12.10.10

The One Man Who Can Sink Obama's Tax Plans

President Obama may be preparing to push through part of his deficit commission’s plan, which has found surprising bipartisan support. But first he has to get by Grover Norquist, whose influential anti-tax group is waging war on the proposal—and any Republican heretic who dares to back it.

It seems hard to believe amid the current bonanza of tax breaks that the talk of the town in Washington just last week was all the bipartisan plans to slash the deficit by trillions of dollars. The most prominent proposal, put out by President Obama’s deficit commission, drew surprising support from both Democratic and Republican senators in the group. Commission members and senior White House officials met Thursday morning to determine their plan going forward, and Obama is reportedly planning a push to adopt their recommendations for overhauling the nation’s tax code for the first time in 25 years in order to bring down the deficit. Could this be the Congress that finally gets serious about the national debt? Not if Grover Norquist has anything to say about it. The longtime face of the GOP’s anti-tax wing has been leading a crusade against the commission’s fragile progress through his group Americans For Tax Reform, and budget experts are openly fretting that he’ll sink their proposals before they get anywhere near Congress.

While deficit hawks talk up a new bipartisan consensus on the debt—“The era of deficit denial is over,” presidential commission co-chair Erskine Bowles declared recently—Norquist insisted in an interview with The Daily Beast that there’s only one path to small government: unconditional Republican victory.

“We have to get 60 Republicans in the Senate and a different president,” he said. “Then you can do things.”

Such a statement is no surprise coming from Norquist, one of the GOP’s most prominent and pugilistic voices over the last three decades. While his politics don’t always toe the party line—his pro-gay, pro-immigration stances have earned him the enmity of many conservatives—no Republican better defines the small-government wing of the party and its militant, uncompromising line on taxes. Not even this week’s surprise breakthrough between Obama and Republican leaders on the Bush tax cuts has swayed Norquist’s certainty that bipartisanship won’t work in the long run, though he said he was pleased to see the Bush tax cuts extended with some Republican-friendly tax breaks thrown in as part of the White House’s demands as a bonus.

“It seems a lot of what he got out of this negotiation was on our wish list,” he acknowledged. Nonetheless, he predicted that the uncertainty resulting from making the cuts temporary and unemployment insurance benefits incentivizing Americans to stay out of work would rob Obama of any economic and political headwinds heading into 2012.  The discontent from House Democrats over the president’s tax-cut deal also has been music to Norquist’s ears, an indication that bipartisan talks are a nonstarter on the other side of the aisle as well.

“They can’t even agree to talk to the Republicans on maintaining the lower rates for two years and they think they’re going to do entitlement reform?” he said. “They act like a guy who lost an arm and still feels the nerves as if it’s still there, but their majorities aren’t still there.”

Democrats and progressive groups have generally been more critical of the deficit commission proposal than their Republican counterparts, decrying proposed cuts to Social Security that House Speaker Nancy Pelosi called “simply unacceptable.” But while House Democrats may be in open revolt these days, their days in the majority are numbered and signs are popping up that there might be more appetite for deficit talks than previously thought. Republican Senators Tom Coburn and Mike Crapo, two of the most conservative members of the president’s commission, offered an unexpected ray of hope to deficit wonks by joining with Democratic Senators Kent Conrad and Dick Durbin in backing the group’s plan, which would combine spending cuts with more than $1 trillion in new revenue by 2020. One of the first questions Coburn and Crapo received at their press conference announcing their vote was how they would deal with Norquist.

“Our obligation is to the country as a whole,” Coburn told reporters, “not to any special interest group.”

In response, Norquist’s group has launched a flurry of broadsides at the dissenting Republicans this week. Americans for Tax Reform staff member Ryan Ellis put up a blog post under the headline “The Two Faces of Tom Coburn” on the group’s website, accusing the Oklahoma senator of backing down from a signed pledge not to raise taxes, and wrote on Twitter that Coburn and Crapo “admitted they lied about taxes to get elected.” The attacks prompted a rebuke from Coburn’s spokesman, who wrote that Ellis should “cool it or tell his boss to come over and tell Dr. Coburn in person that he is a liar and tax-hiker.”

“I am concerned that the world will take what [Coburn and Crapo] did as an endorsement of tax increases aligned with spending restraint,” Norquist said.

The “lie” in question is Norquist’s ace in the hole, a signed promise organized by Americans for Tax Reform not to raise taxes and a basic prerequisite to running for office for Republicans, all but a handful of whom have signed it. The two major bipartisan commissions both argue that the debt problem is simply too big to tackle without tax increases, while Norquist argues that the explosive growth created by even greater tax cuts will erase the deficit even without major cuts to popular entitlements. The theory carries little weight with most mainstream economists.

While his employees seek to label any Republican who breaks ranks on the deficit commission a heretic right out the gate, Norquist has taken a different tack, suggesting that Republican support for the plan is actually a mirage. He told The Daily Beast that Coburn and Crapo, far from heretics, were “heroes of the revolution” and that after talking with them on the phone he was reassured they wouldn’t support any tax hikes in the unlikely event they reached Congress.

“I talked to both Coburn and to Crapo afterwards and both said they were not in favor of tax increases and would work to make sure anything that moved would not have tax increases,” he said. “They thought they were advancing the conversation on spending restraint.”

But aides to both Coburn and Crapo confirmed to The Daily Beast that the lawmakers’ support for the deficit commission plan was genuine, even as they declined to comment on Norquist’s remarks. Asked about the discrepancy, Norquist called back to clarify that the two senators do differ with him on their definition of a tax increase. Indeed, Coburn and Crapo have made clear they don’t believe their proposal raises taxes at all. The reason is a creative budgeting maneuver crucial to both of the major bipartisan commissions’ plans. Each proposal would lower income and corporate tax rates across the board even as it raised overall revenue by drastically cutting into the $1 trillion-plus  annual assortment of ad hoc tax breaks labeled “tax earmarks” by Simpson and Bowles. Coburn and Crapo have argued that ditching the bulk of these byzantine giveaways, which often blur the line between spending and taxes, does not constitute a violation of their pledge.

“Senator Crapo is against tax increases and supports the report recommendations in large measure because of the tax reforms which would result in lower taxes, and the spending reductions/caps,” a spokeswoman for Crapo said in an email.

So given his competing take, does Norquist believe, as his staffer suggested, that the two are liars?

“They’re not fibbing. They said, ‘Here is what we did,’” Norquist said. “I am concerned that the world will take what they did as an endorsement of tax increases aligned with spending restraint.”

That’s exactly what supporters of the two bipartisan deficit plans, both of which contain versions of the tax tradeoff, hope will happen, and Coburn’s conservative bona fides could lend unprecedented credibility the effort. The two-term senator is infuriating to Democrats and celebrated by the base for filibustering legislation and appointments, often singlehandedly, and is already threatening to block an increase in the debt limit unless hundreds of billions of dollars in spending cuts are included. In a panel discussion hosted by the Bipartisan Policy Center this week, former Clinton budget aide and commission member Joseph Minarik said that allowing Republicans like Coburn to “fudge with Grover a little bit” could be their only hope for a deficit deal.

“If the rates are lower, they may be able to live to tell the story,” Minarik said.

Norquist’s fears about the tax plan’s increasing popularity are not unwarranted. The White House is reportedly considering whether or not it might have enough support to push forward as a standalone deal even without the rest of the deficit plan’s tougher cuts to spending.

Others are more pessimistic about the political environment. William Hoagland, a former Republican budget aide and member of the Bipartisan Policy Center’s deficit team, told The Daily Beast that it might take a Greece-like disaster to get past the political obstacles created by the anti-tax movement.

“It’s not like we’re not trying to talk to them, they just feel very strongly about their position,” Hoagland said. “I think [Grover] is wrong, but he’s been consistent on this position as long as I’ve known him.”

Benjamin Sarlin is the Washington correspondent for The Daily Beast and edits the site's politics blog, Beltway Beast. He previously covered New York City politics for The New York Sun and has worked for talkingpointsmemo.com.