Editorial: Fiscal Faceoff, Round II
We have been following with interest the talks in Washington aimed at averting the impending tax increases and spending cuts our colleagues in the commentariat are pleased to call “the looming fiscal crisis.” While we won’t hazard a guess as to the outcome, there are at least some encouraging general developments. Here’s a guide (think of it as a kind of fiscal cliff’s notes) to some of them.
First of all, President Obama has stopped talking to himself. This is a good thing, because every time he negotiated with himself over the past four years, he lost. For instance, about a third of the economic stimulus program the president proposed upon taking office was devoted to tax cuts, on the theory that they would appeal to Republicans. Similarly, health care reform contained free market elements that Obama thought Republicans would like. As it turned out, they spurned both initiatives, and didn’t much care for anything else the president did, either.
This time around, Obama has confined himself to achieving his top priority, higher taxes on the wealthy, and letting the Republicans specify the spending cuts and entitlement reforms they want to achieve beyond those that were on the bargaining table last year in the debt ceiling talks. This perhaps falls into the category of fool me once, shame on you; fool me twice, shame on me. Anyway it seems like a sensible negotiating position, given that the Republicans’ entire emphasis throughout this process has been on reining in spending.
While Obama has broken off talks with himself, he has begun talking in a systematic way with the business community, specifically corporate America. According to The New York Times, the president has been toning down his populist rhetoric and personally appealing to business leaders to help avoid the fiscal abyss and get the country back on a solid footing. Obama has framed the issue in a way that especially appeals to business — the need for certainty, which is said to be a prerequisite for robust economic expansion.
The response has been encouraging, with some executives endorsing higher taxes for the wealthy as long as a sincere effort is made to put entitlement spending on a sustainable footing. According to the Times, Frederick W. Smith, the chief executive of FedEx, characterized the idea that raising taxes on the wealthy would kill jobs as “a lot of mythology.” Lloyd C. Blankfein, chief of Goldman Sachs, found Obama’s deficit reduction plans “very credible,” and Randall Stephenson, CEO of AT&T, embraced a compromise involving a tax rate increase and significant entitlement reform. Smith and Stephenson, by the way, were supporters of Mitt Romney. The lesson here perhaps is that the White House needs to continue to reach out to the business community, not only in the effort to bring congressional Republicans to a more reasonable stance on the need for higher taxes on the wealthy but also as a way to advance the administration’s other priorities, including curbing climate change.
Speaking of reaching out, fractious House Republicans seem to have finally gotten the message that they need to shut up and listen to their leader, Speaker John A. Boehner, who all too often during the past two years seemed to be the only adult on the red side of the aisle in budget and tax negotiations.
Now the caucus seems to have realized that any tax and spending deal may hinge on Boehner’s ability to deliver Republican votes for it. So far, Boehner has put on the table $800 billion in new revenue. Despite this ideological heresy, the Times reports, the speaker attracted a strong show of support during a private meeting with House Republicans last week. This newfound respect probably has its origins in the election results, but Boehner perhaps aided the cause of party discipline by stripping four of his most persistent critics of prized committee appointments.
Anyway, there’s reason to think this deal might actually get done, and we can at last consign the fiscal cliff to wherever it is that tiresome figures of speech go to die.