeted (so-called) loopholes, the White House has to give Boehner a way to sell it to his caucus. Republicans want sweeping reforms of the tax code, both in personal and corporate taxes that flatten and simplify the tax code in order to provide easier compliance and better predictability for investors. That kind of reform could pay substantial benefits to both parties; Republicans can take credit for lowered top rates, while Democrats could take credit for boosting revenues and promoting “fairness” through closed loopholes.


In fact, that is the kind of approach that Obama’s own debt commission recommended. However, that isn’t what Obama offered Republicans. He demanded tax hikes first, with promises for reform later, a position that puts the GOP entirely at odds with the pledges it made in the 2010 election, which voters across the nation endorsed. Republicans remember all too well another deal on spending cuts that required them to raise taxes first — the 1990 budget deal with the first President George Bush, whose “read my lips” pledge to stop new taxes got turned into a series of attack ads by Democrats in 1992. Republican leadership isn’t about to fall into that trap again.

In fact, isn’t it curious that even in this extremity — we’ll stipulate that the White House’s hysterical pronouncements on the upcoming default are certainly their reality — Obama hasn’t yet used the recommendations of his own debt commission? Republicans might not have liked the Simpson-Bowles plan much, mainly because of the tax increases, but it’s a much better basis for negotiations than anything Obama has offered since. Had Obama started negotiating on that basis in February, we might not be staring at the deadline of August 2nd at the moment.

Obama said he’s ready to listen to any serious proposals. How about the proposal his own blue-ribbon commission sent?
 
But even if he did start using Simpson-Bowles, it would take longer than a few days to write, debate, and pass, given the complexity of the bundled issues. These are the same issues over which Congress has fought for years. Who seriously expected all of these issues to get resolved simultaneously in a couple of dinner dates and a couple of days of floor debate? Even if Obama negotiated in good faith, we’d need the rest of the summer to hammer out the language, review it, and pass it. The answer to that is simple: pass a 90-day deal to extend the debt ceiling for breathing room. Obama flatly refuses to do so, which is why it’s fairly obvious that he’s either negotiating in bad faith, delusional, or both.

In that context, Mitch McConnell’s plan makes some sense, as flawed as it is:

Senate Minority Leader Mitch McConnell recognized that Obama might still try to walk away from even a moderate-scale deal, at least for a few days, in order to pressure Republicans into the tax trap. That’s why he floated what amounts to the nuclear option for both sides late Tuesday. Republicans would give up trying to control the debt ceiling for most of the next two years, in exchange for 1:1 cuts from Obama — but Obama would end up entirely owning the debt ceiling, the deficit, and spending for the 2012 election. Conservatives might not like this option for a number of good reasons, but if Obama refuses to drop his ultimatum for a commitment to $1 trillion in tax hikes now in exchange for gauzy promises to reform the tax code later, they may have no better way to set up the 2012 elections than to make Obama take responsibility for his own spending spree.

It seems very clear that these issues won’t get resolved by the present administration. The responsible action would be to secure American credit for the next two years and take it to the voters in 2012, with the burden on those who failed so badly to negotiate in good faith that they wouldn’t even put their own best proposal on the table.