Call the President’s bluff, or beat him at his own game?


On Wednesday, White House Press Secretary Jay Carney said the President would not extend current marginal tax rates for those Americans who make $250,000 or more annually, even on a temporary basis. With major debt ceiling, sequestration and tax policy debates on the horizon, should conservatives call the President’s bluff on the matter? Or should they try to undermine the President’s self-proclaimed “balanced approach” preference to deficit reduction by combining major spending cuts with tax increases?

There are strong arguments to both sides. To show how unserious the President is on actual deficit reduction outside of his rhetoric, Republicans could use the media to hold the President to his oft-broken promise of a “balanced approach” by saying if he wants three-quarters of a trillion dollars in tax increases we want nine or ten times that amount in spending reductions. I outlined one potential approach to this strategy soon after Carney’s comments.

The weakness to this strategy is obvious: while it would highlight the President’s unserious policy platform for the American people (after all, interest payment savings plus the full tax increases would only equate to about 1.88% of the next decade’s spending), and highlight the more responsible nature of conservatives when it comes to both principles and balancing the budget, it is philosophically and practically antithetical to conservatives to take more money from honest, hard-working citizens to pay for Congress’ irresponsible fiscal habits. Furthermore, why trust Democrats when history shows deals that include spending cuts and tax increases tend to ignore the former and enforce the latter?

The other approach is to call the President’s bluff. To take from this piece — written months prior to last year’s debt ceiling debacle — conservatives could either call for major spending reductions and tax reform in exchange for raising the debt ceiling or simply state they want a balanced budget so the hike never has to take place.

It is my view that conservatives should call the President’s bluff and tell Democrats we want two things if they really want a debt ceiling hike and avoidance of sequestration: First, spending reductions of at least $600 billion annually for ten years — including medium reductions in the Department of Defense and aggressive entitlement reforms — and at least $100 billion annually in tax loophole closures and equivalently lower income tax rates. Second, we want a balanced budget by the time the 2014 fiscal year starts. If we don’t have a public promise by Obama and Reid (in addition to signed legislation) for all of these goals by the time the day of the debt ceiling arrives, we default on our debt. Plain and simple.

The weakness of this approach would be the media’s predictable reaction — which will almost certainly include accusations of “hostage-taking” and intransigence on the part of conservatives. We would need an effective media strategy to deal with this, with a focus on three areas:

    1) Explain the coming fiscal cliff that will hit the country if we don’t balance the budget very soon, and how that fiscal cliff is especially likely to devastate young people, AKA the Debt-Paying Generation. If the President doesn’t agree to our spending reductions and tax reforms, we’ll let the cliff arrive sooner (and thus force spending reductions, tax reform, etc.) rather than later, since later means we’d have added trillions more to the national debt and thus reforms would be more drastic.

 

    2) Explain how this approach is a compromise. Many conservatives don’t want to raise the debt ceiling at all, and so strong spending and tax reforms in exchange for raising the ceiling are a compromise.

 

    3) Make certain the American people understand what the implications of a debt ceiling are. During the debate over this last summer, many liberals blamed former President Bush for the “need” to raise the debt ceiling, saying his spending and tax policies led to the deficits responsible for the debt ceiling hike. However, this is the inversion of what a debt ceiling actually is — instead of being a floor related to future spending, a debt ceiling is merely the nation’s credit card limit. As such, we don’t need to raise the debt ceiling because of past spending…but instead because of future spending, much like a credit card limit allows a holder complete freedom to that point. Once the limit is hit, the spree is over. Raising the debt ceiling again and again without changing spending patterns shows Congress is not serious about instituting any kind of spending discipline, and this will prove costly to the nation in the long run.

 

Of course, conservatives could always hold the line completely and not raise the debt ceiling. However, I think that would eliminate what could very well be the last chance for aggressive phased — as opposed to completely abrupt — spending and tax reforms before we hit a financial crisis. This crisis, which could very well include high inflation, higher unemployment and severely reduced retirement programs, is likely to arrive in the next two to four years. It would also give the media and Democrats too easy an opportunity to demagogue us and sway the American people against the changes necessary for the future of the nation.

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