The agenda

Barack Obama, 2004:

Maybe peace would have broken out with a different kind of White House, one less committed to waging a perpetual campaign–a White House that would see a 51-48 victory as a call to humility and compromise rather than an irrefutable mandate.

Any hope that Obama might approach his second term non-hypocritically has already been dispelled by his position on the “fiscal cliff”. And any such hope was foolishness anyway: after what he did in his first term, which would he be any less aggressive in his second, when he has “more flexibility”?

But what should be the Republican response? Many Republicans say that tax hikes will hurt the economy. On the contrary, I tend to think that overspending is more dangerous than overtaxation, in part because of Ricardian Equivalence, and in part because we are rapidly reaching insolvency. If we could strike a deal in which we can fix the spending problem at the cost of some tax hikes, we should take it. But such a deal is not likely to be on the table. Instead, what will be on the table is the usual bargain: tax hikes now in exchange for future spending cuts that will never actually happen. I’ve read that (can’t find the link now) while such deals typically promise a 3-to-1 ratio of spending cuts to tax hikes, on average they actually deliver a minus-2-to-1 ratio.

If fixing the problem isn’t on the table, should Republicans focus on holding the line on taxes? I don’t think so. On the contrary, two factors suggest that we should give President Obama the tax hikes on the (so-called) rich that he says he wants.

The first consideration is the sequester, which will bring dangerous cuts to defense spending. At the third presidential debate, Obama pledged that the sequester “will not happen”. But that was a lie: the very next day he was touting the sequester in an off-the-record interview, and now the administration proclaims openly that they are happy to go ahead with it if they don’t get the tax hikes they want.

The idea behind the sequester, as I understand it, was to include big cuts to defense and domestic spending, to give both sides an incentive to come to a different agreement. But that supposed more honesty from the Democratic side than actually exists. While they love to attack Republicans over any proposed cuts to domestic spending (killing Big Bird and whatnot), they are perfectly willing to see cuts to discretionary spending if such cuts advance their higher priorities, as this whole fight illustrates. Moreover, since the White House proposed the sequester (Obama’s lies to the contrary notwithstanding), one ought to expect that it serves their purposes. Republicans were foolish to agree to it.

The second consideration is broader. Our economy is screwed: Obamacare is kicking in. The EPA is regulating CO2. Dodd-Frank puts the government in control of the financial industry. And entitlement spending is quickly driving the Federal government to insolvency. (The EPA’s action is illegal, and most of the Dodd-Frank apparatus can’t legally operate until the Senate confirms the new bureau’s director, but I wouldn’t count on the courts to enforce the law.) If fixing the problem is off-the-table, it is imperative that we make sure that blame for the upcoming disaster is assigned correctly.

What Democrats are demanding — tax hikes for the “rich” — are reversible, and ultimately not within Republicans’ power to prevent anyway. Republicans can try to moderate them, but that won’t save the economy (as above, spending is the main problem), and doing so will give Democrats and their compliant media allies a way to blame the upcoming disaster on Republicans. What is essential is when the economy tanks, America knows who is at fault.

This is not to say that we should give Democrats anything they want. We should not allow them to nationalize any more industries or create any new entitlements, and we should vigorously fight Dodd-Frank and the EPA in the courts. Generally, we should not grant them anything irreversible. But tax rates are different; excessive taxes can be scaled back, and have been many times.

UPDATE: Were the Republicans to take this advice, here’s a way they should considering doing it.

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