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Morning Jay: GOP To Obama: Read Our Lips!

6:00 AM, Jul 13, 2011 • By JAY COST
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Pity poor John Boehner: He really, truly is fine with hiking taxes by $800 billion, but his political coalition – hijacked by those deranged Tea Partiers – has moved his party so far to the right that he just can’t agree to such a hike! This is the 10-cent version of Dana Milbank’s latest column, and indeed the evolving opinion of the media, who are set to blame the lack of a long-term budget deal on the radicalism of today’s Republican party.

It’s nonsense. The tax hike on the table is a terrible deal for the Republican party, which would be utterly foolish to sign on to it. This conclusion does not require us to assume that the GOP has gone off the deep end, as the media does, but rather to follow a simple, three-step argument. First, a tax hike is contrary to seventy-five years of public promises from the GOP, and cannot be adopted lightly. Second, this tax hike is not part of a package that will solve our long-term deficit problem. Third, there is no point in dealing with Obama now on our long-term deficit problem. So, Republicans need to get the best deal on spending that they can, then take their argument on deficits to the voters next November.

1. It is contrary to seventy-five years of public promises from the GOP.

Quoting the late Robert Novak:

“God put the Republican Party on earth to cut taxes. If they don't do that, they have no useful function.“

An overstatement, perhaps, but not by much. Cutting taxes is as close to a raison d'être that the modern Republican party has, and in case anybody is under any delusions about where the party has been in the last seventy-five years on the issue of taxes, consider this sampling of planks from GOP platforms since 1936:

1936: Stop the folly of uncontrolled spending. Balance the budget—not by increasing taxes but by cutting expenditures, drastically and immediately.

1948: The maintenance of Federal finances in a healthy condition and continuation of the efforts so well started by the Republican Congress to reduce the enormous burden of taxation in order to provide incentives for the creation of new industries and new jobs, and to bring relief from inflation.

1956: [I]nsofar as consistent with a balanced budget, we pledge to work toward these additional objectives: Further reductions in taxes with particular consideration for low and middle income families.

1968: Such funds as become available with the termination of the Vietnam war and upon recovery from its impact on our national defense will be applied in a balanced way to critical domestic needs and to reduce the heavy tax burden.

1980: [T]he Republican Party supports across-the-board reductions in personal income tax rates, phased in over three years, which will reduce tax rates from the range of 14 to 70 percent to a range from 10 to 50 percent.

1992: [W]e will oppose any attempt to increase taxes. Furthermore, Republicans believe that the taxes insisted on by the Democrats in the 1990 budget agreement were recessionary. The Democrat Congress held President Bush and indeed all Americans hostage, refusing to take even modest steps to control spending, unless taxes were increased. The American economy suffered as a result. We believe the tax increases of 1990 should ultimately be repealed.

2004: Our Party endorses the President's proposals to make tax relief permanent, so that families and businesses can plan for the future with confidence.

The suggestion here is not that no Republican has ever agreed to raise taxes. Ronald Reagan and George Bush (41) both did. The point is that opposition to tax hikes is an enduring position of the Republican party, and in fact essential to its modern identity. Thus, any Republican-backed agreement to hike taxes should have some very good reasons to justify it.

And the empirical burden is especially high in 2011. Not just because there is a recession, but also because tax revenues are set to return to their historic average once the recession ends. As I wrote last week, if we keep the Bush tax cuts and patch the Alternative Minimum Tax, then tax revenues should return to their long-run average of around 18 percent of GDP. It’s hard to imagine the Republican party ever agreeing to push taxes beyond its historical average, not without an overall package that will deal with our long-term deficit problem.

2. No such package is on the table.

Consider the following chart, which tracks the Congressional Budget Office's projection of mandatory and discretionary spending over the next 10 years against their historical averages.

Clearly, the problem is mandatory spending, namely entitlements.

If entitlements are driving our deficit problem, then Republicans should agree to an increases in taxes only if they are tied to sufficient reform of the system. The deal on the table just does not offer such reform, so all a tax increase now will do is delay the deficit crisis to a later date. And when we get to that day, you can bet dollars to donuts that the Democrats will demand…more tax increases.

3. There’s no point in trying to solve the long-term deficit problem in July 2011.

There’s no reforming entitlements between now and early August when the debt ceiling is breached. The whole idea is laughable.

And let’s be serious: there is no dealing with Obama on entitlements in the next eighteen months because there is no common ground to be found with him. Sure, he talks a good game about controlling spending, but consider his actions. The country handed the keys of the kingdom to Obama and the Democrats in November 2008. At that point, CBO was already projecting that entitlement spending was going to break the bank, and what did Obama and his party do? Create another new entitlement, one designed not for long-term durability, but short-term political calculations. Since his midterm rebuke, he’s decided to channel hyper-partisan Harry Truman and run against the evil Republicans, who are threatening to kill seniors with the Ryan plan. Clearly, his focus is on his reelection, which is dependent on firing up the Democratic left once again.

And that’s fine. He’s entitled to focus on whatever he wants, but Republicans shouldn’t delude themselves into thinking that he’ll take a major deal that they could also accept. He won’t.

This is the party’s best bet: rein in spending as best it can in a debt ceiling deal as well as the upcoming budget, then take the battle on deficits to the November 2012 election, offering the public this position: Our entitlement system is no longer sustainable with the taxes we raise to support it; either taxes must be raised substantially or the system must be reformed; we Republicans oppose tax hikes and believe that reform of the system can be achieved without reducing benefits.

Obama will offer his alternative, and the people can decide.

If the people vote Republican in 2012, then the GOP can get its plan through. If they vote Democratic, well that’s that. And if they split their vote, then congressional Republicans can worry about finding common ground with Obama in 2013.

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