Wayne O'Leary

Munich on the Potomac

In the end, the “grand bargain” turned out to be a hollow bargain. Barack Obama, giving his best impression of Chamberlain at Munich, achieved peace in our time -- our time being from now until the end of the year -- but to do so, he had to abjectly accede to Republican budgetary demands across the board, the required ransom for a debt-ceiling extension.

As he signed what White House spokespersons were bizarrely calling a great victory for the American people (What planet are they living on?), the world’s worst political negotiator claimed credit for preserving the “big three” of Social Security, Medicare, and Medicaid. That’s a bad joke. The entitlements, especially Medicare, will be back on the table big-time in late November, when the so-called super committee of Congress delivers its fast-track proposals for further mandated deficit reductions. It’s interesting how often our spineless political class now opts for special legislative committees — commissions, “gangs” of five, six, or whatever — to do its dirty work.

It’s also instructive that these secretive, undemocratic groups, working behind closed doors and away from public scrutiny, are almost invariably composed of center-right members, the apparent reasoning being that progressives won’t wield their budget knives ruthlessly enough in the prevailing cut-and- slash environment.

Rest assured, the latest negotiating body (six Republicans and six Democrats) will eventually produce a conservative majority in favor of substantial entitlement cuts accompanied by minimal revenue increases. Mitch McConnell and John Boehner, riding the wave of their debt-ceiling victory, have announced the composition of their super-committee team: hard-line Republican ideologues exclusively; the Democratic appointees selected by Nancy Pelosi and Harry Reid, on the other hand, include “responsible” compromisers from the Senate side (Max Baucus, John Kerry) in thrall to the Simpson-Bowles austerity approach. So kiss those untouchable entitlements as we have known them goodbye.

Notable for its absence from the final negotiated debt-ceiling package was anything remotely resembling a tax increase. Not only weren’t the wealthy, or the corporations, asked to contribute directly to help balance the books, they weren’t even required to surrender undeserved tax loopholes. The budget deal, which could justifiably be called the Obama-Norquist agreement (after antitax activist Grover Norquist), was budget cuts, more budget cuts, and nothing but budget cuts.

Like all previous presidential lines in the sand, the ephemeral revenue-enhancement demand was withdrawn without debate; it was a preemptive Obama cave-in that affirmed the McConnell insistence on negotiating final terms only with the great relinquisher himself.

When push came to shove, Obama was unwilling to fight for anything at all. Turning the other cheek is his natural style; it won’t change, and it was expressed time and again by an abandonment of defensive positions as soon as the other side made its nonnegotiable demands known. The one-sided deliberations were the ultimate proof of the failure of the president’s celebrated bipartisan strategy. It takes two to tango, and Republicans never had any intention of dancing. Obama and his advisors should have been perceptive enough to realize this, but they decided to willfully deceive themselves.

As zero hour approached, the president even refused to play his ace card, Section 4 of the 14th Amendment, which states that “the validity of the public debt of the United States, authorized by law ... shall not be questioned.” Invoking this constitutional edict would have eliminated the need for a vote on the debt ceiling and bypassed all the extraneous, time-consuming negotiations over future budget deficits. Obama, a closet deficit hawk who, it can be readily surmised, wanted to discuss deficits all along — he reportedly offered Boehner extra-large entitlement cuts in exchange for some added revenue enhancers — obstinately refused to pull the 14th Amendment trigger despite the urging of his party.

It’s entirely possible the Roberts Court would have eventually declared use of the 14th Amendment unconstitutional, but a president with audacity would have dared it to do so in the face of a cratering economy and gained needed time in the interim. A Harry Truman certainly would have done it, and others (FDR, JFK, LBJ) likely would have as well. Alas, confrontation is not the Obama strong suit.

Instead, the president allowed the congressional hostage takers, McConnell, Boehner, and the tea partiers, to tie his hands and cripple his future fiscal endeavors. McConnell has already said he will reprise his successful ransom tactic when the debt ceiling comes up again in 2013.

The obvious lessons of successful conflict resolution (you don’t negotiate under the gun, and you don’t enable hostage takers) have not been learned by the incumbent administration; it almost seems to have a form of collective Stockholm Syndrome.

There is, however, a way out of the Democratic dilemma, if the White House has the stomach to implement it. At the end of 2012, the Bush tax cuts are once more up for renewal. The president should let them — all of them — expire, thereby generating in 2013 the funding needed for job-creating stimulus spending and long-range deficit reduction. Federal taxes are at their lowest level in over two generations; fiscally speaking, they need to go up.

Republicans will howl; Obama should let them.

The end of the decade-long Bush income-tax holiday will bring in a windfall for the Treasury previously estimated at $1.6 trillion over 10 years. Most marginal rates would rise by 3%, and the rate for incomes over $250,000 would jump by 5%. That’s real money, but it’s money that could be directed toward lowering the deficit and stimulating economic growth while avoiding radical entitlement cuts.

Ask yourself if you would rather pocket some minor tax savings now, or have a sound economy along with guaranteed Social Security and Medicare for the future.

The pre-Bush Clinton tax rates were in effect throughout the high-employment boom of the 1990s; they were obviously not burdensome enough to become an issue, and they certainly didn’t derail economic expansion.

Today’s millions of unemployed won’t object to marginally higher income taxes; they have no income to be taxed. Other Americans, especially those with six-figure incomes, can afford to pay a bit more.

In December 2012, President Obama needs to swallow hard, gather his nerve, and do the right thing for the country.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.

From The Progressive Populist, October 1, 2011