There is a political reality inside the Beltway (e.g., divided government, a president “playing a waiting game on fiscal issues ever since he became president”), but even more important is the economic landscape. The markets on news of a fiscal cliff deal, no matter how half-hearted and flawed, took off. The Post noted, “U.S. markets surged more than 2 percent Wednesday, soaring hours after Congress approved a plan to avoid the ‘fiscal cliff’ by raising taxes on America’s wealthiest households and holding their gains through the day. By the close, the Dow Jones industrial average was up 2.35 percent, the Standard & Poor’s 500-stock index had gained 2.54 percent, and the Nasdaq had shot up 3.07 percent.”
A potential recession had been nipped in the bud. Is there any doubt that failure would have sent the markets tumbling? Now imagine the positive or negative reaction depending on the success or failure of debt-ceiling negotiations that involve real spending restraint.
Right-wing Republicans and the president may not understand the concept of half-a-loaf or the lesser-of-evils, but investors, employers and consumers surely do. And that economic reality, including the burgeoning U.S. debt, anemic growth and the potential slack in demand for Treasuries, is potentially a more effective curb on President Obama’s borrow-and-spend liberalism than anything the GOP might devise.
Moreover, it has not gone unnoticed that we have cut discretionary domestic spending and defense. We’ve raised taxes even on the non-rich (via the payroll tax and assorted Obamacare taxes). The only think we haven’t done is tackle the main driver of debt, entitlement spending. On this I concur entirely with David Ignatius, who observes, “Obama must lead his own party, as a first step toward truly leading the country. . . . It’s Obama’s job to lead the party toward entitlement reforms and other policies that will be painful but necessary.”
The problem, however, is that the president quite obviously doesn’t want to do it. He did not come to the White House to curb the welfare state, disappoint the left or rework New Deal and Great Society programs. In fact, his only “accomplishment” in his first term was the creation of a new entitlement program. Waiting for Obama to wake up to economic realities and to cease seeing every negotiation as a chance to stick his finger in his opponents’ eye, I fear, is hopeless. This is why the shift in energy and initiative to Congress is so important. This is the only way to get something done: Take the reins away from Obama and craft a bipartisan deal.
Sen. Mitch McConnell (R-Ky.) seems intent on doing just that. He writes: ” If I had my way taxes would not have gone up on anyone, but the unavoidable fact was this: If we had sat back and done nothing, taxes would have gone up dramatically on every single American, and I simply couldn’t allow that to happen. By acting, we’ve shielded more than 99% of taxpayers from a massive tax hike that President Obama was all too willing to impose.” But he’s had quite enough of that:
Predictably, the President is already claiming that his tax hike on the “rich” isn’t enough. I have news for him: the moment that he and virtually every elected Democrat in Washington signed off on the terms of the current arrangement, it was the last word on taxes. That debate is over. Now the conversation turns to cutting spending on the government programs that are the real source of the nation’s fiscal imbalance.. . . . The President may not want to have a fight about government spending over the next few months, but it’s the fight he is going to have, because it’s a debate the country needs. For the sake of our future, the President must show up to this debate early and convince his party to do something that neither he nor they have been willing to do until now. Over the next two months they need to deliver the same kind of bipartisan resolution to the spending problem we have now achieved on revenue — before the 11th hour. . . . It’s a debate Republicans are ready to have. And it’s the debate that starts today, whether the President wants it or not.
McConnell seems optimistic he can reach an agreement; he’s just not sanguine about doing it with the president. That might seem strange, but in 2011 and again in the first hours of 2013 Obama was essentially handed a bill he had little influence in drafting and told by both parties to sign. It is a reversion to a more legislative-centric form of government borne of necessity. Democrats should embrace McConnell’s challenge and begin formulating their own proposals.
Only infantile pols think they will get everything in their starting position. But they’ll get nothing if they leave it up to the White House. And the country will suffer a fiscal debacle that will make its 2011 credit downgrade look like the good ol’ days.