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November 18, 2012

Make a deal, but make a good one

From New York Times columnist and economist Paul Krugman to the Daily Kos website to pundit Robert Kuttner, the advice President Barack Obama is getting from the far left is clear: Don’t cut a deal with Republicans to avoid the “fiscal cliff.”

Such a deal would avert some $600 billion in tax increases and spending cuts due to take effect in January if Congress doesn’t act.

Many economists say not tackling the issue could hammer a fragile economy. But Krugman and others say that very economic pain would make it easier for the president to conclude a deal next year on terms more to their liking, a deal that would go heavier on tax increases and include fewer, if any, spending cuts.

Meanwhile, the liberal Huffington Post reports that many congressional Democrats are urging the president not to strike a deal for the very same reason.

Politically, they may have a point. Even though the loudest voices calling for the United States to drive over the cliff are found on the left, a Pew Research Center/Washington Post survey released last week found that 53 percent would blame Republicans rather than Obama if no deal is reached.

So what should the GOP do?

Politically, and economically, the best thing to do may be to meet the president’s goal’s on tax increases. House Republican Leader John Boehner has indicated that Republicans may agree to some deal that meets or comes close to the president’s goals, some $1.6 trillion in new taxes, but only if it raises revenue by eliminating deductions rather than raising rates, and only if it is tied to getting spending under control.

Flattening out and simplifying the tax system makes sense, and if that’s the alternative to raising rates it is the better one. But Congress may not have time over the next few weeks to strike such a complex deal.

A better idea may be simply to renew the Bush-era tax cuts except for those making over $250,000 a year, as Obama has suggested in the past. Doing that would raise about $800 billion over 10 years, or less than one year of the deficits Obama has run up on his watch.

But no matter what tax deal the GOP strikes, it must insist on two things. First, Obama must take ownership of the tax increase. Make it clear they were dragged into that unwillingly and give it the minimum of their votes needed to pass it.

Second, they must insist on spending cuts of at least a dollar for each dollar of tax cuts. They must insist on real spending cuts now, during no more than the next two fiscal years, not future spending cuts. They can’t accept the parlor tricks that Obama trots out when asked about his plans to cut spending, such as double-counting “cuts” included in past budget deals or vague promises to cut “wasteful” spending. If they can’t agree on where to cut, then make the cuts across the board, including defense.

Again, this doesn’t have to be a long-term deal to completely rein in federal spending. Congress doesn’t have the time to do that in this lame duck session. But it does have to be a plan that shows Congress is serious about getting debt, deficits and spending under control, a deal that would be a good first step to a larger, comprehensive plan.


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