Politics Is Perception

The Republicans in the House appear to be ready to bring the Cut, Cap and Balance proposal to the floor for a vote next week.  I believe this is a mistake.  It is not that I disagree with any of its objectives.  However, politics is about perception.  Proceeding with this plan the way it is packaged is going to allow the Democrats and the mainstream media to feed the narrative that Republicans are unreasonable ideologues.

Cut, Cap and Balance is relatively straightforward.  The proposal would require immediate cuts in the 2012 budget of $111 billion.  It would set a statutory, enforceable cap to align federal spending with average revenues of 18%.  Finally, it would require passage of a Balanced Budget Amendment to the U.S. Constitution that would then go the states for ratification.

In return for the passage of Cut, Cap and Balance the Debt Ceiling Limit would be increased by $2.4 trillion.

If you read my previous post, "A Reasonable, Balanced Plan To Balance The Budget", there is hardly a scintilla of difference in the policy result between my suggestion and Cut, Cap and Balance.  There is a significant difference in how it would be perceived.  Perception is reality in politics.

For example, let's look at the Cut.  The Cut plan will talk about $111 billion in cuts to the 2012 budget.  My plan would state that we are only asking for about 4% in reductions from President Obama's 2012 budget request.  Get off the dollar amounts and talk about percentages!  What budget cannot withstand a 4% cut?  That seems reasonable, $111 billion or $161 billion, that is a lot of money in anyone's mind until you compare it to the $3.7 trillion in spending that is in President Obama's 2010 budget request.  It is about perception.

I work toward a spending cap of 19% of GDP in my Reasonable Budget.  As I stated, I would set the glide path at 5 years in my proposal but I would give the Democrats the opportunity to extend it to 10 years.  Again, showing a reasonable approach and a willingness to compromise with the Democrats.  In addition, the Reasonable Budget sets up across the board spending cuts unless a better plan can be agreed to before the trigger dates.  President Obama has asked for shared sacrifice.  The Reasonable Budget says we heard you.  Defense, special interest subsidies and everything else would be on the chopping block equally.  There are no sacred cows.  It is about perception.

Finally, the Reasonable Budget puts potential tax increases in the mix.  They can be raised once we reach the spending targets if the current tax code is not providing sufficient revenues.  It is also reality that if we don't create more taxpayers, we will have no choice but to raise taxes anyway.  I would rather have a line in the sand as to what that amount is as a % of GDP.  However, just as the President stated, we have to eat our peas first.  Spending cuts have to come first but tax increases are not precluded if we need them.  This would be seen as a major concession by Republicans and would put the Democrats on the defensive.

However, if our economy comes back and we create more taxpayers I doubt it would ever be triggered.  If the Democrats want to put their favorite tax increases on the list right now for possible increase in the out years, I would let them do it.  However, the spending cuts much come first.  Tax increases fill the gap when the heavy lifting is done if it is still required.

I would rather see a commitment to major tax reform that would rid the tax code of most of the preferential deductions in a revenue neutral manner..This would then allow for the lowering of both individual and corporate rates.  However, give the Democrats a chance to say they got something.  Again, it is all about perception.

I did not address the Balanced Budget Amendment in my proposal for the simple reason that I don't think it adds much right now.  It is a bridge too far.  It is unlikely that it will get the necessary 2/3 vote in the House and Senate.  Even if it did, President Obama would be even more unlikely to sign it.  What is the point of of trying to make a point?  It does not really help the Republicans bridge the issues right now.  I would take this off the table and save the issue for the 2012 elections.  Get the process started and starting making progress on the budget problem and the amendment gets a lot easier to pass in the future.

The bottom line is that the Republicans have to look at the end result rather than the process. Cut, Cap and Balance and the Reasonable Budget do the same thing.  However, the Reasonable Budget can be sold to the American people and it is totally defensible.  I don't think Cut, Cap and Balance can be marketed in the same way in the current political environment.  It is all about perception and that it what politics is all about.