Jeffrey T. Kuhner Archive

Obama's Waterloo: Colossal overreach in debt-limit talks

Republicans have a golden opportunity to break Barack Obama’s presidency, ensuring he will be a one-termer. Mr. Obama has backed himself into a corner on the debt-limit talks; the GOP can smash his re-election prospects if they have the will — and intelligence — to do it.

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President Barack Obama sits with House Speaker John Boehner of Ohio, as he meets with Republican and Democratic leaders regarding the debt ceiling, July 11. AP/Charles Dharapak

Mr. Obama has asked that the nation’s $14.3 trillion debt ceiling be raised, and he knows that cannot be done without support from House Republicans. Moreover, along with Treasury Secretary Timothy F. Geithner, Mr. Obama warns that fiscal Armageddon is coming unless the ceiling is lifted before Aug. 2 — the date Mr. Geithner claims the United States begins defaulting to its debtors.

Mr. Obama seeks a “grand bargain”: a debt-reduction package that includes $1 trillion in tax increases to accompany entitlement spending cuts, including Social Security and Medicare. He wants to go big. His target is to slash $4 trillion over 10 years. He has repeatedly vowed to veto any “small” debt-limit increase — one that allows America to keep paying its bills until a more comprehensive agreement is ratified. In other words, Mr. Obama has issued an ultimatum to congressional Republicans: Either break your 2010 campaign pledge not to raise taxes or else be blamed for the debt-limit debacle. As he put it, it’s time to “eat our peas.” The president is playing Russian roulette with the economy and our nation’s future.

Yet he has badly played his weak hand. Like the dictator Napoleon Bonaparte, who sought to spread the radical French Revolution across Europe, Mr. Obama has committed a fatal mistake: overreach. The president has issued a public ultimatum that either must be upheld or he must back down from. Either way, it is Mr. Obama’s political credibility that threatens to be shattered.

In fact, the debt-limit talks represent the culmination of a Machiavellian strategy that Mr. Obama has been pursuing since he entered the Oval Office. The president’s goal has been to erect a Franco-German welfare state.

Mr. Obama is primarily responsible for America’s debt crisis. He is the one who rammed through Congress the nearly $1 trillion failed economic stimulus. He is the one who has approved successive budget deficits of $1.5 trillion. He is the one who has saddled us with Obamacare, which will cost trillions of dollars and add more than 30 million Americans to the rolls of Medicaid — already the nation’s fastest-growing entitlement program. In short, he has buried America under a mountain of debt. Hence, it is the height of hypocrisy — not to mention chutzpah — for him to be grandstanding about the need for fiscal responsibility.

However, he understands one fundamental reality: European-style spending eventually requires European-style taxation. His aim has been to pile up such high deficits and debt so he can force America to accept massive permanent tax increases. Mr. Obama is using primitive class-warfare rhetoric, insisting on soaking “the rich.” He is not serious about confronting our debt bomb; rather, he seeks to consolidate his socialist revolution, paying for the expansion of the entitlement society.

Mr. Obama is cynically seeking to position himself as a centrist, the only adult in Washington willing to tackle the country’s real problems. Hence, he claims that “everything must be on the table” and that both parties need to confront “sacred cows.” For Democrats, that includes entitlements; for Republicans, it refers to tax hikes.

Yet the details emerging from the backdoor discussions tell a different story. Mr. Obama is looking for GOP political cover on huge tax increases in exchange for promises of entitlement reform. Much of the $1 trillion that Democrats have allocated purportedly to reduce domestic spending over 10 years comes from money that was supposed to fund the wars in Iraq and Afghanistan, as well as $500 billion in interest on those outlays. In other words, the supposed “spending cuts” are nothing more than smoke and mirrors — futuristic, imaginary money being shuffled from one budgetary category to another. Yet the taxes are very real. If Mr. Obama has his way, the rates on capital gains, dividends and upper-income earners will skyrocket, especially after the George W. Bush-era tax cuts expire in 2012.

The president is trying to lure House Speaker John A. Boehner into a trap. Should the Ohio Republican capitulate, this would violate the GOP’s promise to voters, enrage its base and give Mr. Obama a historic victory. Mr. Boehner, however, rightly wants nothing of it. He has definitively ruled out any tax increases. He is holding all the cards.

Mr. Boehner should insist on a small deal — lifting the debt ceiling along with corresponding spending reductions. Every debt dollar raised should be coupled with a spending dollar cut. That way, the package pays for itself. More important, it places Mr. Obama in a no-win situation. House Republicans will pass legislation that raises the debt limit. Therefore, they cannot be blamed for any economic fallout should America default. Mr. Obama can veto it, which means he will be solely responsible for the fiscal calamity. Or he can sign it — publicly standing down from his earlier threats. Thus, he will be denuded among his liberal supporters and the larger electorate, and shown to be a weak leader whose words mean nothing.

Either way, it will be his Waterloo — the effective end of his presidency. Ambition cost Napoleon his empire. For Mr. Obama, the “big package” strategy is the moment of colossal overreach. He wanted too much, too soon. Now comes the long, humiliating and fatal retreat.