The Outlines of a Budget Deal Are Obvious

November 29, 2012

With a big assist from Ohio, the president clinched a second term after a tough fight. In his victory statement, he pledged to "continue our economic progress" and see "our servicemen and women . . . come home." There were high hopes and a belief he had a mandate.

The year was 2004, and the president was George W. Bush.

The turbulence began almost immediately. Mr. Bush ran on Social Security reform. But in the election aftermath, no congressional Democrat supported it while many Senate and House Republicans were eager to see the issue go away.

Mr. Bush's comprehensive immigration reform floundered as congressional Democrats, especially Senate Majority Leader Harry Reid, did in the measure. Some of its supporters, including then-Sen. Barack Obama, voted for amendments that gutted the reform.

While Mr. Bush campaigned on a platform of winning the Iraq war, after the 2004 election many Democrats—including Mr. Obama—still tried to defund the war, even opposing a debt-ceiling increase in an attempt to starve its funding.

The lesson? A president doesn't get his way in a second term nearly as easily as he does in his first term. Like his predecessors, Mr. Obama can expect opposition not just from the other party, but also from his own. It's natural for congressmen in the president's party to begin looking out for themselves more. Their names will be on the next ballot, not his. And 2014 is likely to be ugly for Democrats. The White House party has lost seats in every second-term off-year congressional election except one—1998, when Democrats gained five House seats and stayed even in the Senate. 

The dissent has already begun over the president's calls for "the rich" to pay more in taxes. Republicans oppose raising tax rates, believing it will hurt small business and the economy. Yet Democrats are also expressing concerns about Mr. Obama's extensive tax increases. Some are red-state Democratic senators up for re-election in 2014, including Senate Finance Committee Chairman Max Baucus of Montana, who opposes raising the estate tax. Others are among the nearly 40 House Democrats from districts Mitt Romney carried, or who won their own seat with less than 55%.

The negotiations over how to avoid the so-called fiscal cliff will reveal Mr. Obama's real goals. Does he want to raise the income-tax rates on the rich to redistribute wealth or generate more revenues for the government?

If the president is dogmatic about raising tax rates, the country will know that his main objective is to pit congressional Republicans against one another, while furthering his redistributionist agenda. If his goal is increasing revenues, he can strike a deal by closing or limiting deductions and loopholes, perhaps even lowering income-tax rates in the process, as recommended by his own Simpson-Bowles deficit-reduction commission.

Then there's spending. In the past four years, Mr. Obama has spent $650 billion more than the Congressional Budget Office forecast in January 2009. While this fiscal year's federal revenues of $2.469 trillion nearly match 2008's total of $2.524 trillion, the budget is now $3.563 trillion, up 20% from 2008's $2.978 trillion.

Will a second term feature a new, fiscally responsible Barack Obama? We'll know soon enough.

Real spending restraint must involve changes to entitlements and other mandatory programs, which (along with interest payments) comprise 64% of this year's budget. But the White House says it's not considering any Social Security reforms, has offered little in the way of fixes for Medicare, and now finds that its union and liberal pressure-group allies vociferously oppose any entitlement changes.

As for Republicans, they are smart to offer reasonable solutions, conceding the need for more revenue without abandoning opposition to raising tax rates. They have rightly insisted on linking any revenue measures to entitlement reforms that bend the long-term budget base line to something that is sustainable. They know that America's real problems are too much spending and not enough economic growth, neither of which will be solved by higher taxes.

The outlines of a deal are obvious, but only the president can make it happen. That will require him to do in the next few weeks what he failed to do in his first four years: strive for genuine bipartisan solutions.

If Obama 1.0 is at the negotiating table, the country will go over the fiscal cliff. If that happens, public disgust at the political class—already near record levels—will go off the charts. Both parties will pay a price, and so will America's most visible politician. It would be an unfortunate way to begin a second term.

This article originally appeared on on Wednesday, November 28, 2012.

Related Article

February 04, 2016 |
It was quite a turnaround. After he led in Iowa most of December, Ted Cruz’s numbers started falling Jan. 6, after Donald Trump declared him ineligible for the presidency because he was born in Canada. But Mr. Cruz unleashed a disciplined, d...
January 28, 2016 |
If Donald Trump doesn’t show up at the Republican debate on Thursday in Des Moines, Iowa, it might be enough to blow his lead—now at 5.7 points in the state, according to the Real Clear Politics average of polls. The Donald has re...
January 21, 2016 |
This isn’t the cakewalk she expected. While not mentioning his name often, Hillary Clinton has tried marginalizing Bernie Sanders by moving left, narrowing the distance between them on income inequality and Wall Street regulation, then whacking h...
January 14, 2016 |
When the GOP presidential candidates gather in North Charleston, S.C., on Thursday—19 days before the Feb. 1 Iowa caucuses—for the Fox Business debate, much will hang on their performances. Even more could depend on the Jan. 28 Fox News deb...

Button karlsbooks 8115560310d99dcf7066a6791c2abb0e6e44efbce9d2a69ac5febbadd06cf979
Button readinglist 0c30cf88cf3c963eb72013f1b5906b6848694ba842d6efa0de8d2d3efbfd8fd2
Button nextapperance d1e601b7044cba97bcfe46cdf8bc572ab09797ca56157b5f533c25051217bb69