December 15, 2012 • Editorial

GOP moving, Obama should, too

It’s puzzling how much the definitions of “compromise” and “balance” have changed since the November election.

The message out of the White House, dutifully repeated by the press corps, is that the GOP’s stubborn refusal to compromise on President Barack Obama’s balanced approach to attacking the budget deficit is what’s holding up a deal to avoid the fiscal cliff.

To the president, compromise apparently means capitulation, and balance means nothing but tax hikes will do. He’ll be in Detroit Monday to continue selling that theme.

Although they’re getting no credit for it, the Republican congressional leadership actually has moved a far piece from the “no new taxes” pledge that had been its line in the sand prior to the election.

Those leaders have agreed to raise more than $800 billion in new revenue by closing tax loopholes and eliminating deductions for higher-income [auth] earners. That’s the amount Obama said he wanted to extract from the wealthy during the campaign.

The GOP has also expressed a willingness to put defense spending cuts on the table as part of the overall deficit-reduction package.

Both positions have brought the leaders harsh criticism from within their own ranks. But they recognize that in winning re-election, Obama gained bargaining clout.
The president, though, is taking the stance that victory means he doesn’t have to bargain at all.

His counter to the Republican concessions is to move sharply away from the middle. Obama now wants twice the amount of new taxes from the wealthy — $1.6 trillion — and instead of spending cuts, he’s asking for $50 billion for another stimulus package.

His only concession is a vague commitment to discuss $400 million in entitlement reforms, but only after the tax hikes are in place.

The president also would double taxes on capital gains and dividends, a disastrous step that would chill job-creating investments. And he wants to be the sole decider of when and how much the debt ceiling rises.

Obama must know Republicans can’t accept these terms. Yes, Obama won his election. But leaders of the House also were re-elected in November, and their voters did not send them back to Washington to affirm policies that would replace the fiscal cliff with a downhill slope that eventually leads to the same ruined economic place.

Republicans, against their better instincts, have agreed to transfer a considerable amount of money from private pockets into government coffers. That’s a significant move, and one that comes with a political price.

The president should respond by showing more flexibility with tax rates and instead accept the more effective revenue raising approach offered by the GOP.

Economic history teaches that tax revenue stays at roughly 18 percent of gross domestic product regardless of where tax rates are set, because GDP slows when rates rise, and grows when rates decline.

Closing loopholes and ending deductions, however, will limit how much income the Warren Buffets of the world can shield from the tax man.
The president seems convinced that if the fiscal cliff is not averted, Republicans will get the blame, and he’ll then be able to force the GOP to accept his terms. That’s a risky bet, and one that could lead the nation back into recession.

A better goal for the president is to work in good faith toward a pragmatic solution that doesn’t harm economic growth.

Republicans are moving off their ideological hard line; the president should do the same.

Guest Editorial

The Detroit News

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