The markets tanked today for good reason. The president who could not manage to address fiscal issues in the first term was reelected on a campaign with no agenda. The New York Times reported: “Stocks were sharply lower in afternoon trading in New York, with both the Standard & Poor’s 500-stock index and the Dow Jones industrial average down 2.2 percent, as European shares sank and Asian stocks were mixed. While many executives on Wall Street and in other industries favored Mitt Romney, many had already factored in the likelihood of Mr. Obama winning a second term. Still, continued divided government in Washington and little prospect for compromise unnerved traders.”
It is fitting then that House Speaker John Boehner stepped up to lead. In remarks today he told Americans: “We know what the best thing would be. It would be an agreement that sends the signal to our economy, and to the world, that after years of punting on the major fiscal challenges we face, 2013 is going to be different. It would be an agreement that begins to pave the way for the long-term growth that is essential if we want to lift the cloud of debt hanging over our country. We won’t solve the problem of our fiscal imbalance overnight, in the midst of a lame-duck session of Congress. And we certainly won’t solve it by simply raising tax rates or taking a plunge off the fiscal cliff.”
In other words, the voters sent the same players back to Washington, and Boehner (R-Ohio) suggests that they get it right this time, finally making the grand bargain that the president fumbled away in the first term. Boehner proposes: “For purposes of forging a bipartisan agreement that begins to solve the problem, we’re willing to accept new revenue, under the right conditions. What matters is where the increased revenue comes from and what type of reform comes with it. Does the increased revenue come from government taking a larger share of what the American people earn through higher tax rates? Or does it come as the byproduct of a growing economy, energized by a simpler, cleaner, fairer tax code, with fewer loopholes and lower rates for all? And at the same time we’re reforming the tax code, are we supporting growth by taking concrete steps to put our country’s entitlement programs on a sounder financial footing?”
He cleverly reminds the president that this was the deal they had reached, or thought they reached, once before. (“During those discussions, the president endorsed the idea of tax reform and lower rates, including a top rate of lower than 35 percent. Not a top rate of 39.6 percent. Lower than 35 percent. Sen. Pat Toomey and Chairman Jeb Hensarling, with the support of other Republicans, offered substantive proposals in the so-called supercommittee last year that provided revenue via tax reform.”)
So he challenges the president to step up to the plate as well. Given the market’s reaction and the prospect of divided government, this is both politically responsible and economically smart. Democrats will want the GOP to cave on tax rates, but we’ve been down this road before. The president knows where the deal is (as Bob Woodward documented in his book), and Boehner is giving them both a chance to grab it once more. And to boot, the economy is weaker now than it was in 2011, as we face the prospect of less than 1.5 percent growth in the last quarter. Do newly minted Democrats who ran as moderates really want to raise taxes now? Could the economy withstand it?
The irony is that many Democrats never acknowledged that revenue was on the table to begin with. But by publicly explaining where the deal left off and by asking the president to seize the moment, Boehner has moved the discussion ahead by leaps and bounds. If the president has a better idea and a majority to get it through, let him pipe up. The markets and the voters are watching.
UPDATE (4:12 p.m.): A source close to Rep. Paul Ryan (R-Wis.) tells Right Turn that he and and the Speaker spoke and are unified in their approach on this. A Senate insider points to a line in Sen. Mitch McConnell’s remarks earlier (“The American people did two things: they gave President Obama a second chance to fix the problems that even he admits he failed to solve during his first four years in office, and they preserved Republican control of the House of Representatives”) as reflecting McConnell’s hand in the approach as well.