Lucy Always Snatches Away the Football — 26 November 2012

Amid the atmospherics surrounding the upcoming “fiscal cliff” negotiations, one of the salient news stories that emerged this weekend was that a few Republicans are tiptoeing toward breaking ranks on the No Tax Pledge.

This pledge, which virtually every Republican lawmaker and candidate for higher office has signed for the last twenty years, commits them to voting against any bill that raises tax rates.  Period.

It’s really remarkable how disciplined the GOP has been on this issue over the years, despite extreme pressure to renege on the oath.  The mainstream media has regularly painted them as recalcitrant, the reason why Washington seems locked in interminable dysfunction.  President Obama comes off sounding so reasonable when he demands a “balanced” approach to budget talks, and when he says that “millionaires and billionaires”would be “asked” to pay a little more.  Against that, the Republicans’ chorus of “no” looks like simple bloody-mindedness.

But there’s a good reason why the GOP feels the need to hold firm.  One thing Washington can be relied upon to do is to spend more money.  It’s how politicians convince the folks back home they are looking out for them.  When domesticated Republicans agree to increase taxes to offset even partially the spending boost, they are in effect ratifying the increase.  Spending ratchets inevitably upward; if taxes ratchet upward alongside, we are on a one-way track toward a sclerotic Euro-style economy and social democratic government.  Greece isn’t far beyond that.

There is an institutional imbalance in Washington that favors spending as well.  One Congress cannot tie the hands of future Congresses.  So any promises to control spending, no matter how sincere, are just that – promises.  And not binding after the next election, except insofar as the political landscape might not have changed.  Taxes, however, are a matter of law, and once enacted remain on the books until amended by a new tax law.

Any deal, therefore, that exchanges higher taxes for restrained spending is an exercise in self-delusion.  The taxes will go up, but the spending won’t slow down – at least not permanently.  The political classes in Washington who are urging “reasonableness” on Republicans are asking them to emulate Charlie Brown kicking the football with Lucy holding.

Lucy always snatches the football away at the last instant.

The politics of this are difficult.  There is precious little constituency for cutting spending, particularly on the big entitlements.  Everyone is planning on receiving them, nobody wants that expectation frustrated.  On the other hand, there is substantial constituency for raising taxes on “the wealthy.”  As the saying goes,

“Don’t tax you; don’t tax me.  Tax that man behind the tree.”  People are quite happy to raise taxes on somebody else.

Republicans who resist that siren call will find plenty of critics; by contrast, those who cross over and become “reasonable” will be feted with media attention.  One of the reasons John McCain was treated nicely by the media during his presidential run – at least until Obama swept onto the scene – was that he was a maverick who bucked the Republican establishment.  Can you think of any maverick Democrats who earned similar approbation?

This is why the Tea Party movement is so important.  For once, there is a vocal and organized constituency for fiscal prudence.  And, similarly to the stubborn Congressional Republicans, their reward is scorn and calumny on the part of the media – with charges of racism, hatred, and worse.    But because of their activism, there is a crop of legislators in Washington who are dedicated to controlling the deficit, and the No Tax Pledge is an indispensable part of that.  This helps to balance the contest.

Then of course there is the recent election, after which President Obama can legitimately say his proposals won.  On the other hand, the House Republicans kept their majority, so there is not what you might call a mandate for either set of positions.

What is important is the willingness professed by both sides in working toward a deal.  Ironically, that deal might well look a lot like the plan Mitt Romney proposed during his campaign: tax reform that keeps rates low (or perhaps even lower) in exchange for limits on deductions.  That would satisfy Obama’s demand that the rich pay more, since they use  deductions more than the rest of us.  It would also satisfy the call to keep rates down.  Conservatives could actually get excited about such a deal if it led to lower and flatter rates, which would have the not-insignificant side benefit of being a tonic for the underlying economy.

There are two ways Democrats could scuttle such a deal.  Obama has been insisting that tax rates have to go up for the top brackets.  Indeed, his press secretary just today was insisting Obama would veto any bill that kept the Bush rates for the wealthy.  He appears more committed to this than to actually raising revenue, which the above reform would do.  It would be a deal-killer; there are not enough tame Republicans to pass that bill.

The second risk is that when limiting deductions comes on the table, Democrats try to pocket that as a free concession and insist on higher tax rates as well.  This too would kill any deal – but don’t be surprised if they try it anyway.  Democrats are no stranger to bad-faith negotiation.

If the GOP agrees to higher taxes, however formulated, they will insist on meaningful reform to entitlements; Speaker Boehner was saying as much today.  As I said above, any pledge by the other side to hold the line on regular budgetary spending is worthless, so the only spending control worth pursuing is to change the statutory outlines of Medicare and the rest.  That’s where the real future spending explosion is set to occur in any case, so it needs to be addressed.

The problem is that a grand bargain like this takes time to put together, particularly when the political weights are as balanced as they are in Washington.  A meaningful package of tax and entitlement reform rushed through in five weeks would be sloppy and riddled with contradictions and unintended consequences.  Better to find a way to punt for some time and then agree to serious, extended good-faith negotiations.

Violating the No-Tax Pledge would not be a sin if it means a lower, broader tax system and entitlement reform.  If it means merely higher tax rates now and spending reductions later, that’s just Lucy and the football again.

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