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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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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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