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Philip Klein: How to evaluate 'fiscal cliff' proposals

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Opinion,Philip Klein,Columnists,Campaign 2012,Politics Digest

After weeks of relative calm, America's "fiscal cliff" drama has now been overtaken by a flurry of proposals, counterproposals and legislative maneuvering.

As various ideas have been floated, they have triggered two main reactions among conservatives. One is to insist that if Republicans firmly stand their ground long enough, they will eventually get what they want from President Obama. Another is to side with House Speaker John Boehner and to act as if anybody who rejects any of his proposals is completely detached from reality.

If Republicans refuse to back any deal that doesn't preserve all of the Bush-era rates in hopes of protecting the GOP's reputation as the low-tax party, they risk accomplishing the exact opposite. Americans would likely blame the GOP for taxes going up on everybody -- as would happen automatically on Jan. 1 if no deal is struck. At that point, Obama could propose a massive tax cut for those making less than $250,000 per year, and it would be difficult for Republicans to resist. If they continued to do so, their reputation as tax cutters would be deeply damaged.

So, due to the quirky fact that all tax cuts are slated to expire at year's end, it's inevitable that Republicans will have to make some sort of concessions to limit tax increases. But at the same time, Obama's leverage only goes so far.

House Republicans know that at any point they could pass a bill making permanent Bush tax rates for those under $250,000 while allowing the upper-income rates to rise, and Democrats would have to support it. It's what Obama campaigned and won on. Such a move would increase taxes by $824 billion over a decade. Therefore, that should be seen as the maximum amount of tax increases that Republicans would need to agree to.

This means that reasonable conservatives have a right to be skeptical of any deal that raises taxes by more than a penny over $824 billion.

One of the remaining areas of difference in negotiations is that Boehner wants to preserve tax rates for income up to $1 million, and Obama has proposed doing so for income up to $400,000. For the unacquainted, this would seem like a better deal for conservatives than a $250,000 threshold. But in reality, because the proposals would also impose various limitations on deductions, Obama's offer would raise taxes by $1.2 trillion (or $1.3 trillion, depending on who you believe), and Boehner's proposal would raise taxes by $1 trillion. Therefore, in both cases, this tax increase would be north of the $824 billion that Republicans could always fall back on.

That's not all. Under the Obama-Boehner framework, Republicans would agree to raise the debt limit (for two years under Obama's proposal and for one year under Boehner's). This would mean Republicans would be giving up future leverage to demand spending cuts. Obama is also pushing for more stimulus spending and another extension of unemployment benefits, which Boehner's deal did not include.

What would conservatives receive in exchange for agreeing to several hundred billion dollars more in tax hikes than Obama campaigned on, plus a debt-limit increase and possibly more stimulus spending? In a Tuesday press conference, Boehner said he'd support $1 trillion in tax increases in exchange for $1 trillion in spending cuts that include some entitlement reforms.

When evaluating any such deal in the coming weeks, conservatives should look carefully at how any spending cuts are calculated and how realistic it is that they'll go into effect. Any new stimulus spending, any effort to delay or replace the automatic spending cuts scheduled to go into effect on Jan. 1 as part of the 2011 debt-ceiling deal (the so-called sequester), any effort to delay scheduled cuts to doctors' payments in Medicare (known as the "doc fix"), should be deducted from any spending-cut claims. At the same time, any promises to set up a mechanism to deal with tax reform or entitlement reform next year should be greeted with severe skepticism.

Conservatives should acknowledge that some sort of compromise is inevitable. But that doesn't mean they have to swallow anything that Boehner cooks up.

Philip Klein (pklein@washingtonexaminer.com) is a senior editorial writer for The Washington Examiner. Follow him on Twitter at @philipaklein.

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Philip Klein

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The Washington Examiner