Call Obama’s bluff on sequestration

For the first time since Election Day, President Obama is on the defensive. That’s because on March 1, automatic spending cuts (“sequestration”) go into effect — $1.2 trillion over 10 years, half from domestic (discretionary) programs, half from defense.

The idea had been proposed and promoted by the White House during the July 2011 debt-ceiling negotiations. The political calculation was that such draconian defense cuts would drive the GOP to offer concessions.

It backfired. The Republicans have offered no concessions. Obama’s bluff is being called and he’s the desperate party. He abhors the domestic cuts. And as commander-in-chief he must worry about indiscriminate Pentagon cuts that his own defense secretary calls catastrophic.

So Tuesday, Obama urgently called on Congress to head off the sequester with a short-term fix. But instead of offering an alternative $1.2 trillion in cuts, Obama demanded a “balanced approach,” coupling any cuts with new tax increases.

What should the Republicans do? Nothing.

Republicans should explain — message No. 1 — that in the fiscal-cliff deal the president already got tax hikes with no corresponding spending cuts. Now it’s time for a nation $16?trillion in debt to cut spending. That’s balance.

The Republicans finally have leverage. They should use it. Obama capitalized on the automaticity of the expiring Bush tax cuts to get what he wanted at the fiscal cliff — higher tax rates. Republicans now have automaticity on their side.

If they do nothing, the $1.2 trillion in cuts go into effect. This is the one time Republicans can get cuts under an administration that has no intent of cutting anything.

Of course, the sequester is terrible policy. The domestic cuts will be crude and the Pentagon cuts damaging. This is why the Republican House has twice passed bills offering more rationally allocated cuts. (They curb, for example, entitlement spending as well.)

Naturally, the Democratic Senate, which hasn’t passed a budget since before the iPad, has done nothing. Nor has the president — until his Tuesday plea.

The GOP should reject it out of hand and plainly explain (message No. 2): We are quite prepared to cut elsewhere. But we already raised taxes last month. If the president wants to avoid the sequester, he must offer a substitute set of cuts.

Obama is trying to sell his “balanced” approach with a linguistic sleight of hand. He insists on calling his proposed tax hikes — through eliminating deductions and exemptions — “tax reform.”

It’s not. Tax reform, as defined even by the White House’s own Web page on the subject, begins with lowering tax rates. It then makes up the lost revenue by closing loopholes.

Real tax reform is revenue neutral. It’s a way to clean the tax code by eliminating unfair, inefficient and market-distorting loopholes on the one hand while lowering rates.

Obama has zero interest in lowering tax rates. He just got through raising them at the fiscal cliff and has made perfectly clear ever since that he fully intends to keep raising taxes. His only interest in eliminating loopholes is to raise more cash for the Treasury — not to use them to lower rates.

That’s not tax reform. That’s a naked, old-fashioned tax increase.

Hence Republican message No. 3: The sequester is one thing, real tax reform quite another. The sequester is for cutting. The only question is whether it will be done automatically and indiscriminately — or whether the president will offer an alternative set of cuts.

Then we can take up real tax reform. Reprise the landmark Reagan-Tip O’Neill-Bill Bradley tax reform of 1986, a revenue-neutral spur to economic growth and efficiency.

The country needs tax reform. But first it needs to rein in out-of-control spending. To succeed in doing that, Republicans must remain united under one demand: cuts with no taxes — or we will let the sequester go into effect.

The morning after, they should sit down with Obama for negotiations on real tax reform as recommended by the president’s own Simpson-Bowles commission: broaden the base, lower the rates.