Mitch McConnell: 'We Have a Voter Mandate Not to Raise Taxes'

By STEPHEN MOORE

In the wake of President Barack Obama's electoral victory, gleeful Democrats believe that the impending "fiscal cliff" has Republicans trapped into finally accepting higher tax rates. But as Senate Minority Leader Mitch McConnell sits for an interview in his Capitol office 48 hours after the election, one thing is certain: He is in no way chastened by Tuesday's results. If Mr. Obama wants fiscal hand-to-hand combat, he will get it.

Editorial board member Joe Rago and assistant editorial page editor James Freeman react to the President's remarks on the fiscal cliff. Photos: Associated Press

"Let me put it very clearly," says the five-term Republican senator from Kentucky. "I am not willing to raise taxes to turn off the sequester. Period." On Jan. 1, Washington faces both a huge tax increase and an automatic spending cut known as the "sequester," which could tip the economy back into recession. A newly emboldened President Obama is likely to take his soak-the-rich case straight to the people, I remind the senator. The political pressure to capitulate could become intense.

"Look, he may think it would be helpful to his presidency to continue to divide and demonize us," says Mr. McConnell. "But my answer will still be short and firm: No. We won't agree to any tax increases that will hurt the economy."

This isn't to say that next week, when the lame-duck congressional session begins to negotiate some kind of budget solution, taxes are off the table. Mr. McConnell is a realist. Republicans are willing to be "flexible" on raising revenues but, he hastens to add, only "in the context of broad-based, comprehensive tax reform." He's open to prying more out of the rich by closing tax loopholes. But he and his caucus of 45 Republicans want lower, not higher, rates.

Two years ago, Mr. McConnell notes, Mr. Obama agreed to extend all the Bush-era tax cuts for two years. The president's explanation for doing so was that raising taxes would harm the economy. "That logic still stands," the senator says. "The economy's actually growing slower now than it was then."

The tax matter could quickly turn into another political standoff similar to the one in the summer of 2011 over raising the debt ceiling. White House spokesman Jay Carney said Friday that the president will veto any bill that includes an extension of the Bush tax rates for anyone making more than $250,000—precisely the rates Mr. McConnell says he won't allow to rise.

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It isn't at all certain that Mr. McConnell and House Speaker John Boehner will be able to hold their troops together. The senator understands that Mr. Obama will try to cut a deal with other senators—Lamar Alexander of Tennessee, Susan Collins of Maine, Lindsey Graham of South Carolina—but Mr. McConnell doubts that the tactic will work. "We have differences on other issues, but on taxes I can't think of a single member of my conference from Maine to Texas who thought he was sent here to Washington to raise taxes on anybody or anything."

So how should the president prevent another gridlocked negotiation that ends in a fiscal-cliff leap? The smart way forward, Mr. McConnell says, "is pretty simple. Let's extend the current rates for another year for everyone—a bridge—and get busy working on the comprehensive tax reform that we need to do. There's bipartisan support for that."

I ask him about the recent counterproposal by Democratic Sen. Charles Schumer that Republicans should abandon tax reform of the kind that passed in 1986 and lowered rates in return for fewer loopholes, and instead should both close loopholes and keep tax rates high to lower the deficit. "He's on another planet," Mr. McConnell replies, and doesn't seem to be kidding.

Would Republicans accept the liberal dream of a value-added tax as a new revenue machine? "There won't be any new tax. It's not going to happen in this Congress," he says.

What is clear about the coming tax-cliff negotiations is that Mr. McConnell doesn't trust the White House after the debacle of the debt-ceiling nonsolution in July 2011.

"The speaker and I spent an endless amount of time in the first half of 2011 trying to get the president to do what we all know has to be done if we're going to save the country," Mr. McConnell says. "Until we adjust the entitlement programs to fit the demographics of today's America, you can't fix the problem. You can't tax your way out of it. You can't cut health-care providers as a way out of it. But Democrats laughed at those ideas even when we offered a quarter-trillion of higher revenues largely taken from high-income people."

Will things be different in an Obama second term, with a president who last month said he would "do whatever is required" to avoid sequestration, even "walk Mitch McConnell's dog" if necessary?

"The missing person, the guy who was AWOL in 2011, is still the president. I think a good starting place in trying to figure out how to go forward is for the president to have an epiphany." I get the impression that he doubts the epiphany will come soon.

If you haven't gathered by now, Mitch McConnell doesn't have a chummy relationship with Barack Obama. These two aren't going to sit down for a drink and swap stories as Ronald Reagan and his political adversary, Tip O'Neill, did when the Gipper occupied the White House.

I ask the senator how many times he's been to the White House in the past year and a half. "Not once," he says, but then an aide reminds him that he went briefly for one meeting. After the 2011 budget negotiations broke down, Mr. McConnell says, the president "just checked out" and hit the campaign trail.

What is also evident from our conversation is that Mr. McConnell and his colleagues don't trust the president and his underlings even in closed-door meetings. "He was never serious in 2011 about solving the debt problem. What happened was the president set the crossbar so high on taxes that he knew we couldn't get a deal." Did Mr. Obama intentionally sabotage the deal? "Sure, it was clear to me in retrospect that the whole strategy for re-election was to energize his liberal base."

Yet Mr. McConnell is convinced that a deal isn't hopeless, and he mentions the one time in Mr. Obama's first term that Democrats and Republicans reached an agreement. "I was the one who personally negotiated with Joe Biden the extension of the current tax rates" after the 2010 midterm elections. "When the president said, 'I'm for it,' 40 Senate Democrats voted to extend the Bush tax cuts, which leads me to my point: Without the president, we can't fix this problem."

What kind of a deal would Mr. McConnell accept? The senator's top priority is long-term entitlement reform. "Changing the eligibility for entitlements is the only thing that can possibly fix the country long term." He wants means-testing for programs like Medicare. "Warren Buffett's always complaining about not paying enough in taxes," he says. "What really irritates me is I'm paying for his Medicare."

The senator will also press for the Medicaid reforms, such as block-granting money to the states, that are part of Rep. Paul Ryan's budget. But Mr. McConnell doubts that Democrats would ever go for the Ryan idea for Medicare premium support, allowing seniors to shop around for their preferred health-insurance plan.

The $16 trillion question: How much is Mr. McConnell willing to give on taxes in exchange for those entitlement reforms? "The country doesn't need a tax increase; we have a spending problem. But they control a big part of the government and they insist on taxes. I'd be willing to pay the ransom [of higher taxes] if I thought we were going to get the hostage out." By that he means every dollar of taxes would have to be matched by a dollar of entitlement savings.

How do you ensure that any deal doesn't lead to immediate higher taxes and disappearing spending cuts? "That's a good complaint," Mr. McConnell acknowledges. "In the past, when we've gone along with revenue, the taxes happened and the cuts never did." He believes that if you "change the eligibility for entitlements," those changes will stick, as with an agreement that "Reagan and Tip O'Neill made to raise the age for Social Security that happened 25 years ago."

Any tax and entitlement deal would likely leave unresolved the newest budget-busting entitlement: ObamaCare. "It's the single worst piece of legislation that's been passed in modern times," Mr. McConnell says, "and the single biggest step in the direction of Europeanizing the country. It can't possibly work." Democrats don't understand that now, he continues, but "people are going to be coming at us in hordes asking for us to revisit it" and fix the mounting problems.

He says that in the towns he visits in Kentucky, "the health-care providers who are dealing with patients on a daily basis—big hospitals, rural hospitals, nonprofits—are all freaked out about virtually every aspect of the Medicare cuts that affect today's seniors and today's providers. Seven of nine justices on the Supreme Court said the Medicaid part of it is genuinely optional. Smart states won't take this additional burden." Employers are dropping their coverage. He predicts the law will come apart on its own.

The other unresolved mega-issue is what to do about the scheduled sequester cuts of $110 billion for 2013, half coming from defense and half from discretionary domestic programs. Much like the president, he wants to shut it off, but with a caveat: "I don't think we should just forget about the spending reductions we promised. We ought to achieve exactly the same amount of spending reductions," with targeted cuts that the two parties have already agreed to. When pressed on whether he could live with the sequester, as some Republican budget hawks have suggested, the senator dismisses that drive-off-the-cliff option as "Thelma and Louise economics."

Why are Democrats like Senate Majority Leader Harry Reid so obsessed with raising our highest marginal income tax rates? "You have to understand, they really don't believe that raising taxes hurts the economy," Mr. McConnell says. "They think rates can go much higher. What they are seeking is the Europeanization of the U.S. economy."

But don't Messrs. Obama and Reid think they've just been given a mandate to raise those tax rates? "Yes, well, we Republicans in the House and Senate think we have a voter mandate not to raise taxes."

Despite this deep ideological divide, and the bad blood between Mr. Obama and congressional Republicans, it isn't hard to envision a deal on taxes and spending cuts that both sides can live with. All of this will depend on Mr. Obama's willingness to stand down on the tax-rate increases—which Republicans rightly regard as a political poison pill and a jobs killer.

If the president does sit down and negotiate in good faith, Mr. McConnell sees positive effects on Wall Street and the overall economy because Washington will have "convinced the rest of the world and the financial community that the Americans are serious about fixing their fundamental problem, and we're not going the way of Greece and Italy and Spain with these trillion-dollar deficits."

And what if the president insists on raising tax rates? Expect a principled stand by the minority leader and his fellow Republicans: "He's got to understand he doesn't fully control the Senate. He doesn't control the House at all. In order to accomplish things for the country he will need to work with us."

As Mr. McConnell walks me to the door, he adds: "You know, he doesn't own the place."

Mr. Moore is a member of the Journal's editorial board.

A version of this article appeared November 10, 2012, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: 'We Have a Voter Mandate Not to Raise Taxes'.