Boehner offers a fiscal olive branch to the White House.
So much for the post-election honeymoon. The financial markets took a header Wednesday on (take your pick) the return of European troubles, the risk of a Beltway breakdown over the looming tax cliff, or the greater prospect of a major tax increase arriving in 2013. The most important question now is how a re-elected President Obama is going to deal with this economic policy mess.
Specifically, is he going to consider his re-election to be a mandate to repeat his first-term record of rejecting all GOP ideas and insisting on his priorities? Or is he going to show some magnanimity in victory and give Republican Speaker John Boehner something he can sell to his own re-elected majority?
Mr. Obama can certainly pound on Republicans until their approval rating descends into the single digits, but it won’t help the country or his own standing if the economy goes into recession along the way.
Mr. Boehner laid out his own opening offer on Wednesday afternoon, and it included both a warning and an olive branch. The latter is an offer to put tax revenue increases on the table. This is a major concession given the antitax hostility among voters who renewed the Republican majority with minimal losses despite the strong Democratic trend on Election Day.
The warning is that he doesn’t consider the election to be a mandate to raise tax rates. So any additional revenues need to be considered as part of a larger budget and tax reform that doesn’t raise rates. “In order to garner Republican support for new revenues, the President must be willing to reduce spending and shore up the entitlement programs that are the primary drivers of our debt,” Mr. Boehner said.
On January 1, Washington faces both a huge tax increase and an automatic spending cut known as the “sequester.” Our sources say that to get past these immediate deadlines, Mr. Boehner will ask Mr. Obama to maintain the Bush tax rates for at least another year, ease the sequester for defense in particular, and in return GOP House leaders will be open to giving the President new revenue. Then the two sides can negotiate the bigger tax and entitlement questions next year.
We hope the Speaker has learned not to offer current concessions in return for the promise of future reforms. But Mr. Boehner’s offer has the virtue of not whacking a still-fragile economy with a near-term tax increase.
More at the link. But your Editor says no, no, no, no, no! Republicans have been snookered before with accepting tax increases in the present in exchange for spending cuts in the future, and the second part never materialized. President Reagan agreed to the TEFRA tax increase of 1982, Social Security tax increases in 1983, and several other adjustments. However, overall, taxes declined from 19.6% of GDP when he took office to 18.2% when he left office. The spending cuts never happened. The elder President Bush agreed to a tax increase deal with the Democrats, in exchange for spending cuts; taxes were increased, but the spending cuts never happened, until Republicans took over the Congress following the 1994 elections.
It’s simple: the House should not agree to any tax increases, period, without spending cuts as part of the legislation, so that the Democrats cannot renege on their promises as they have before. And, quite frankly, I’d be very willing to see us go over that fiscal cliff; if taxes are going to be increased on some people, then they should be increased on everybody. Since the sequestration includes spending cuts, it would be a good thing fiscally. If the top producers have to pay higher taxes, then the minimum wage people should have to pay higher taxes as well. One thing we must not allow is a continuation of the class warfare tactics of the Democrats; either we are all in this together, or none of us are.