Durbin doesn’t want entitlement changes this year. He wants to put them off until 2013. Why does everybody want to put spending cuts off until next year? It doesn’t work. It won’t persuade the financial markets or the credit-rating agencies. Small, money-saving entitlement reforms, like cost-of-living adjustments and raising the eligibility age, would be a useful down-payment within thisyear’s fiscal-cliff deficit deal.
And herein resides the GOP leverage, if they choose to use it. Republicans should not sign a tax deal that doesn’t have a sizeable spending component. And they should argue that a smaller spending share of gross domestic product is actually a tax cut stimulant for the economy, and that it would give confidence to the business and financial worlds as well as the rating agencies that Washington is on the right track. And the GOP should use this leverage to press on with the idea of capping deductions, rather than raising top rates on successful earners, small businesses and investors.
Now, some people argue that Senate Democrats, and perhaps the president, should just let all the tax cuts expire this year. That, of course, would bring on a recession, or at least an even more anemic economy. Just blame the Republicans, it is said.
But I don’t buy this. Why? Because the president does not want a second recession during his watch. Herbert Hoover Obama is not the legacy he’s after.