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Rove, Carville Debate Fiscal Cliff

Nov 13, 2012 || OpenMarkets || 1Comment

The 2012 election underlined a changing American landscape for demographics, policy and media, according to Democratic strategist James Carville and Republican strategist Karl Rove.

At a forum moderated by Ted Koppel at the The Global Financial Leadership Conference today, the two disagreed on some of the lessons of the election, but mostly agreed on the compromises necessary to address the fiscal cliff. Rove questioned the timeline for legislators and the President to get a deal done, and said his side shouldn’t be the only one to give in:

I don’t think they have enough time to get it done. My hope is they’ll take some things and make it status quo for 6 month,  9 months. The big issue is spending and taxes, and what’s the balance between revenue and spending… You can’t ask Republicans: ‘Violate your code and raise taxes, and go back to the rates of the Clinton years’ without moving your position at all.

Carville highlighted how House Speaker John Boehner and President Obama have opportunity in the near future:

If you sit down, there’s enough stuff out there.  You can pick some from column A or column B. But that’s politics. There’s options to get a deal done.

He also pointed to a New York Times oped by former Clinton administration Treasury Secretary Robert Rubin, which suggests that cutting tax credits, and reducing tax rates won’t be enough to pay down the debt. Rubin writes:

Some tax expenditures should be cut back and reformed. But when the substantive effects and political realities of large-scale reductions are examined, it becomes clear that there would not be sufficient savings to reduce tax rates and also cut the deficit.

Rove echoed a view that Glenn Hubbard, a Romney campaign economic adviser, wrote about in the Financial Times where the U.S. would raise average tax rates, instead of marginal tax rates to solve the issue. Hubbard wrote:
US policy makers must begin by realising three points. First, raising revenue is about raising average tax rates, not marginal tax rates, as Barack Obama’s campaign suggested. Higher marginal tax rates distort behaviour and reduce activity. There are ways to raise revenue without increasing marginal rates. Tax deductions should be scaled back, especially in the areas of mortgage interest, charitable giving and employer-provided health insurance.

Though they differed on the policy, two of the world’s best known political strategists agreed on the political realities of the situation and the importance that deal-making will play. Carville sums it up:

“I agree with Karl I think what they’re gonna do is extend the status quo for a period. I don’t know if it’s 90 days or 180 days, or something in between that… The President whatever he does, he’s gotta go to the Democrats and sell it. That’s what politics is about, that’s what you gotta do. You gotta cut a deal, you gotta go to your own people, and you gotta go to the country to sell it.”

Read here for more coverage of the 2012 GFLC.