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Solving the fiscal mess

WASHINGTON — The two-day delay until Friday that Erskine Bowles and Alan Simpson obtained before their debt-management commission decides on their tough-medicine recommendations may not be enough to produce the votes needed to send those proposals on to Congress.

But make no mistake. Something historic has happened in Washington. This week, as Bowles said, thanks to the commission’s work and the outlines of a tax-extension agreement between President Obama and the congressional Republicans, “the era of deficit denial in Washington is over.”

Also over are two years in which Obama and the Democratic Party pretended they could govern the nation on their own and Republicans thought they could score points simply by objecting.

Both sides have been sobered by the midterm election and have emerged chastened and prepared to talk.

The discussions will be difficult, and an agreement may be impossible to reach in the first forum, the 18-member commission that includes a dozen representatives and senators who have to defend their actions immediately to their colleagues and constituents.

But for the first time, the momentum has shifted to those who are advocating and outlining an eventual agreement. And the first step forward came when Obama, House Speaker-to-be John Boehner and Senate Minority Leader Mitch McConnell agreed on an agenda for this lame-duck session of Congress.

Contrary to pessimistic predictions, the way is now clear for Congress, while still under nominal Democratic control, to extend a workable system of taxes and unemployment benefits—and perhaps ratify the New START arms control agreement with Russia, as well.

A corollary benefit of this week’s work is the growing realization that the route to fixing the looming fiscal debt and deficit crisis in this country may lie in reform of the tax system, rather than endless battling over federal expenditures.

When Bowles on Tuesday emphasized repeatedly that what he likes to call “tax earmarks”—and the rest of us call tax expenditures—amount to a $1 trillion-a-year trove of funds that could be tapped for the national interest, he was pointing to the way out of the No. 1 problem facing the country: how to finance our worldwide and domestic obligations while creating room for the accelerated private-sector and employment growth we desperately need.

The way is now open for Obama and his able new budget director, Jack Lew, to seize the initiative with a bold loophole-closing proposal that would also allow the new Republican majority in the House to offer the cuts in overall tax rates that they believe will awaken the slumbering economy.

By focusing on the trillion-dollar treasure that can be tapped even while we reduce tax rates for business and individuals, Bowles and Simpson have steered the debate in the most useful direction since the 1986 tax reform agreed upon by President Ronald Reagan and Democratic Sen. Bill Bradley.

The shift in focus may have come too late to produce consensus among the members of the debt commission, but it likely will influence debate from this point forward. By insisting that these special-interests provisions that now stud the tax code are every bit as objectionable as earmarks, Bowles has even provided a political tool that can power the effort to close tax loopholes.

Meantime, Obama and Republican congressional leaders have taken the first step on a path to political cooperation, one that can lead to multiple benefits. Washington could emerge from December with an agreed-upon plan for financing the government for the next two years, a workable budget for this year’s government activity and an agreement by the Senate on the significant arms treaty Obama has negotiated with Russia. That is the best possible prelude to next year.

When the Republicans used what I called the Reagan formula—trust but verify—on Obama’s profession of reasonableness, they found him eager to provide the proof. There is more trust today as a result.

David Broder is a columnist for The Washington Post. Readers may write to him via e-mail at davidbroder@washpost.com.