A Moment Of Fiscal Truth


Assessing the preliminary responses to the Simpson-Bowles breakthrough has been a fascinating insight into where we all actually stand on what the Dish regards as the central domestic policy issue of our time: restraining the debt. Ross notes that the proposal - derided by many on the left - is nonetheless remarkably "progressive" if by "progressive", one means protecting the poor:

Yes, it’s tilted toward spending cuts, and away from tax increases. But look at the way it cuts spending and raises taxes. It means-tests Social Security benefits for high earners and raises the cap on taxable income, while also adding a larger benefit for the poorest seniors. Its hypothetical discretionary spending reductions don’t come from anti-poverty programs, for the most part: They come from cutting the defense budget, cutting the federal workforce, cutting farm subsidies, etc. It raises tax revenue by reducing tax credits and deductions that almost all overwhelmingly benefit the affluent. (This would be especially true in the scenario I’d prefer, in which the child tax credit and the earned-income tax credit stick around.) It would cap revenue at 21 percent of G.D.P., which would be higher than any point in recent American history, and well above the average for the last thirty years. And it does all of this, as Chait himself notes, while assuming that Obamacare the capstone of the liberal welfare state would remain essentially unchanged.

And it raises revenue without raising income tax rates. Chait admirably calls the proposal "supportable" because of the long-term debt crisis. But here's Krugman and Drum and Pelosi harshing on the entire mean-but-lean government philosophy behind the proposal. The NYT is admirably supportive overall.

All of which leads to an obvious and compelling political and policy win-win for the president. He needs to embrace this opportunity to end the long-term debt and pivot to the center and call the right's bluff at the same time. There is nothing that would restore Obama's cred with Independents more than tackling his own party's ideologues on the deficit and the debt. Since Obama pioneered this debt commission and wanted it to have more power than it does, this cannot be spun as opportunism (and it isn't). It can be seen as part of Obama's promise not to duck these core and tough issues, not to punt on the big policy choices for another generation. And it can be presented as part of Obama's profound willingness to work with Republicans as well as Democrats to put this country back on a long-term fiscally sustainable path.

Such a breakthrough, I believe, would also galvanize a recovery, restoring long-term confidence in the US economy, and prompting businesses to spend, invest and hire again.

This is Obama's moment. He needs to seize it with clarity, focus and drive. If he does, he will regain the coalition he won with - and then some.

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