12:00 AM, Aug 20, 2011 • By IRWIN M. STELZER
One exception, perhaps: Insiders tell me that Ohio Republican senator Rob Portman, formerly President George W. Bush’s budget director and now a member of the deficit reduction committee, would sensibly look favorably on elimination of various tax preferences. His Republican colleagues see such a move as a tax increase, but if Portman sticks to his guns he might be the swing vote that allows the committee to concoct a deficit reduction package that includes both the revenue enhancements that might flow from tax reform and meaningful spending cuts.
Absent some agreement, it is likely that the Fitch and Moody’s, the two rating agencies that have so far refused to go along with Standard & Poor’s downgrade of U.S. debt, will reverse course. Buffett, by the way, was additionally helpful to Obama by criticizing S&P’s decision to downgrade U.S. debt, a position possibly affected by the fact that his Berkshire Hathaway has been an important shareholder in Moody’s, a rival rating agency.
Hovering above all of this is a fundamental question: What is needed now that the U.S. and world economies are teetering on the brink of another recession? Economists on the left are warning that spending cuts lower growth and tax revenues, increasing deficits and creating a downward debt spiral. Their opponents argue that unless spending and deficits are cut, interest rates will soar, putting a further damper on growth.
In any event, the die is cast for now. The Fed can’t loosen monetary policy much more, and the government is too indebted to fund another significant stimulus, although Obama will probably take a whirl at that next month relabeled as “infrastructure development.” The real question is whether he will deploy any of the pro-growth tools at his disposal: scrap the 4,257 regulations now pending and no new regulations for an extended period; remove restrictions on the development of domestic energy resources, rather than tighten regulation of shale gas drilling; send the trade deals to Congress for a vote, even if Nancy Pelosi threatens to rally her troops in opposition; insist that all banks, including foreign banks with which U.S. banks do business, be adequately capitalized and transparently so; at long last, offer a well timed debt reduction plan; and push for tax reform.
The president can surely take time from the vacation he undoubtedly needs after last week’s exhausting campaign tour in what Politco dubs Ground Force One to extend this list. It is in the interest of the 25 million Americans who need work that he do so.