The Conservative Action Project, the influential working group led by former Reagan Attorney General Ed Meese, has released another of its "Memos for the Movement." This time the organization is warning conservatives of the dangers inherent in any "Grand Bargain" aimed at averting the approaching "fiscal cliff."
It's a brief memo, one that explains that any comprehensive deal between Congress and President Barack Obama must include: no net tax increase; no decoupling of tax rates; no sequester without real spending reductions; no "two-step process" that "kicks the can down the road"; and no increase in the federal debt limit without both budget cuts and enforceable spending caps.
The memo reflects the calls by other conservative leaders for the Republicans in Congress to stand firmly on principle, in this case the need to oppose any and all efforts to increase marginal tax rates. Such increases would only do more damage to the domestic economy by moving even more money out of the private sector—where it can be allocated efficiently and produce economic growth—into public coffers.
Right now President Obama is engaged in a high stakes game to raise tax rates on the so-called "wealthiest Americans"—which includes a healthy number of small businesses—in exchange for no real progress on spending reduction. As noted economist Richard Rahn and others have pointed out, the taxes Obama wants would barely make a dent in the spending problem, which now has government consuming almost one quarter of U.S. gross domestic product. Even if taxes go up—on some or on all Americans—Obama plans to increase spending well beyond whatever new revenues those higher tax rates might produce.
The problem, quite simply, is overspending, not undertaxation. This should be easy to understand and easy to explain. By focusing on the tax question almost exclusively, however, the Republicans are playing into Obama's hands. There is little time in which to do it, but the American people need to be made to understand that the current level of federal spending is way out of line with the economy's ability to support it.
One way to do this effectively would be to put the congressional negotiations over a deal to avert the fiscal cliff on television. Americans for Tax Reform's Grover Norquist said as much Sunday to an incredulous David Gregory on NBC's Meet the Press. It's a theme the Conservative Action Project has picked up as well, arguing that "Conservatives should insist that negotiations on any ‘Grand Bargain' be an open process for the citizens to observe for themselves and President Obama should submit a plan in the form of actual legislation so all will have time to read it and express their opinions to their elected representatives."
The only way to avoid a bad deal is for it to be crafted in full view of everyone who would be affected by it—meaning the American taxpayers. Putting the negotiations on television, putting the proposals on line, making sure everything is subject to public scrutiny, is the only away to get around the political spin machine and through the media filter. In the meantime, Speaker John Boehner should have the Republican-controlled House pass an extension of the George W. Bush/Barack Obama tax rates—including the rates on the death tax, capital gains, and dividends—as well as another extension of the 2 percent payroll tax holiday, send them to the Senate, and challenge Majority Leader Harry Reid and the Democrats to bring them up for a vote. Such a move would be consistent, in spirit at least, with President Obama's insistence that taxes be handled first and that the spending cuts come later.
The political brinksmanship the president is playing is not worth the very real costs it will produce. Higher taxes will hurt the U.S. economy. The rate increases that will occur, even though they can be fixed retroactively later in the year, will likely push growth downward even further and might produce another recession—and more unemployment—and higher federal spending as relief payments rise. What Obama wants is no "bargain" for the American people.