Why stalemate suits GOP just fine in Round 2 of deficit fight

The GOP knows it will get $1.2 trillion in deficit cuts this year no matter what. That gives it less incentive to compromise with President Obama on a deal that raises taxes on the rich.

Republican leaders have unleashed a rhetorical barrage against President Obama’s plan for deficit reduction, dubbing it class warfare, a massive tax hike, and a job killer. Their greatest weapon against Mr. Obama's plan, however, might be the deal struck last month to avoid a debt-ceiling crisis.

The deal ensures that $1.2 trillion will be cut from the deficit no matter what, giving House Republicans already ill-disposed to compromise with Mr. Obama even less incentive to do so. In what is shaping up to be a classic Washington stalemate, that could change the calculus, giving Republicans extra leverage.

If no compromise is struck on deficit reduction between now and the end of the year, “there will be massive spending cuts and no tax increase, and what Republican would be upset at that?” says antitax activist Grover Norquist, president of Americans for Tax Reform.

The Aug. 2 debt ceiling deal, called the Budget Control Act, created a special bipartisan "supercommittee" comprising members of both the House and Senate and tasked it with presenting a plan by Nov. 23 to cut at least $1.2 trillion from deficits over the next 10 years. Congress has until Dec. 23 to pass it. If it fails, the law mandates deep spending cuts to defense and entitlements – deemed draconian on both sides of the aisle – which would take effect in 2013.

The 2013 date is key to the thinking of conservative advocates like Mr. Norquist. Republicans believe they can take the Senate and the White House in 2012, which would give them the ability to recast any unpalatable cuts.

“Some [Republicans] would rather not have that kind of spending cuts on defense. When the public elects a Republican House and Senate, you can put some of it back,” Norquist adds. “The president has no leverage. He’s giving speeches.”

On Monday, Obama said he would veto any deficit-reduction plan that does not require the wealthiest Americans and the biggest corporations to “pay their fair share” of federal taxes.

But House Speaker John Boehner (R) of Ohio says that he will not move a bill through the House that amounts to a tax hike in an economic downturn.

Senate minority leader Mitch McConnell (R) or Kentucky offered a similar assessment. “Veto threats, a massive tax hike, phantom savings, and punting on entitlement reform is not a recipe for economic or job growth – or evening meaningful deficit reduction,” he said in a statement. “The good news is that the Joint Committee is taking this issue far more seriously than the White House.”

The joint supercommittee has given the White House and congressional committees until Oct. 14 to contribute their ideas.

In his proposal, Obama also called on the joint committee to overhaul the 10,000-page US tax code with an eye to removing loopholes and provisions for special interests. Such an undertaking would typically be a labor of years, not weeks, and a wildcard is how quickly tax-writing committees in the House and Senate would be able to come up with a specific plan for tax reform.

Sen. Max Baucus (D) of Montana, who chairs the Finance Committee, told seniors on a town-hall teleconference on Monday that he backs the president’s call for a tax increase for high-income earners, but that cuts in Social Security entitlements are not necessary, according to the Associated Press.

But his GOP counterpart, Sen. Orrin Hatch (R) of Utah, said in a statement that the president’s political rhetoric “hurts our ability to effectively streamline our burdensome tax code that has put America at a competitive disadvantage around the world.”

For his part, Norquist says he expects Republicans to hold this line – no net tax increases – throughout the joint committee’s deliberations.

Still, some 72 percent of Americans support raising taxes on the wealthiest Americans, according to a July Washington Post/ABC news poll. That could sway vulnerable Republicans to rethink their views on taxes, especially in an election year, Democrats argue.

"Americans know shared sacrifice is the best path to fiscal sustainability," said Senate majority leader Harry Reid (D) of Nevada in a floor speech Monday.