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Tackling the Deficit, Kicking and Screaming

Wednesday, December 01, 2010

US President Barack Obama speaks alongside Erskine Bowles and Sen.Alan Simpson, co-chairs of the National Commission on Fiscal Responsibility and Reform US President Barack Obama speaks alongside Erskine Bowles (L) and Sen.Alan Simpson, co-chairs of the National Commission on Fiscal Responsibility and Reform, earlier this year (Getty Images)

Welcome to Politics Bites, where every afternoon at It's A Free Country we bring you the unmissable quotes from political conversations on WNYC. On today's Brian Lehrer Show, David Leonhardt, writer of the "Economic Scene" column for the New York Times, talks about today's deficit commission meeting.

The leaders of the Bowles-Simpson deficit reduction commission today released their second draft of a plan to bring down the staggering national debt. The document is a sweeping series of proposals that amount to lots of spending cuts and lots of tax increases. Nothing about it is popular.

True to their party lines, Republicans would rather see more spending cuts while Democrats would favor more of a net tax increase. In other words, both sides would rather see more of something the other side really hates. But with regard to the plan at hand, neither party is throwing their weight behind it. To the contrary, it's entirely possible that the rest of the deficit reduction commission will reject their leaders' proposals. David Leonhardt said that has less to do with policy differences than with pure politics.

I don't think that's mostly a reflection of whether the report is a good approach or not. I think it's mostly a reflection of this funny political moment in which everyone says they want the deficit reduced but they are against tax increases and real spending cuts. If you have an electorate that’s against those things, it's very hard for politicians to sign onto any kind of plan.

It's a recipe for gridlock, and nobody's moving. Unpopular decisions are the hardest ones for a politician to make, especially since we seem to always be in an election cycle. On the other hand, this could be President Obama's chance to regain some momentum by supporting the plan and taking the point position on a difficult issue. According to Leonhardt, that's a big risk with little chance for reward, and one the President is unlikely to take.

If Obama came out for this plan, he would be guaranteed that the Republicans would run against him in 2012 saying he broke his pledge not to raise taxes on people making under $250,000. That would be a centerpiece, maybe even the centerpiece of their campaign against him, because this plan does raise taxes on people making less than $250,000. He would dispirit the liberal base that really doesn't like some of these Social Security things. So he'd get some of that "I'm willing to tell an unpleasant truth," but I don't think it would necessarily make the plan any easier to adopt, and I think it would have really tangible political difficulties.

One of the great missed opportunities for Democrats this year, as Leonhardt put it, was failing to let the Bush-era tax cuts expire for individuals making more than $250,000. Ideally, they would have extended the cuts for people making less than that amount, ended them for the wealthy, and thereby brought down the deficit while still in control of Congress. Unfortunately for them, none of that happened.

The Democrats managed this really badly. They waited until after the election. Let's say Obama says, "I'm not going to compromise. I want all Bush tax cuts on income above $250,000 to expire." So what happens then is the Republicans filibuster the tax cut extension in the Senate. If nothing happens, the cuts expire for everyone on December 31st. So basically you get nothing, taxes go up for everyone, and the whole country would be talking about the fact that the tax cuts expired.

Laonhardt said that the new Republican House coming to Washington in January would make it their first priority to pass a bill extending all of the Bush tax cuts, not just for people making under $250,000. That would put President Obama and Senate Democrats in the uncomfortable position of having to veto or oppose legislation that would lower taxes.

Some callers brought up the point that lowering taxes means lowering revenue, which is counterproductive to reducing the deficit. A woman named Shelly said, "We have to re-understand that taxes are the price we pay for civilized society." Leonhardt conceded that cutting taxes in the thick of deficit reduction may not be the best plan, but he said that the Bush cuts aren't the real problem anyway.

I'm very sympathetic to the notion that extending the Bush tax cuts is really irresponsible fiscal policy, but it's not like if we didn't extend them we'd solve all our problems. The fundamental problem isn't really anything other than the fact that we've promised ourselves much more in benefits than we've paid in taxes. Your typical baby boomer has paid far less in taxes than he or she is now on pace to get in Social Security and Medicare benefits. In a nutshell, that's the long-term problem.

» Listen to the entire conversation on The Brian Lehrer Show.

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