WASHINGTON -- The main achievements of the lame-duck session of Congress were reminders of what might have been. President Obama gave something to get something. To secure a second stimulus, he accepted Republican economic methods. To pass the New START treaty, Obama offered assurances to Republican senators on nuclear modernization and missile defense. Contrast this to health care reform, imposed in party-line maneuvers that left an aftertaste of ideological radicalism.
The American political system, it turns out, was not broken -- just poorly used for nearly two years.
But the lame-duck session was also a preview of conflicts to come. The defeat of the omnibus spending bill -- a trillion-dollar, earmark-laden declaration of congressional imperviousness to public sentiment -- was exactly the sort of fight Republicans are spoiling to repeat.
Which leaves a vacationing President Obama with his largest strategic decision since choosing to pursue health reform at all costs. In his State of the Union address, he will take a first cut at the economic message he carries to re-election or defeat.
Some of that message is predictable. Obama is likely to propose a multi-year cap or freeze on discretionary spending. But there is no way he can outbid Republicans when it comes to cuts. The president is also likely to endorse budgetary reforms such as an earmark ban.
All of this would be useful; none of it decisive. Only two proposals currently under discussion would reshape the American economic debate as well as the president's public image: reform of the tax code or reform of entitlements. Both are necessary, difficult, and politically deceptive.
Overhauling the tax system seems the easier approach. It isn't. Most serious plans, including the options raised by the president's debt commission, would broaden the tax base, consolidate and lower rates, and eliminate most tax deductions and exemptions. But even a revenue-neutral tax overhaul creates a complicated system of winners and losers. Especially if the mortgage interest deduction, the charitable deduction and the child tax credit are modified or eliminated, the losers know immediately who they are. The winners must be persuaded of abstract, future benefits.
Republicans would have an easy time criticizing a thinly disguised tax increase for millions of Americans. It would seem like another Obama overreach that fundamentally changes the economy in frightening ways -- confirming an image that the president desperately needs to change.
The other option, entitlement reform, seems more politically dangerous. It is actually more promising.
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