Obama Promises a Grand Bargain to Avoid the ‘Cliff’
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The Fiscal Times
October 24, 2012

President Obama voiced confidence this week that – provided he wins a second term -- he can strike a major budget and tax deal with Republicans early next year that would avert the fiscal cliff and put the government on course to reduce the deficit by $4 trillion over the coming decade.

“It will probably be messy. It won’t be pleasant,” Obama said during an off-the record interview with the Des Moines Register on Tuesday that the White House allowed to be released today. “But I am absolutely confident that we can get what is the equivalent of the grand bargain that I’ve been offering to the Republicans for a very long time.”
The “grand bargain” would match $2.50 worth of spending cuts for every $1 of new revenue – a plan similar to the president’s 2010 Simpson-Bowles fiscal commission, but whose recommendations the president did not support.

The president tried a year ago to negotiate a major deficit reduction plan including some tax increases with House Speaker John Boehner, R-Ohio, but those talks subsequently collapsed. The substantial cost savings in his new plan would come from Medicare, Medicaid and other health care entitlement programs.

Obama used the interview to defend his economic and jobs record and to make the case for a second term, while sharply criticizing Republican policies, particularly on immigration reform. While Republican presidential nominee Mitt Romney and other GOP leaders have repeatedly opposed tax increases, saying they would discourage investment and job creation, Obama insisted that “nobody who looks at the numbers thinks it’s realistic” to reduce the trillion dollar annual deficit without some fresh revenues.

“We’ve identified tax rates going up to the Clinton rates for income above $250,000; making some adjustments in terms of the corporate tax side that could actually bring down the corporate tax overall, but broaden the base and close some loopholes,” he said. “That would be good for our economy, and it would be good for reducing our deficit.”

Obama said that if both sides choose to work together after the election, he and Republican and Democratic congressional leaders can “credibly meet the target” of $4 trillion of long term deficit reduction that was recommended by Simpson-Bowles. Although neither the president nor most congressional leaders ever fully embraced that plan, many members of Congress and policy makers consider it the gold standard of deficit-reduction strategies.

“We can stabilize our deficit-to-GDP ratio in a way that is really going to be a good foundation for long-term growth,” the president told the newspaper. “Now, once we get that done, that takes a huge piece of business off the table.”

Action is essential, he said, in the face of the expiring Bush tax cuts and major automatic across the board spending cuts in defense and domestic programs set to take place in early January that Federal Reserve Chairman Ben Bernanke and others warn could jolt the economy back into a recession – the so called fiscal cliff. “But we’re going to be in a position where I believe in the first six months we are going to solve that big piece of business,” Obama said.

The president’s comments to the newspaper about addressing the fiscal cliff follow Obama’s remarks during the Monday night presidential debate in Boca Raton, Fla., where he ruled out the possibility of a sequester of the defense budget beginning early next year.

Obama declared for the first time that he would block the large, automatic cuts in defense set to take effect early next year after Romney sharply criticized the administration for weakening U.S. armed forces just as the nation is facing a nuclear threat from Iran and growing tumult in the Middle East.

Neither Obama nor Romney directly mentioned the fiscal cliff in any of their three debates this month. A formidable array of players, from Defense Secretary Leon Panetta and House Armed Services Committee Chairman Buck McKeon, R-Calif., to former Vice President Dick Cheney and the CEOs of Lockheed Martin, Pratt & Whitney and EADS North America, have mobilized against the roughly $500 billion in long-term across-the-board defense cuts that will kick in beginning in early January, absent congressional intervention.

Normally, the Des Moines Register publishes its interviews with presidential candidates, but in this case, it agreed to an off-the-record conversation with Obama. Afterwards, however, it revealed the situation in an editorial, which led to an embarrassing moment for the campaign as some asked why the president saw the necessity to speak with the largest newspaper in Iowa on background. In response, the Obama campaign allowed the Register to publish the interview, as is custom.

If there’s anything of an eyebrow raising nature in the interview, it’s the president’s sharp criticism of the Republicans for their handling of the immigration issue, which he said has cost Romney the vast majority of the Latino vote.

“The second thing I’m confident we’ll get done next year is immigration reform,” he said. “And since this is off the record, I will just be very blunt. Should I win a second term, a big reason I will win a second term is because the Republican nominee and the Republican Party have so alienated the fastest-growing demographic group in the country, the Latino community. And this is a relatively new phenomenon. George Bush and Karl Rove were smart enough to understand the changing nature of America. And so I am fairly confident that they’re going to have a deep interest in getting that done.”

Washington Editor and D.C. Bureau Chief Eric Pianin is a veteran journalist who has covered the federal government, congressional budget and tax issues, and national politics. He spent over 25 years at The Washington Post.