On the fiscal cliff: Senate Republicans learn to sit, heel, play dead

Anxious to avoid the fiscal cliff, Senate Republicans compromised with President Obama, much as Lee compromised with Grant at Appomattox. Photo: Associated Press

WASHINGTON, DC, January 1, 2013 — Senate Minority Leader Mitch McConnell looked out over the fiscal cliff and, terrified, reached a compromise with the Obama Administration to avoid it.

The compromise makes tax hikes for couples earning above $450,000 permanent; abandons the “chained CPI” calculation to slow entitlement growth; extends unemployment benefits for another year; raises estate, capital gains, and dividend taxes; extends tax benefits for education for five more years, and puts off sequestration for two months and pays for it with the new taxes. In return America gets $15 billion in spending cuts this year.

This was a compromise the way that the Germans compromised with France in 1940, the way that the Redskins compromised with the Cowboys on Sunday. In his press conference Monday, President Obama crowed of this compromise, “You know, keep in mind that just last month, Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans. Obviously the agreement that’s currently being discussed would raise those rates and raise them permanently.”

In 2011, Obama had argued for a “balanced” approach to reducing the deficit, agreeing to three dollars in spending cuts for every dollar in new tax revenues. He managed a balance considerably more in his favor, with one dollar in spending cuts for every $41 in new taxes.

Senate Republicans responded to Obama’s victory lap by voting overwhelmingly for the deal. On an 89-8 vote, only five Republicans voted against the compromise.

Senate Republicans played dead, but the deal has gone over less well in the House. Obama’s victory lap probably didn’t help matters with House Republicans, who unlike their “octogenarian” colleagues in the Senate are still able to distinguish between chicken salad and chicken ****, to bleep a phrase from late Senate titan Lyndon Johnson.

“This is not a good deal,” said Rep. Steve LaTourette of Ohio. “This is a sad state of affairs – that we’re going to take a bill that was passed on New Year’s Eve by some sleep-deprived octogenarians that [is] very, very heavy on taxes and does nothing to cut spending, which is really part of the big problem that we have in the country.”

Eric Cantor, the House Majority Leader, said of the bill, “I do not support it.”

There is sentiment in the House to amend the compromise and send it back to the Senate, but Senate Democrats took an uncompromising view of that. One Congressional aide observed, “The Speaker was kept appraised throughout the negotiations. There are no surprises in this bill, and the House needs to pass it as is. If House Republicans mess with this agreement that got 88 votes in the Senate, they will be solely responsible for the largest tax hike in American history.”

The fear of being “responsible for the largest tax hike in American history” is calculated to stampede Republicans into voting for the compromise. Further pushing them in that direction is fear of what the markets will do on Wednesday if they don’t vote for it. One anonymous Republican was quoted by Reuters saying, “Everyone knows once the markets open tomorrow our courage drops in direct proportion to the market fall.”

House leadership permitted an up-down vote on the Senate compromise without any amendments. Democrats voted heavily for the compromise, and 85 Republicans joined them to pass the bill. 

The history of tax-now-cut-later isn’t a happy one. When cuts are agreed to for tomorrow, tomorrow never comes. What the Senate didn’t understand is that the fiscal cliff reflects a deeper problem, a problem of rapidly growing debt. Obama managed to get a little over $60 billion in new taxes every year for the next ten years, about one-fifteenth of the amount necessary to eliminate projected deficits. Even with Obama’s forgotten $3 for every new dollar in taxes, we’d close the deficit by only $250 billion, less than a quarter of this year’s deficit.

Before anyone celebrates this historic compromise, we should remember that taxes will not just rise on the top 2 percent if this deal gets through the house. They will rise on the top 77 percent, and by an average of over $1500 for the middle class. That’s because payroll taxes will rise. Smile when President Obama tells you he kept your taxes from rising. What he just did to you can’t be legally done to minors or non-consenting adults.

(This article was updated to include the House vote.)

 

James Picht is the Senior Editor for Communities Politics and teaches economics at the Louisiana Scholars’ College in Natchitoches, La., where he went to take a break from working in Moscow and Washington. But he fell in love with the town and with the professor of Romance languages, so there he stayed. Now he teaches, annoys his children, and makes jalapeno lemonade. He’s never met a dog that could learn to play dead as fast as Senate Republicans. He tweets, hangs out on Facebook, and has a blog he totally neglects at pichtblog.blogspot.com. 

 


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Jim Picht

James Picht is the Senior Editor for Communities Politics and teaches economics and Russian at the Louisiana Scholars' College in Natchitoches, La. After earning his doctorate in economics, he spent several years working in Moscow and the new independent states of the former Soviet Union for the U.S. government, the Asian Development Bank, and as a private contractor. He returned to Ukraine recently to teach principles of constitutional law and criminal procedure at several Ukrainian law schools for a USAID legal development project. He has been writing at the Communities since 2009.

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