What Debt Talks Teach Us About Obama and Republicans: Ezra Klein

July 14 (Bloomberg)-- We have learned a lot about American politics in recent days. We learned, for example, that Republicans are more committed to keeping taxes low than to reducing the deficit.

We learned that the party is led more by House Majority Leader Eric Cantor than by his nominal boss, Speaker John Boehner. We learned that its current composition renders it seemingly incapable of making concessions to close a bipartisan deal, even if the concessions are minor and the benefits to the Republican policy agenda -- $3 trillion in spending cuts -- are massive.

But we’ve also learned a lot about President Barack Obama. Take taxes. The prevailing theory has been that the Obama administration would seek the largest tax increases it could plausibly pass. Liberals are now dismayed to learn that that notion is false. Instead, the Obama administration wants to take the tax issue off the table as soon as possible; the president is willing to take much less in revenue in exchange for spending less time arguing about taxes.

There have been signs of this disposition all along. In the 2008 campaign, Obama swore never to raise taxes on families making less than $250,000 (a pledge that he has technically broken several times -- the excise tax on high-value health insurance plans is one instance -- while continuing to repeat it). Then there was the December 2010 tax deal, when the White House extended all the Bush tax cuts in return for additional fiscal stimulus. The economy was weak, White House aides said, so stimulus was more important than revenue. Besides, they argued, it was only a two-year extension. In 2012, the economy would be stronger, and they’d be in a better position to let some of the cuts expire.

Wanting a Deal

But the debt deal that the president just offered the Republicans showed that’s not a fight he wants. That deal would have preempted the expiration of the Bush tax cuts next year, eliminating the White House’s leverage on that issue while raising less than half the revenue that the Simpson-Bowles report recommended -- and about one-fifth as much as letting the tax cuts expire in full.

To the White House, that was part of the deal’s appeal. If he wins a second term, Obama doesn’t want to begin it with a bruising partisan fight over Bush’s tax cuts. He would prefer to focus on infrastructure, education, trade. Rather than exploit his political leverage to raise taxes, Obama is eager to give it away, if only the Republicans would let him.

Boosting Economy

Another mistaken view of Obama is that he considered a deficit-reduction deal good politics, and perhaps inevitable policy, but that it’s a discussion he’d prefer not to be having. In recent weeks, it’s become clear that key members of the White House seem to believe a deficit-reduction deal would improve the economy.

Treasury Secretary Timothy Geithner said as much at a recent congressional hearing on small-business lending. “If Congress can find a way to reach a bipartisan, comprehensive, balanced agreement to bring down long-term deficits, that would help,” he said. “It would be a sign that Washington works, is able to come together to solve some problems. That would improve overall confidence across the country.”

His boss made much the same argument in his July 2 radio address. “Government has to start living within its means, just like families do,” Obama said. “We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.”

Political Interest

White House aides also think they might be able to add a bit of stimulus -- mainly unemployment insurance and an extension of the payroll-tax cut -- to the deal, and that a grand bargain would open up more political space for further efforts on job creation. Without a deal, there’s no more stimulus: not now, and not later, either.

So yes, part of the administration's interest in a deal is political. They see a grand bargain on the deficit as a way to resuscitate Obama’s battered brand as a post-partisan change candidate who can break out of stale partisan categories and transcend gridlock. But the White House could’ve made that point with theatrics and a few mostly symbolic concessions.

Instead, Obama offered Republicans a two-year increase in the Medicare eligibility age, to 67, along with tens of billions in cuts to food stamps and hundreds of billions in cuts to Social Security. They don’t just want credit for being willing to make a deal. They want the deal, too.

No Compromise

In this, we’ve learned Republicans and Democrats are polar opposites, at least right now. Republicans are dead set against any deal that includes compromise with Democrats, no matter its effect on the deficit. Obama is interested in almost any deal that proves he can compromise with the Republicans, in large part because it will cut the deficit. And so the negotiations come down to this: The Republicans are willing to resist the most seductive policy details in order to avoid a deal, while the president is willing to extend those enticements precisely because he wants one so badly.

(Ezra Klein is a Bloomberg View columnist. The opinions expressed are his own.)

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