Tuesday, July 30, 2013

The Economics of Growth... & Politics of Compromise

Last week, President Obama traveled to Galesburg, Illinois, to talk about the nation's economic future. Today, he's in Chattanooga, Tennessee, to give Congressional Republicans an offer they shouldn't refuse. The President is willing to lower the overall corporate tax rate... So long as they're willing to close loopholes and invest in job creation.

“I’m willing to work with Republicans on reforming our corporate tax code, as long as we use the money from transitioning to a simpler tax system for a significant investment in creating middle-class jobs,” he said in prepared remarks. “That’s the deal.”

As an alternative to seeking quick passage of thedeficit-reduction formula that has eluded lawmakers for two years -- a mix of increased tax revenue and entitlement curbs -- Obama proposed spending more to help manufacturing, worker training and infrastructure improvements that create jobs.

“If Washington will just end the gridlock and set aside the kind of slash-and-burn partisanship we’ve seen these past few years -– our economy will be stronger a year from now,” he said.

Under the proposal, Obama would seek a business tax change that produces a one-time revenue gain, and that would be earmarked for the repair of roads and bridges or other public works, innovation centers for manufacturing and community college training to close skill gaps.

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Yet so far, House Republican "leaders" are so far refusing this "grand bargain" anyway. The White House likely stopped caring about what they say a long time ago. At this point, they're eyeing the Senate "Compromise Caucus" in hopes of striking a deal.

Just about everything the White House and Congressional Democratic leaders propose at this point is intended to bolster the fledgling consensus caucus in the Senate — or at least is crafted with the goal of winning over those Republicans in mind.

That’s why we’re talking about a small bore jobs plan that directs dollars to popular government initiatives and a pretty generic, revenue neutral tax reform plan that concedes lower rates in advance.

It’s also why the White House and Senate Democrats aren’t trying to turn off sequestration in the appropriations process.

And it’s part of the reason Democrats welcome these Quixotic conservative attempts to make defunding Obamacare the ransom for keeping the government open or increasing the debt limit. Setting aside the damage that kind of radicalism does to the GOP nationally, this behavior is at long last splintering the GOP rather than uniting it behind a path-of-most-resistance conservative consensus. It’s invigorating the dozen-or-so Senate Republicans who are done with the 2011 way of doing things.

So it’s no surprise that Boehner and McConnell rejected this latest White House idea out of hand. The real question is what do Susan Collins and John McCain and Bob Corker and the rest of them think of it. Obviously their support wouldn’t mean the plan would pass cleanly in the Senate this week or this fall, let alone become law. But it would be an indication that the same group that’s been instrumental in confirming Obama nominees and fighting the right over defunding Obamacare is coalescing around the kinds of ideas that could be included in a future legislative package that would also probably include an increase in the debt ceiling.

As we've discussed before, G-O-TEA approved austerity has led to real economic pain and unnecessary hampering of economic recovery. If we want more economic growth, we need less austerity. It's really as simple as that.

Well, at least it should be. Yet even though the economics here are simple, the politics can be quite complicated. That's why the President is in Tennessee today. And that's why all eyes are now on this budding "Compromise Caucus" in the Senate.

Again, the economics of this are plain and simple. We need pro-growth policies, not pro-poverty austerity. It's now just a matter of whether the politics of Capitol Hill can finally catch up to economic reality.

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