Obama, Tax Increases and Debt Reduction: How GOP Can Avoid Political Trap

Published April 14, 2010

Politics Daily

President Obama is in the early stages of setting a political trap for the GOP — one he hopes will take one of his greatest weaknesses and turn it into a strength.

The weakness Obama has is that he is viewed as fiscally reckless by much of the electorate, having engineered an unprecedented spending binge even before he passed into law a hugely expensive new entitlement program in health care. At a time when the deficit and debt are more potent political issues than ever, and when those who are viewed as responsible for them are more vulnerable than ever, Obama and Democrats in Congress are in a quandary.

What to do?

If you're Obama, the answer is to admit America faces a fiscal crisis, ignore the fact that you are now a key contributor to it, then force Republicans into an uncomfortable choice: either sign on to large tax increases to cut into the deficit and the debt, or refuse to do so, in which case Obama will then blame Republicans for not taking the necessary steps to put our fiscal house in order.

The deficit commission is one vehicle the president will use; there are sure to be others.

So what can Republicans do to keep Obama's attempt from succeeding?

Several things, I think. The first is to remind voters — morning, noon and night, on weekends as well weekdays – that Dr. Obama is largely responsible for building the fiscal Frankenstein we face. Last year the federal government spent $1.67 for every dollar it collected; the deficit reached a record $1.4 trillion. The president has proposed budgets that double the debt in five years and triples it in 10 years. And according to the Congressional Budget Office, our debt is headed to more than $20 trillion in 2020. (As a reference point, from 1789 through 2008, America accumulated less than $6 trillion of public debt.)

While Obama faced a very serious situation when he took office, he's taken steps that have made things far worse. It's also worth pointing out that if Obama were serious about putting a dent into the deficit, he would have used the cuts he is hoping to achieve in Medicare toward paying down the debt. Instead, Obama is using the promise of future cuts to finance a new, hugely expensive middle-class entitlement. Obama has also taken the money that banks have paid back as part of their TARP loans and used it to for yet more “stimulus” spending.

Obama has, for now at least, forfeited the right to be taken seriously on spending. Having him preach on the dangers of our fiscal imbalance is like John Edwards or Mark Sanford preaching on the joys of marital fidelity. It won't work, and it shouldn't be tried.

Second, Republicans need to show iron discipline in making it clear that tax increases are not the best or only option when it comes to reducing the deficit and debt. At the top of the list goes spending, and in particular Obamacare. Obama's success at nationalizing health care has made our fiscal situation, which was already reaching crisis proportions, far more acute. If you are badly wounded in battle you need to do several things to get well — but the first thing you need to do is remove the sword in your side. Obamacare is the fiscal sword in our side; Republicans should demand that those who put it there kindly remove it. Once they do, Republicans can say, they will look at other options. But until they do, Republicans won't.

Republicans have a considerable advantage in this confrontation. Obamacare, after all, continues to get more and more unpopular. According to Rasmussen Reports, three weeks after Congress passed the health care legislation, support for its repeal ticked upward four points to 58 percent — including 50 percent of respondents who “strongly” favor repeal.

These numbers are bad for Democrats — they know — and they continue to worsen with every passing week. Many Democrats and journalists insisted that passage of health care legislation would be a boon to Obama and his party, since it would rally his base and demonstrate to the country that Democrats could govern. In fact, support for Obamacare continues to collapse, to the point that there is very little chance that it can be rebuilt between now and November (and probably long after that). If Republicans frame the national debate between higher taxes and repealing elements of Obamacare, they should do quite well.

Third, Republicans need to articulate the case for why tax cuts are not only better for individual families but for our society. People need to be reminded more often than they need to be instructed, Samuel Johnson said, and the task for Republican leaders at every level is to remind the country why lower taxes are an engine of economic growth and greater prosperity — and, in turn, lower federal budget deficits — while higher taxes are a prescription for economic stagnation and decline. That isn't an original argument to make, but it is an effective one. Sometimes people in politics can get so caught up in the game of coming up with “new” ideas that we don't pay sufficient attention to some pretty good old ideas. What matters isn't whether an argument is “new” or “old”; what matters is whether it's wise and true. That doesn't mean that under no circumstances can taxes ever be raised; but at this stage, given that the main engine of our fiscal crisis is spending and, in particular, unrestrained entitlement programs, that is where our attention needs to be focused.

Fourth, Republicans need to connect Obama's fiscal policies to a larger narrative: Obama, Speaker Nancy Pelosi, Senate Majority Leader Harry Reid and their congressional foot soldiers are engaged in an effort to remake our country in fundamental ways. It is no state secret that they are enamored with big government and drawn to centralized authority, equality of outcomes more than equality of opportunity. They want the public sector to dominate our mixed economy. They are instinctively critical of free enterprise and the wealth-creators of our society.

Obama has set the frame for the upcoming election: a debate between those who want to expand the size, scope and reach of government at a time when confidence in government is near record lows versus those who want to limit and in some respects even roll back the power of the state. At different moments in our history the public has wanted different things. In the current environment, it's clear where public sentiment lies. And come November, those sentiments will alter the political landscape in ways that will, I think, have ramifications that extend for a decade to come. The 2010 midterm elections could be that significant — and for Democrats, that brutal.

Peter Wehner is a senior fellow at the Ethics and Public Policy Center in Washington, D.C. He served in the Bush White House as director of the office of strategic initiative.

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