Posts Tagged ‘fiscal cliff’

We have met the enemy and it’s us

January 6, 2013

UnknownRecently I got one of those virally forwarded e-mail blasts, flaying Washington politicians and demanding an array of draconian punishments for them, stopping just short, perhaps, of tumbrils.

But who elected these miscreants?

It doesn’t take a political science genius to understand politicians’ behavior. There’s but a single explanatory factor: winning elections. That means following voter wishes.

So why doesn’t the fiscal cliff deal tackle spending? Don’t voters want that? Oh, yes, absolutely they do, just so long as you don’t cut Social Security or Medicare or education or farm programs or defense or, well, anything, except of course for foreign aid. (On which the average American thinks we should spend no more than 10%. In fact it’s less than 1%.)

thRepublicans, especially Tea Partiers, really really want spending cuts. But just ask exactly what to cut, besides Big Bird (0.014% of the budget). And just whisper a suggestion and you get the campaign ads with granny shoved over a cliff. Of course Republicans don’t want to hand Democrats this nuclear weapon. What they’d like is for Democrats to disarm by joining them in the spending cuts. But any Democrat doing that would get the granny-over-the-cliff ad himself in his own next primary.

We imagined that Republicans would make a deal with President Obama, agreeing to higher taxes for the rich in exchange for spending cuts. How foolishly naïve. We forgot the nuclear weapon. We forgot that whereas soaking the rich is popular, cutting spending risks granny-over-the-cliff ads and political annihilation. So what we got was soak-the-rich and nothing on spending.

Why did Republicans agree? In the end, instead of trading off soak-the-rich taxes for spending cuts, they were forced to swallow the tax hikes merely in exchange for avoiding even bigger tax hikes.

The New York Times editorially labeled this a big payoff for Republicans, rewarding their “intransigence”! The Times fulminated that the rich aren’t being soaked enough – while saying hardly a word about spending – nor noting that under this deal, deficits will continue to balloon – or that no conceivable level of taxes on the rich could close that gap.

Devotees of this blog may recall how accurately I foresaw this outcome. The Democrats did get their Great White Whale, with Bush’s tax cuts terminated for high incomes. And the argument over spending can seemingly continue. I say “seemingly” because for all the sturm-und-drang, nothing serious will be done about spending because Republicans have now squandered their biggest bargaining chip. Any further blackmail they might attempt would be seen as just that, blackmail, politically suicidal.

I hope President Obama enjoys his whale meat. He might have exercised responsible leadership. He might have forced Democrats to accept the need for spending action, as a trade-off for the tax increases they craved. This fiscal cliff moment was actually a grand opportunity for him to achieve something meaningful – just like Simpson-Bowles – the opportunity he missed earlier. But instead of seizing the moment, the President chose the easy, expedient thing, to pocket the cheap “victory.”

History will write that Obama’s eight years mark the time when America might have saved itself, but didn’t. We may have survived this th-1recent little cliff, but we’re running straight down the track toward a far bigger one, of economic ruin, with clearly now no hand on the throttle.

And if you want to find the real culprit to blame, dear voter, look in the mirror.

In Pursuit of the Great White Whale

December 3, 2012

As explained in my recent post, the best way to raise tax revenues, mainly from the rich, is to cap deductions, avoiding the politically charged issue of raising tax rates. Republicans seem open to this. But President Obama and the Democrats are not; instead, they seem Unknownpositively obsessed with raising tax rates. It’s no longer just about revenues, or even merely making the rich pay more; it’s a line in the sand for a top tax rate restored to 39.6%, and not a tittle less. They pursue this as some kind of vendetta, as Ahab pursued his great white whale.

Both sides are blameworthy, pushing narrow partisan interests while convinced of rectitude. But the Democrats now outstrip the GOP in zealotry, in their evident sangfroid approaching the fiscal cliff. They even seem to think going over would be good for them. Here’s why: in the first place, they figure they can pin the blame on Republicans. And secondly they see this as a white whale trap (this is the Patty Murray plan; she’s an extreme liberal Senator from Washington). If nothing is done, all the Bush tax cuts will expire on January 1. Republicans wouldn’t have the votes to restore them for the rich, while Democrats would bring forward legislation to re-reduce tax rates for the non-rich, and defy Republicans to oppose that. Gotcha!

images-1And because they thusly think they have the upper hand, Democrats aren’t being serious at all about spending cuts, even reducing what they’d previously offered Republicans in trade for higher taxes. The cuts on offer now are paltry, and mostly smoke-and-mirrors besides. No wonder Republicans balk. Democrats want them to: it’s “Make my day.”

They feel cocky and empowered because they won the election – “decisively.” How often do we hear that? But a 50-48% win is not what I call “decisive.” The electoral vote was more lopsided, but only because a passel of swing states went by the narrowest of margins. And though they gained a few seats, Democrats failed to capture the House of Representatives. The fact is that the country remains closely divided; the election changed nothing, settled nothing.

The conventional wisdom seems to be that going over the cliff briefly is not catastrophic, because then the parties will scramble up a deal. I’m not so complacent.

Firstly, the mere fact of Washington actually letting this happen would be terrible for the economy, eroding confidence in our political system even more than it was already eroded by the partisan games of the last few years. Remember that the fiscal cliff was created intentionally, to force the parties to compromise. And if they can’t compromise when up against such a deadline, why expect a deal without one? Once over the cliff, a kind of virginity will be lost. If the sky does not fall straight away – but only in slow motion – there will be even less impetus for a “grand bargain.” Furthermore, Democrats will now have actually bagged their white whale – tax rates will rise for the rich – thus leaving no bargaining chips for getting anything done on spending. So nothing substantive will get done.

bigstock_sinking_ship_in_the_sea_187677741-300x225America is the Pequod. The Democrats will party on deck while the vessel takes on water below.

Call me Ishmael.