Articles

Obama's Debt-Ceiling Opportunity

July 06, 2011

The weaker the hand Barack Obama has to play, the more sanctimonious he becomes. That was clear in his news conference last week when the president lectured Congress that "there's no point in procrastinating," and argued senators and representatives "need to do their job" and raise the debt ceiling. He presented himself as a model of fiscal discipline, the one serious adult in a city full of distracted children. This claim is detached from reality.

It is Mr. Obama who proposed—and Democratic congressional majorities that passed—the spending bills in 2009 and 2010 that are pushing the federal government up against the current debt ceiling of $14.3 trillion. It is Mr. Obama who started the year by demanding Congress pass a "clean" debt ceiling increase to $16.7 trillion—"clean" meaning no cuts or restraint, just a blank check to keep spending. Mr. Obama is the one without a budget, the Senate having sent his to the bottom of the Potomac by a 97-0 vote. And he has yet to publicly offer a real plan to cut spending, as House Republicans did months ago.

Thus, in backroom negotiations recently, the administration offered roughly $1 trillion in phony savings—mostly money that would never have been spent in Iraq and Afghanistan over the next 10 years anyway, along with $500 billion in interest savings on the trillion. It has also offered another supposed trillion in domestic and entitlement savings, but with cuts starting in 2014 and unlikely ever to be realized.

If the administration's spending cuts are mostly fake, its desire for tax increases is not. While the proposals are constantly shifting, you can be sure the president is looking to grab big chunks of cash from lots of people (and small businesses) who make less than a million a year.

There's still time for the president to make history's largest debt-ceiling increase a moment when spending is curbed, a debt crisis averted, entitlement programs saved, and a fraying social safety net repaired.

As a liberal Democrat, this could be Mr. Obama's Nixon-to-China moment. He could draw on ideas with fairly broad bipartisan support, including changing the way benefits are indexed for inflation, raising the age at which people start receiving benefits, and modest means-testing. These reforms wouldn't make Medicare or Social Security permanently solvent, but they would put the programs on firmer financial ground for decades. It would be good for the country, to say nothing of Mr. Obama's re-election chances.

To date, the president has convinced himself his political self-interest is best served by savaging his GOP opposition and insisting, as he did in last week's press conference, that gigantic tax increases must be part of any "balanced approach."

In fact, there is zero appetite on the Republican side for tax increases and little enthusiasm among Democrats either. If there were, Majority Leader Harry Reid would already be moving tax legislation through the Democrat-controlled Senate.

Even former President Bill Clinton called for lower corporate tax rates at last weekend's Aspen Ideas Festival. His remarks are evidence that comprehensive tax reform could be accomplished with a bill that cleaned out preferences, erased carve-outs, and killed special provisions in return for lower rates on the corporate and personal side. This, in turn, might actually result in more revenue through faster economic growth.

Mr. Obama could secure America's future prosperity and, perhaps, even his own re-election by reining in spending. He'd find receptive allies in his political opposition. Instead, he is blustering and preening for the cameras, demanding action of others and pressing for measures that will further hinder an already anemic recovery.

Americans want their president to agree with them on important issues and demonstrate strong leadership. But when there is disagreement, a strong executive can create confidence and change public opinion, especially if he performs well in crisis. The debt-ceiling debate is such a test for Mr. Obama. The odds are against him seizing this opportunity, but stranger things have happened.

This article originally appeared on WSJ.com on Wednesday, July 6, 2011.

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