Let’s understand President Obama’s strategy in the “fiscal cliff” negotiations. It has nothing to do with economics or real fiscal reform. This is entirely about politics. It’s Phase Two of the 2012 campaign. The election returned him to office. The fiscal-cliff negotiations are designed to break the Republican opposition and grant him political supremacy, something he thinks he earned with his landslide 2.8-point victory margin on Election Day.
This is why he sent Treasury Secretary Tim Geithner to the Republicans to convey not a negotiating offer but a demand for unconditional surrender. House Speaker John Boehner had made a peace offering of $800 billion in new revenues. Geithner pocketed Boehner’s $800 billion, doubled it to $1.6 trillion, offered risible cuts that in 2013 would actually be exceeded by new stimulus spending, and then demanded that Congress turn over to the president all power over the debt ceiling.
Boehner was stunned. Mitch McConnell laughed out loud. In nobler days, they’d have offered Geithner a pistol and an early-morning appointment at Weehawken. Alas, Boehner gave again, coming back a week later with spending-cut suggestions — as demanded by Geithner — only to have them dismissed with a wave of the hand.
What’s going on here? Having taken Boehner’s sword, and then his shirt, Obama sent Geithner to demand Boehner’s trousers. Perhaps this is what Obama means by a balanced approach.
He pretends that Boehner’s offer to raise revenues by eliminating deductions rather than by raising rates is fiscally impossible. But on July 22, 2011, Obama said that “$1.2 trillion in additional revenues . . . could be accomplished without hiking tax rates, but could simply be accomplished by eliminating loopholes, eliminating some deductions, and engaging in a tax reform process.” Which is exactly what the Republicans are offering today.
As for the alleged curative effect on debt of Obama’s tax-rate demand — the full rate hike on the “rich” would have reduced the 2012 deficit from $1.10 trillion to $1.02 trillion.
That’s a joke, a rounding error.
Such nonsense abounds because Obama’s objective in these negotiations is not economic but political: not to solve the debt crisis but to fracture the Republican majority in the House. Get Boehner to cave, pass the tax hike with Democratic votes provided by Minority Leader Nancy Pelosi, and let the Republican civil war begin.
It doesn’t even matter whether Boehner gets deposed as speaker. Either way, the Republican House would be neutered, giving Obama a free hand to dominate Washington and fashion the entitlement state of his liking.
This is partisan zero-sum politics. Nothing more. Obama has never shown interest in genuine debt reduction. He does nothing for two years, then spends the next two ignoring his own debt-reduction commission. In less than four years, he has increased U.S. public debt by a staggering 83 percent. As a percentage of GDP, the real marker of national solvency, it has spiked from 45 percent to 70 percent.
Obama has never once publicly suggested a structural cut in entitlements. On the contrary, he created an entirely new entitlement — Obamacare — that, according to the CBO, will increase spending by $1.7 trillion.
What’s he thinking? Doesn’t Obama see looming ahead the real economic cliff — a European-style collapse under the burden of unsustainable debt? Perhaps, but he wants to complete his avowedly transformational social-democratic agenda first, and let his successors — likely Republican — act as tax collectors on the middle class (where the real money is) and takers of subsidies from the mouths of babes.
Or possibly Obama will get fiscal religion and undertake tax and entitlement reform in his second term — but only after having destroyed the Republican opposition so that he can carry out the reformation on his own ideological terms.
What should Republicans do? Stop giving stuff away. If Obama remains intransigent, let him be the one to take us over the cliff. And then let the new House, which is sworn in weeks before the president, immediately introduce and pass a full across-the-board restoration of the Bush tax cuts.
Obama will counter with the usual all-but-the-rich tax cut — as the markets gyrate and the economy begins to wobble under his feet.
Result? We’re back to square one, but with a more level playing field. The risk to Obama will be rising and the debt ceiling will be looming. Most important of all, however, Republicans will still be in possession of their unity, their self-respect — and their trousers.
— Charles Krauthammer is a nationally syndicated columnist. © 2012 the Washington Post Writers Group.