The road to revenues

From a progressive perspective, there’s a list of concerns about the debt-reduction agreement reached yesterday, but if I had to guess, I’d say the lack of revenues is the most frustrating.

After all, the White House, the Senate majority, and the clear majority of the American mainstream all wanted a “balanced” package, featuring both cuts and new revenues. The deal before Congress is nevertheless made up entirely of spending cuts, just as far-right Republicans demanded.

Wait, White House officials argue, that’s only half the story. Sure, there are no revenues now, in this initial phase of the process, but this isn’t a one-round fight.

At the center of the next round will be the Bush-era tax breaks, which President Obama extended in full last December, but all of which are set to expire on New Year’s Eve 2012. This inflexible deadline offers Democrats a degree of leverage that’s been missing. Whether they take advantage of it or not remains to be seen, but I’m cautiously optimistic.

Jon Chait, who wants all of the Bush-era rates to expire, had a good item on this earlier.

Obama has one golden ticket out of the revenue dilemma. As I’ve written multiple times, the expiration of the Bush tax cuts gives him enormous leverage over the GOP. Republicans signaled last year they’d rather kill off the entire Bush tax cuts than sacrifice the portion that only benefits the rich. Holding firm on the Bush tax cuts would let Obama maneuver Republicans into the position of killing off all the Bush tax cuts. That would provide all the revenue he needs — some $4 trillion over a decade, as opposed to the $800 billion he’d raise merely by ending tax cuts for the rich.

What’s more, going to the mat over the Bush tax cuts would provide Obama with a strong political message for 2012. He can’t run on the economy. He needs a contrast election. Republicans will try to pass some version of the Paul Ryan budget, cutting taxes for the most affluent and laying waste to Medicare and Medicaid. Obama can run as the candidate insisting on shared sacrifice — and having already agreed to $3 trillion in spending cuts would give him credible to draw that line.

The problem, though, is that we can’t be sure Obama really intends to draw that line.

That’s true, we can’t, but some of the evidence is encouraging.

White House Press Secretary Jay Carney, for example, told reporters that the president will veto any measure that extends the Bush-era rates for the wealthy. There was no wiggle room. Obama would almost certainly make permanent the breaks for those making less than $250,000 — breaks that arguably need to be scrapped, too — but if Republicans fight make the same demands as they did in December 2010, the president apparently won’t accept another deal.

Indeed, I’ve heard rumors that when the White House was trying to help sell the debt deal yesterday, officials swore up and down they’ll follow through on this in 2012.

This also matters a great deal in the context of the bipartisan “Super Congress” panel, where, if the deal passes, Dems will demand additional revenue and Republicans will demand the opposite. No matter who wins, or if there’s deadlock and the triggers kick in, Obama knows he can still get revenue by simply watching Bush-era tax cuts expire on schedule. GOP members know this, too, which Dems intend to use as leverage.

To be sure, there will be opportunities for Dems to screw this up, and Kos sketches out just such a scenario today. Time will tell. The fact remains, however, that this remains a unique opportunity and the surest way to create a balanced debt-reduction plan that sets the nation on a fiscally-healthier path for many years.