Michael Gerson

WASHINGTON -- The main achievements of the lame-duck session of Congress were reminders of what might have been. President Obama gave something to get something. To secure a second stimulus, he accepted Republican economic methods. To pass the New START treaty, Obama offered assurances to Republican senators on nuclear modernization and missile defense. Contrast this to health care reform, imposed in party-line maneuvers that left an aftertaste of ideological radicalism.

The American political system, it turns out, was not broken -- just poorly used for nearly two years.

But the lame-duck session was also a preview of conflicts to come. The defeat of the omnibus spending bill -- a trillion-dollar, earmark-laden declaration of congressional imperviousness to public sentiment -- was exactly the sort of fight Republicans are spoiling to repeat.


Some of that message is predictable. Obama is likely to propose a multi-year cap or freeze on discretionary spending. But there is no way he can outbid Republicans when it comes to cuts. The president is also likely to endorse budgetary reforms such as an earmark ban.

All of this would be useful; none of it decisive. Only two proposals currently under discussion would reshape the American economic debate as well as the president's public image: reform of the tax code or reform of entitlements. Both are necessary, difficult, and politically deceptive.

Overhauling the tax system seems the easier approach. It isn't. Most serious plans, including the options raised by the president's debt commission, would broaden the tax base, consolidate and lower rates, and eliminate most tax deductions and exemptions. But even a revenue-neutral tax overhaul creates a complicated system of winners and losers. Especially if the mortgage interest deduction, the charitable deduction and the child tax credit are modified or eliminated, the losers know immediately who they are. The winners must be persuaded of abstract, future benefits.

Republicans would have an easy time criticizing a thinly disguised tax increase for millions of Americans. It would seem like another Obama overreach that fundamentally changes the economy in frightening ways -- confirming an image that the president desperately needs to change.


Medicare is the main policy challenge here, because rising health costs are the primary cause of unsustainable entitlement commitments. But Medicare reform -- the topic of intense, ideological debate -- is a political nonstarter. While Social Security is a relatively small contributor to future deficits, reforming it would be a large symbol, and a logical place to begin.


Obama's liberal base contends that the Social Security trust fund is not in immediate trouble. But this argument depends on an elaborate accounting trick. The trust fund is not filled with assets -- gold bullion and Apple stock. It is filled with debt issued by the government to itself. The surpluses of the trust fund are actually liabilities for the government as a whole. And these illusory surpluses are regularly used to subsidize the rest of the budget. The scheme begins to collapse in 2037, when promised benefits for Social Security recipients will suddenly drop by a quarter -- unless the system is reformed.

If Obama pursues Social Security reform, liberals are threatening a serious political revolt -- a genuine risk. But Obama's urgent political need is to polish his image among Independents on spending and debt. And this won't happen by being risk averse.


Michael Gerson
