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Tea Party may snuff out a chance to shrink government

By Dana Milbank
Sunday, October 3, 2010; A11

If Tea Party adherents were serious about shrinking the federal government, they would have put down their picket signs, abandoned their defense of Christine O'Donnell's phony résumé and crowded into Room 608 of the Dirksen Senate Office Building last week.

There, 18 Democrats and Republicans sat around a conference table to work on what may be the last hope for gaining control of government spending.

This wasn't about shouting slogans, waving posters that call the Democrats socialists, or giving voice to Glenn Beck conspiracy theories. Rather, they were poring over the arcana of gas royalty computations, user fees, federal leases and performance-linked funding formulas. The good news: The members of President Obama's Commission on Fiscal Responsibility and Reform are nearing agreement on a mixture of tax and spending policies that would put the country back on a path to solvency. The bad news: Nobody thinks their proposals have a chance of becoming law.

The result was a heavy feeling of ennui in the room. There weren't enough members of the public to fill the 30 seats set aside for them. As the meeting was brought to order, 11 seats around the commissioners' table were empty. The proceedings weren't even taken seriously enough to merit live coverage on C-SPAN 1, 2 or 3.

The problem is so big as to seem insurmountable: $13 trillion of debt, now equivalent to 60 percent of gross domestic product. In 10 years, that is projected to increase to 90 percent of GDP, at which time we'll be making $1 trillion a year in interest payments.

Yet the solution, at least in the near term, is fairly obvious. Democrats will have to swallow spending cuts to their beloved "discretionary" programs. Both sides will have to accept cuts in defense spending. And, yes, Republicans will have to tolerate a tax increase.

Erskine Bowles, the Democrat who co-chairs the commission, has already offered a major concession: He says that two-thirds of the shortfall should be covered with spending cuts and the other third by increasing tax revenue. Democrats on the commission appear ready to accept a cap on discretionary spending -- similar to those that worked in the 1990s -- based on current or recent levels that will amount to a major across-the-board cut over time.

Republican commissioners, in turn, seem to be warming to the idea of attacking tax "expenditures" -- more than 170 exclusions, credits and loopholes, including the mortgage and charitable deductions. Reducing these tax expenditures has been endorsed by no less than Martin Feldstein, a Reagan administration economist, who regards them as the equivalent of government spending. By taking a chunk out of these $1.1 trillion in annual tax expenditures, the commissioners could plug the rest of the budget gap and still have room for a reduction in income-tax rates.

Because the recent health-care wars have wearied the lawmakers on the panel, the commission is likely to punt on the looming problem of Medicare. For now, the main question is whether Republicans can stomach a modest increase in tax revenue -- even if it's coupled with a much larger spending cut, and even if there's an overall reduction in income tax rates.

There's reason to believe that Bowles and Alan Simpson, the GOP co-chairman, will be able to corral the support of 14 of the 18 members -- the supermajority needed to send the recommendations to Congress. But that's where optimism dies.

You'd think that the Tea Party, which claims as its one unifying principle an aversion to the bloated size and scope of government, would leap at a deal like this and would press other conservatives to do the same. Yet it appears that the Tea Partyers and their allies would summarily reject anything that might be labeled a tax increase -- even eliminating tax giveaways and loopholes.

"The other side could stand up and say, 'we're for apple pie and motherhood,' and we'd be against it -- and vice versa," a Republican senator told me over lunch this week. He said that if the commission produces any form of a tax increase, "that's going to make it hard, especially with this generation of fire-breathing conservatives coming in, to vote for it."

Paradoxically, the Tea Party may be the obstacle blocking the way toward a shrunken government and a reduced debt.

danamilbank@washpost.com

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