I really didn’t see much new in President Obama’s off-the-record, on-the-record interview with the Des Moines Register, certainly nothing that demands to be hidden from public view. It mostly contained a restating of arguments that have played out over endless stump speeches, debates and TV ads. People are trying to treat Obama’s two major 2013 campaign promises – a debt deal and immigration reform – as some kind of revelation, but he promised an immigration bill to Univision and he said the debt deal would come together “one way or another” early in 2013 when he visited with Jon Stewart.
I suppose there’s a bit more detail in the Register interview with respect to the grand bargain – Obama uses the phrase himself – but it’s nothing the President isn’t already running on, this idea of a “balanced” deficit reduction solution. I suppose we do now know the meaning of the word “balanced” to the President – a 2.5:1 ratio between spending cuts and tax increases:
THE PRESIDENT: Well, Rick, let me answer you short term and long term. In the short term, the good news is that there’s going to be a forcing mechanism to deal with what is the central ideological argument in Washington right now, and that is: How much government do we have and how do we pay for it?
So when you combine the Bush tax cuts expiring, the sequester in place, the commitment of both myself and my opponent — at least Governor Romney claims that he wants to reduce the deficit — but we’re going to be in a position where I believe in the first six months we are going to solve that big piece of business.
It will probably be messy. It won’t be pleasant. But I am absolutely confident that we can get what is the equivalent of the grand bargain that essentially I’ve been offering to the Republicans for a very long time, which is $2.50 worth of cuts for every dollar in spending, and work to reduce the costs of our health care programs.
And we can easily meet — “easily” is the wrong word — we can credibly meet the target that the Bowles-Simpson Commission established of $4 trillion in deficit reduction, and even more in the out-years, and we can stabilize our deficit-to-GDP ratio in a way that is really going to be a good foundation for long-term growth. Now, once we get that done, that takes a huge piece of business off the table.
The President call this the same bargain he’s offered in the past. I believe the Administration is baking into the cake at least the first $900 billion in deficit reduction, all on the spending side, from the spending cap of the deficit deal. Nobody’s talking about breaching that. In addition, the President has committed to using the roughly $1 trillion accounting mechanism from ending the war in Afghanistan and applying that to this equation. So if you look at it that way, the spending cap and war savings get you to $1.9 trillion, with the other $1 trillion you would need to satisfy the 2.5:1 ratio available in the sequester.
So really, what the President’s saying here is that he would keep the level of cuts in the sequester through other means, and then generate around $1 trillion in tax increases, which is roughly what the increase of the high end Bush tax cuts would do. That sounds simple enough. It does not require this “bipartisan tax reform” that would lower the rates. But Obama said to the Register that he would look at a corporate tax reform agenda – rate-lowering, base-broadening – in a “non-ideological way” once the grand bargain is off the plate.
If it’s truly the same offer made to Republicans, then it would entail all of the things, like the increase to the Medicare eligibility age and the changing of the cost of living adjustment in Social Security to cut benefits, that were around in the last conversation. This is the “bait” to get Republicans on board, as Chuck Schumer (last seen blowing up the tax reform part of the deal) predicted.
The President has already vowed to veto any version of this without the fig leaf of the increase in the top two tax rates. If all the Bush-era tax cuts expire, he can present a deficit-INCREASING deal that accomplishes all of these goals. The key comes in what replaces that sequester, which Obama said in the debate the other night “will not happen,” at least on the defense side.