I can think of no easier path to a Republican resurgence than the debt solution plan put forward by that darling of the progressive left, Robert Reich. In an article for the Huffington Post, Mr. Reich outlined the following:
1) Immediately confiscate two percent of the wealth of the 600,000 wealthiest households in the country.
2) Raise federal tax rates on those earning more than $1 million per year to 1950’s rates (80-90 percent).
3) Raise federal tax rates on those earning $250,000 to $1 million to 39.6 percent.
4) Tax capital gains at the same rates as income.
5) Introduce a 0.5 percent tax on all financial transactions.
6) Cap the mortgage interest deduction at $12,000 for all households.
These moves, Mr. Reich generously estimates, could reduce our deficit spending by roughly $3 trillion over a ten year window. Throw in an unspecified hodge-podge of spending and subsidy reductions, and voìla, Reich claims, that’s a $4 trillion reduction in our deficit spending over 10 years. This, to the former Secretary of Labor, is good enough.
Never mind that such policies would cause a massive capital flight from the U.S. to the rest of the world and never achieve the $4 trillion reduction Reich imagines. Reich has failed in basic mathematics: he plans to leave the Alternative Minimum Tax untouched (and thus, through inaction, introduce a large tax increase on the middle class) or make significant cuts to Medicare, the total deficit spending estimated by the Congressional Budget Office over the next ten years is almost $10 trillion (9.975 to be exact). $4 trillion does not even cover the “fiscal cliff” that the nation presently faces, which is a $7.75 trillion difference between today’s vanishing status quo and the default policies of tomorrow.
Reich’s article isn’t a plan for the future, it’s a skewering of his own side. It’s a satirical demonstration of liberal math in action: even if we raised taxes on the wealthy to confiscatory levels in accordance with the far left’s wildest dreams, we’d still only hope to bridge around $3 trillion of the $10 trillion in red ink set to spill over the next decade. Toss in Reich’s poorly specified spending and subsidy cuts, and our public debt would still be greater than 80 percent of our GDP by 2022.
More than that, the plan put forward by Reich would be immediately unpopular. Even as they voted to keep Barack Obama in office, 63 percent of the nation’s electorate said taxes should not be raised in order to shrink the deficit, while only 33 percent said they should. Most experts would dislike it as well — the general consensus in the aftermath of the president’s debt commission has been that deficit reduction should be a mix of two parts spending cuts, one part revenue increases.
Perhaps President Obama could spin an unpopular plan to his favor, much as he did during the debt ceiling debate of 2011. Back then, John Boehner sent the president a plan that would reduce $4 trillion in debt, one third through revenue increases and two thirds through spending cuts. The president refused, sabotaged Boehner’s following attempt to negotiate with the Senate, and then managed to paint Boehner as the stubborn one.
Fool me once, shame on you, fool me twice, shame on me. Republicans are unlikely to walk into the debt negotiations as naively as they did last time. Instead of speaking to the other side first and national press second, they’re going to take a page from Obama’s book and flip the order. They’ll make sure that they look as good as possible and the president looks as bad as possible before they take any seat at a negotiation table.
Against Republicans that no longer trust the president to negotiate in good faith, at most the president should only be able to get away with a 50-50 split on taxes and spending, and probably not even that, since, as Mr. Reich has so aptly demonstrated, the most we could hope to confiscate from the well-to-do is roughly 30 percent of our impending shortfall. If the president wants more than $3 trillion in tax increases, he’s going to have to lay some of it on the middle class and let Republicans take gleeful swings at him. Unlikely.
And yet, the president might not have much of a choice in how hard of a line he draws. His base is convinced that he should demand nothing less than a left-wing plan a la Reich’s, either because they have not looked at the math of such plans, or because they think the general public is as enamored with these plans as they are.
The hand that Republican leadership is being dealt is extremely easy to play. If Democrats suggest any plan that does not reduce more than about $7.5 trillion in deficits over the next ten years, then they can accurately be criticized as adding significantly to the deficit and be stonewalled on that basis. If their plan reduces deficits by this amount or greater, but accomplishes more than about $2.5 trillion of it in tax increases, it can be lambasted as blatant class warfare per Reich, or a tax on the middle class, and in either case the GOP should immediately run ads in every district and state where a Democrat holds office over a conservative electorate. If those vulnerable Democrats refuse to vote for the plan because they want to hold their seats, then the line of attack is simple, “Look at the President’s plan — it’s so left-wing not even his own party can get behind it.” If the vulnerable Democrats vote the party line, Republicans can still block the plan in the House, and then scoop up the Democrats’ seats in the next election. And finally, if the president puts forwards a more moderate proposal, where taxes are raised and spending cut in a 1:2 or lower ratio, Republicans may yet have an opportunity to torpedo the proposition. If enough liberals vote against a moderate proposal due to their raging base, Republicans can vote tactically, endorsing the bill by and large, but letting just enough of their more-rightward members vote against it so that it fails. In that event, the worst will have come to pass for Democrats — the far left will be saddled with the blame for taking the nation off the fiscal cliff, and Democrats as a whole will appear as a party of dysfunction.
It is still possible, of course, that Democrats will put forward a moderate plan, whip their grumbling liberal members into voting for it, and give Republicans little choice but to agree to a plan that, incidentally, is more or less what Republicans were already willing to give in the previous debt negotiation. Such a move would, in the long term, be best for the party. But the more pundits like Reich stoke the expectations of the country’s far left, the harder it will be for Obama to follow such a sane course of action, and the more likely that 2013 will go down in history as the year Democrats strangled a nascent economic recovery by driving the nation off a fiscal cliff into a massive, across-the-board tax hike.