Democrats appear to have the upper hand on the politics of the fiscal cliff, which might explain their brash pronouncements and mind-blowing conceptualization of "compromise." This morning I outlined three possible contingencies for Republicans, none of which is especially attractive. But is there a fourth way? The GOP's dilemma is a doozy. Their opponents, emboldened by the election, are pushing for counter-productive tax hikes on "the rich" -- a politically popular proposition at the moment -- while offering almost nothing meaningful in return. Meanwhile, Democrats' allies in the media have been crafting a 'Republicans-as-stubborn-obstructionists' narrative for years. To a large extent, they've been successful; Republicans are poised to bear the brunt of an irate public's blame if a fiscal cliff deal doesn't get cut. Voters either don't know or don't care about the details. As the story goes, Obama wants a "balanced" deal, and House Republicans are the only people standing in the way of averting economic disaster. Thus, Obama is holding the public relations high card. This is why he feels liberated to shoot for the moon by serving up absurd "deals;" as he sees it, if Republicans walk away, we all go over the cliff, and the media will beat Republicans to a pulp until they either (a) relent and give away the farm or (b) get crushed in 2014.
Short on good options, here's one play GOP leaders might be able to make to regain some of the high ground and throw the White House back on its heels: Embrace Simpson/Bowles. President Obama established a bipartisan debt commission with great fanfare in 2010. Its leaders were Alan Simpson, a former Republican Senator, and Erskine Bowles, President Clinton's former Chief of Staff. The panel was tasked with engineering a solution to right America's fiscal ship. In the end, they produced a set of recommendations that received the blessing of a majority of its members. The commission's blueprint drew a fair amount of criticism from conservatives, but was roundly blasted by liberals. Liberal malcontents like Paul Krugman torched the plan with noteworthy ferocity. The president shelved the recommendations, and they've been collecting dust ever since. What did the proposal actually look like?
- The plan called for a 3-to-1 ratio of real spending reductions to tax increases. Federal spending as a percentage of GDP was capped at 21 percent, substantially lower than the Obama average.
- The spending cuts impacted multiple sectors of government, targeting everything from discretionary spending, to defense, to Medicare, Medicaid and Social Security. Some modest reforms were suggested for these entitlement programs.
- The plan raised taxes by limiting and eliminating many popular deductions, some of which disproportionately favor the wealthy. Some of these massively hiked revenues were offset by a major, pro-growth simplification of the tax code. The proposal established three relatively low marginal income tax brackets (12/22/28 percent). It also repealed the Alternative Minimum Tax and called for lowering the corporate tax.
- Overall, Simpson Bowles projected $4 Trillion in deficit reduction over a ten year budget window.
Of the commission's 18 members, six Democrats and five Republicans endorsed the final document, while the seven 'no' votes split four-to-three along Left/Right ideological lines. Paul Ryan was the most prominent opponent of the plan. The eleven-member 'yes' camp was ideologically diverse, ranging from Sen. Tom Coburn on the right to Sen. Dick Durbin on the left. Like many conservatives, I continue to harbor significant concerns about various elements of the plan. I'm troubled by some of the tax provisions, especially the revenue cap at 21 percent of GDP (far higher than the historical average of 18 percent). The defense cuts are also worrisome, as is the fact that despite some cuts and tinkering, Medicare -- the largest long-term driver of our debt -- escapes a desperately needed overhaul. The framework also assumes the retention of Obamacare, which Paul Ryan has cited as a primary cause of his 'no' vote. But here is today's reality: (1) Unhappy tax news is coming, one way or the other. The president is not budging. (2) The fall election guaranteed that Obamacare is here to stay, at least for the foreseeable future. (3) Sequestration's defense cuts would be even more punishing and abrupt than Simpson/Bowles reductions. (4) Democrats have shown themselves to be totally unserious about any reforms or reductions to entitlements. In short, even if the major players manage to hammer out an eleventh-hour deal before January 1, it's probably going to reek. It will have been negotiated in secret, and will almost certainly be jammed through in a rushed and unsavory fashion. This is no way to govern.
Simpson-Bowles, for all its faults, was conducted in an open and transparent manner and brought disparate political players into a room to forge a serious compromise. It overhauls and streamlines our byzantine tax code, takes some important first steps on entitlements, and reduces and caps federal spending. On substance, I'd wager that it would be considerably better than anything Obama and Boehner might produce after weeks of behind-closed-doors acrimony with the proverbial gun to their heads. Politically, it paints Democrats into a tough corner. Republicans could make a grand show of reluctantly supporting Simpson-Bowles for the betterment of the country. Ideally, the press conference would be led by Paul Ryan, who might explain why he voted against the plan as a commissioner, but is now willing to set aside some of his strong ideological preferences to move the nation forward. They would remind viewers that the proposal they're now backing only exists because President Obama specifically and publicly asked for it. Plus, more Democrats than Republicans voted for it, including Harry Reid's top lieutenant in the Senate. Put simply, Simpson-Bowles represents the very embodiment of bipartisan collaboration and problem solving -- precisely the sort of thing "moderates," the media, and the public are always demanding. It would be exceedingly difficult for Democrats to paint the plan as radical or draconian in light of the commission's origins and participants. The GOP's "party of no" problem would also be hugely diminished; after all, they would have just signed on to the president's commission, with the previously recalcitrant Paul Ryan magnanimously leading the way. It would be fascinating to watch the president and his allies try to denounce and reject the very proposal he called for.
Of course, all of this would require significant coordination and buy-in from Congressional Republicans -- no small thing, to be sure. Many House members in particular find major swaths of the plan rather unpalatable. They would need to be convinced that this idea would still be the best chess move for conservatism, both strategically and tactically. Paul Ryan's agreement and cooperation would also be essential. Furthermore, Republicans would have to be willing to stomach quite a bit of political stagecraft in unveiling their announcement. The reveal would be big, hyped, and dramatic -- out of necessity. Why? To capture the media's attention and earn heavy coverage. Basically, the public would need to know that it happened. They wouldn't need to internalize all the specifics, but they'd have to hear that Republicans offered a "historic" compromise by agreeing to the controversial plan authored by Obama's bipartisan fiscal commission.
Best case scenario: Republicans catch Democrats off-guard, and (much or most of) the plan is adopted. At the very least, GOP negotiators would gain major leverage in fashioning a less horrific final compromise. Worst case scenario: Democrats firmly reject the plan, further talks stall, and the we go over the cliff. But even under this scenario, Republicans would have very prominently done their part to try to avoid the impasse, and the public's assignment of blame would be rendered far more complex than simply, "the Republicans did it." Bottom line: I'm not completely convinced that this is the best course of action, but given the dismal alternatives, it's at least putting out there for consideration. I'll leave you with a clip from last night's Kudlow Report, where our panel discussed the fiscal cliff mess. One of my fellow panelists was former New Hampshire Senator Judd Gregg, a Republican, who served on Simpson-Bowles and supported its recommendations. Gregg told me off the air that he concurs with my assessment that his commission's solutions would be far better than whatever the conclave of secret negotiators might churn out, and that the plan offers a lot for conservatives to like: