House Majority Leader Eric Cantor and No. 2 Senate Republican Jon Kyl want you to know they are taking a principled stand. They are against raising taxes. They will not recommend to their conferences that taxes be raised. They want the Republican base – and particularly young House freshmen – to know they are fighting for them. Welcome to Stage 1 Kabuki, debt-ceiling edition.
We are at the point in the talks where both sides draw lines in the sand to rally their bases. (We will never cave! Compromise is not in our vocabulary! We are fighting for you!) The decision by Cantor and Kyl, who yesterday announced they were walking away from the negotiations because they would not endorse any kind of tax increases, is only the first move in a long dance. Democrats are sure to provide similar gestures of assurance to their base that they would not dream of giving away trillions of dollars in cuts without extracting some amount of pain from Republicans. (We will protect your Social Security! We will defend against the GOP’s evil plot to dismantle Medicare! We will ensure investment in America’s future and jobs!)
If you are worried that the talks have collapsed or that the risk that the debt ceiling lapses has increased, don’t be. These machinations are mostly for the benefit of the base and a few GOP freshmen. The talks will go on. President Obama, House Speaker John Boehner and “sadly, probably me,” as Senate Majority Leader Harry Reid put it Thursday with a sigh, will step up and hammer out a deal.
So what do both sides want? Republicans want trillions of dollars in cuts. Democrats want some kind of revenue raisers to accompany them. Republicans will tell you that Democrats want the debt ceiling raised, and that’s the GOP’s skin in the game, but that’s a false argument. The fact is, most Republicans who care about businesses – which are dependent on good credit and healthy markets – also want to see it raised. The only Republicans who don’t are the hardcore fiscal conservatives, and nothing was ever going to convince them to vote for an increase anyway.
Yes, it’s true that a tax hike won’t pass the House. Frankly, it wouldn’t pass the Senate either. But there are plenty of ways to raise revenues without directly hiking taxes. Thus far, Republicans have resisted closing corporate tax loopholes and other revenue raisers, saying such changes belong in a comprehensive tax-reform bill. But deficit reduction has always required both sides to compromise. If Republicans don’t give anything, what incentive is there for Democrats? Just as tax hikes can’t pass the House, trillions of dollars in cuts with nothing in it for Dems cannot pass the Senate. There are some obvious compromises that both sides can and will make as talks get serious in the coming weeks. In the meantime, pay no attention to the kabuki on your screens.