PRESIDENT OBAMA made an important and welcome contribution to the debate over deficit reduction Wednesday. We would have preferred the president to have weighed in earlier; we could lament the absence of truly courageous moves, along the lines of those by the Democratic senators who endorsed raising the Social Security retirement age. In contrast to the recommendations of the fiscal commission he appointed, Mr. Obama would cut less in spending over the next decade and raise less in taxes.
Nonetheless, sorely needed presidential engagement on the nation’s fiscal crisis has arrived at last. The question of how to put the country on a sustainable fiscal course is now squarely front and center in Washington, where it should be. The looming need for Congress to raise the federal government’s debt ceiling presents a moment of both danger and potential. If Mr. Obama and Republican congressional leaders can use the debt issue to forge agreement on a broad framework for deficit reduction, with details to be sketched in later, that would be a major achievement.
Mr. Obama’s approach offers the balance between spending cuts and tax increases — the mix is 3 to 1 — that is so sorely missing from the cuts-only plan released last week by House Budget Committee Chairman Paul Ryan (R-Wis.). Just how far apart the two sides are was underscored even before the president spoke, when Republican leaders emerged from a White House meeting to reject the notion of tax increases. “If we’re going to resolve our differences and do something meaningful, raising taxes will not be part of that,” declared House Speaker John A. Boehner (R-Ohio). Senate Minority Leader Mitch McConnell (R-Ky.) was only slightly less dogmatic: “We will not be discussing raising taxes in this particular connection,” he said, referring to debt ceiling legislation.
This intransigence on the subject of new revenue is both dispiriting and predictable. At the same time, while Mr. Obama is correct to call for new taxes, he is wrong to hew to his position that all the necessary revenue can be raised by increasing taxes on the small sliver of households earning more than $250,000 a year.
One intriguing part of the president’s plan is the notion of instituting a trigger mechanism that would require automatic cuts if the debt is not declining as a share of the economy by the second half of the decade. A trigger does not replace the need to make difficult policy choices, but it can provide an incentive to reach them. As envisioned by Mr. Obama, this “debt fail-safe” would apply both to spending and, importantly, tax expenditures — that is, revenue losses from tax breaks — although the details are still far from certain. But the president threatens to undermine the effectiveness of his own trigger by exempting Medicare benefits and Social Security from any cuts. The history of such enterprises suggests that the more holes are carved out, the less effective the trigger becomes.