Republican leaders believe they can win the battle on taxes because, however the debt fight turns out, voters will evaluate them based on the issue they care about most: jobs and the economy. “The public wants to make sure that whatever comes out of this will have a positive impact on the economy and job creation,” says a Republican closely involved in the debt ceiling talks. “The challenge for Republicans is connecting this debate to the economy and job creation.”
Look at any Republican statement these days, and it will most likely link the debt fight to jobs. For example, on Monday, after Obama threatened to veto the GOP’s “cut, cap and balance” proposal — White House spokesman Jay Carney called it “duck, dodge and dismantle” — Boehner issued a statement that began by bemoaning Obama’s rejection of a “common-sense plan to rein in the debt and deficits that are hurting job creation in America.”
Even as opponents criticize them as inflexible, look for Republicans to become even more inflexible on taxes and fight back even harder against the charge that their tax cuts would send the deficit into the stratosphere. As it has in the past, the battle will be fought over the Bush tax cuts.
“Everybody talks about how much the Bush tax cuts cost, and we’re saying, no, they led to a huge increase in revenue,” says the Republican involved in the fight. It’s true. According to historical tables published by the Office of Management and Budget, government revenue shot higher after the Bush tax cuts were enacted. Total federal government receipts rose from $1.782 trillion in 2003 to $2.567 trillion in 2007 — an increase of $785 billion, or 44 percent. In 2007, the federal deficit shrank to $160 billion — all after tax cuts that Obama and his Democratic allies portray as disastrous.
That recent history is at the heart of the conflict between Republicans and Obama over taxes. “The president’s view of tax reform is tax increases,” says the Republican. “Republicans view tax reform as setting tax rates to maximize economic activity.”