The proposal to enact the new commission’s policies or enact an automatic trigger virtually guarantees no new taxes because the automatic cuts are all on the spending side. The Obama administration’s defense of this is, in Gene Sperling’s words, quoted by CNN: “You want to make it hard for them just to walk away and wash their hands. You want them to say, if nothing happens, there will be a very tough degree of pain that will take place.” While I have affection and respect for Sperling, and his comment reflects a sound strategy, that strategy has nothing to do with the actual outcome in this case. If the Democrats wanted the Republicans to bear “pain” or to pay attention to a “reform or else” situation, they would have been well-advised to include tax increases in the “or else” part. It is certainly not going to be easier to negotiate with the Republicans when the do-nothing alternative is all spending cuts.
I’m annoyed, too, but I’ve been annoyed with the Democrats’ (including most importantly President Obama’s) position on the Bush tax cuts for years. And I am more hopeful about the “second round” possibilities than Bill is. For one thing, Speaker Boehner spelled out his interpretation of the “no new taxes” pledge in his powerpoint presentation on “the deal.” It calls for tax reform that sticks to the “current-law baseline,” suggesting that that prevents taxes from being raised. But that only prevents revenue levels from coming up relative to current law, which has all of the Bush tax cuts expiring at the end of 2012. It certainly doesn’t rule out revenues coming up relative to current policy, which is fully-extended and deficit-financed Bush tax cuts. There’s a difference between the two standards that’s worth $2.5 trillion over ten years by the Bush tax cuts alone. So there’s a lot of room for a second round of deficit reduction–I mean deficit reduction relative to “current policy” only, not current law–that’s quite heavy on the revenue side of the budget, if this is where Boehner means to go with this.