Why Dems Think They Have A ‘Sword Of Damocles’ In Tax Fight

Democrats believe they finally have a cudgel strong enough to force Republicans to relent on their absolutist opposition to tax increases: the $500-$600 billion in across-the-board military spending cuts due to kick in next year as part of the self-inflicted “punishment” for Congress’s inability to battle the debt with savings elsewhere. Republicans are eager to reverse course on that and shift the cuts to non-defense programs, but even top military Democrats say they won’t let that happen — unless the GOP budges on its identity-defining resistance to new taxes.

The defense cuts — along with an additional $600 billion in reductions to domestic spending — were part of the “sequestration” that was meant to encourage the Deficit Super Committee to strike a deal on cutting by at least $1.2 trillion over 10 years. It failed. And Republicans, after initially signing off on the cuts, now say they’re unacceptable.

Not so fast, say Dems.Sen. Carl Levin (D-MI), chairman of the Armed Services Committee, has not only vowed to hold the line on the cuts, but he recently suggested Dems could use it to force the Republicans’ collective hand.

“The purpose of the sequester is to force us to act to avoid the sequester,” he said. “That sword of Damocles can not be splintered,” he continued, “if it’s going to have its effect.” The effect he said he meant was to “move the rigid ideologues to deal finally with revenue.”

President Obama hasn’t publicly gone that far, but he’s long been pushing the GOP to move on tax revenues. And although he hasn’t ruled out the possibility of achieving similar deficit reduction by other means, he has said he would veto any effort to annul the sequestration.

There are few cows as sacred to Republicans as military spending. Sen. John McCain (AZ), the top Republican on the Armed Services Committee, told TPM that his party strongly supports rolling back the cuts. “We’re going to work on it and we’re going to make it clear to the American people that they’re putting America’s security in great jeopardy,” McCain said.

Meanwhile, among the Dems’ ranks are some who support even steeper defense cuts than the sequestration, meaning the party may have more willingness not to blink first.

That “may,” however, is crucial. Despite their policy leanings the politics are complicated for Democrats because they may potentially have more to gain than to lose in 2012 if they prevent those cuts from going into effect.

Virginia, for instance, derives 13.9 percent of its GDP from defense spending, and will be hit hard by the sequester, according to a Bloomberg Government Study. It’s a key swing state in the presidential election, and Democrats are also fighting for a Senate seat there. 2012 battlegrounds like North Carolina and Florida also benefit economically from federal military spending.

If Democrats decide to charge forward with Levin’s stance, time may be of the essence as their negotiating leverage could start to dissipate as election day draws closer. Strategy is a key factor because polling on the issue is essentially a wash — public opinion on military cuts varies notably depending on how the question is framed.

When it comes to the fight for “framing” and public perception, Defense Secretary Leon Panetta unwittingly gave Republicans ammunition when he uttered the rather apocalyptic warning that the sequestration cuts would “tear a seam” in the country’s defense capabilities and “lead to a hollow force incapable of sustaining the missions it is assigned.”

Republicans, of course, are quite willing to wield those remarks against Dems.

“Washington Democrats are going to realize soon that massive defense cuts — which their own Secretary of Defense says will ‘hollow out’ our Armed Forces — will not be politically sustainable when President Obama is trying to win re-election in places like North Carolina, Virginia, and Florida,” a GOP leadership aide told TPM. “We will have the full additional deficit reduction, but there’s a smarter way to do it, and it doesn’t involve job-killing tax hikes.” No defense cuts and no tax hikes. No sign that there’s a blink about to happen there. It could take great political bravery if the Dems are going to hold their grip on the sword of Damocles.