President Obama, Harry Reid and Nancy Pelosi had a plan.
Together they would explode federal spending with bailouts, stimulus, ObamaCare, cap and trade and more Troubled Asset Relief Program (TARP). Republicans would impotently stand by and watch this growth in spending. Then Obama would turn to the Republicans and demand that they be “fiscal hawks” and combat the deficit spending—not by reducing the spending—but by raising taxes to pay for Obama’s supersized government and make permanent the increase in government spending as a percentage of the total economy.
Obama wanted Republicans to revert to their behavior in the 1960s and 1970s and become, in Jack Kemp’s famously damning phrase, “the tax collectors of the welfare state.”
Part one of the plan worked flawlessly. The “stimulus” of $800 billion, almost doubling domestic discretionary spending, TARP II of $350 billion and the $1 trillion cost of ObamaCare’s first 10 years took total government spending from $2.9 trillion in 2008 to $3.8 trillion in 2011.
Part two ran into some trouble. The Tea Party arose in opposition to the tsunami of government spending. Republicans gained 63 members of the House and six senators. And of the new totals of 47 Republican senators and 240 Republican members of the House of Representatives, 40 senators and 235 House members were elected having signed the Taxpayer Protection Pledge promising their constituents they would never vote for a tax increase.
If the Republicans keep their pledge, the only way to “fix” Obama’s overspending is to spend less. This was a chilling thought for the Democrats.
So they went to work to undermine Republican resistance to tax increases. Obama created the Obama debt commission 18 months ago to have a bi-partisan commission recommend tax increases and spending restraint. Obama hoped this would repeat the liberal victories of 1982 and 1990, where Democrats promised Presidents Reagan and then Bush three dollars of spending cuts for every dollar of tax increases they would allow. In 1982 and 1990, the tax increases were real and permanent while spending increased—there were no real cuts at all. Reagan referred to this “deal” as the worst decision of his presidency. Bush saw his tax-hike-for-no-spending-restraint deal cost him the presidency in 1992.
Wisconsin Rep. Paul Ryan served on Obama’s commission (sometimes called the Simpson-Bowles commission for its co-chairs), and when the commission recommended $2 trillion in tax hikes over the next decade and the spending restraint was questionable at best, he and all the Republican members of the House on the commission voted no. They remembered 1982 and 1990.
But one Republican member of the commission, Sen. Tom Coburn of Oklahoma, voted for the commission recommendations to increase taxes $2 trillion over the next 10 years. (The Heritage Foundation estimates the tax increase is closer to $3 trillion.)
Worse, Coburn has begun to publicly call for higher taxes.
During a May 29 interview on C-SPAN’s “Newsmakers” program, Coburn said, “Why will I take on those that are against tax increases for Republicans? Because it’s the right thing to do to save our country.” In the same interview a few minutes later, Coburn said, “I’ve been just as vocal supporting revenue increases after I left the commission as I was before.”
Appearing on MSNBC on June 9, Coburn said, “Do I believe we have to raise taxes to be able to get a deal to cut spending? Yeah.”
But Coburn could not get any Republicans to break the pledge to never raise taxes. Republican leaders Mitch McConnell (Ken.), Jon Kyl (Ariz.), Speaker of the House John Boehner (Ohio) and Eric Cantor (Va.) repeatedly stated Republicans would never allow a tax increase in any budget deal. The Republicans were united in calling for less spending, never higher taxes. The Republicans in the House passed the Ryan plan that reduces federal spending by $6 trillion over the next 10 years and reforms taxes, taking the top corporate and individual rates to 25%—tax reform, without any tax increase.
Obama tried a new tack. He suggested that reducing tax credits and deductions as the Alternative Minimum Tax does should not count as a tax increase. Because when the government doesn’t tax your health insurance or state income tax or property tax payments it is in fact “spending” money on you. This is a reprise of Ted Kennedy’s 1978 call for higher taxes on Americans by eliminating “tax expenditures.” All your income is owned by the government. So every dollar the government does not take from you it actually has given to you.
Coburn has adopted Obama’s strategy and is now telling Republicans it’s okay to vote for trillions in higher taxes if it comes from reducing tax deductions like the charitable contribution deduction or your home mortgage deduction or the deductibility of your health insurance.
To break down Republicans’ resistance to increasing taxes—and breaking their pledge to voters—Coburn wrote an amendment that would increase taxes through the elimination of the justly unpopular ethanol tax credit without an offsetting tax cut.
Americans for Tax Reform has always supported eliminating this tax credit—which would raise taxes $2.4 billion this year—as long as tax rates were brought down so that “tax reform” did not become a tax increase. But Coburn refused to reduce taxes elsewhere to keep his legislation revenue neutral.
And while Coburn tried to win Republican and conservative support for his amendment by saying it would end the government’s assistance to the ethanol industry, his legislation tellingly did not eliminate the most important part of the ethanol subsidy regime: the government mandate to produce and use billions of gallons of this fuel.
Coburn went further and on the floor of the Senate on Monday, June 13, when he said he supported the mandate to use ethanol and would vote against Sen. Jim DeMint’s legislation to abolish the mandate. So Coburn is a defender of the federal government’s law that forces producers to make and consumers to buy ethanol they don’t want. His amendment was not about ending the government preference for ethanol, but rather about tricking Republicans into voting for a very small tax increase in preparation for larger ones.
To checkmate this effort, Americans for Tax Reform worked with Republican leadership and DeMint so that DeMint could offer his amendment to actually end the ethanol mandate and also abolish the death tax so that together with Coburn’s $2.4 billion tax increase the result would be a tax cut, not a tax increase, and no Republican would be tricked into breaking his or her pledge.
When a vote on cloture for Coburn’s legislation—to which the Republican leadership would have added a vote on the tax-cutting DeMint bill—was defeated, Coburn told the press that the 34 Republicans who voted for his “ethanol” bill had actually all now agreed to raise taxes rather than insist on spending reductions in any deal with the President. Coburn announced that his fellow Republicans had abandoned their pledge to their voters not to vote for tax increases. Actually none had.
The Coburn-DeMint amendments came into play again on Thursday when Reid allowed a vote on Coburn’s amendment which passed 73-27. McConnell said he would demand – and Reid said he would allow – a vote on the DeMint amendment before the underlying legislation came to a vote. This allows every Republican who wishes to eliminate all ethanol preferences and avoid voting for a net tax increase to do so by voting for both amendments.
Republican leadership has again committed to demanding spending cuts without higher taxes in any budget negotiations. They will not be undermined.
The Coburn effort to break the Republican unity in demanding spending cuts and no tax hikes failed.