5 Reasons We’re (Probably) Going Over The Fiscal Cliff
Republicans didn’t pay attention to the polls that showed the president headed to an electoral college landslide in November, and they’re probably not checking them too often now. If they were, we would be much closer to a deal to avert the austerity-ensuring formula of expiring tax cuts and automatic spending cuts.
Instead, Republicans in the House are only vaguely offering to eliminate deductions, which could hit the middle class. In exchange they want big cuts in domestic spending — Medicare, Medicaid, education, etc. — that they’re unwilling to name. Instead they’re demanding that the president name his cuts specifically.
The one “cut” that has become public is the Republican demand that the Medicare eligibility age be raised to 67, something the president reportedly agreed to during the 2011 debt ceiling “grand bargain” talks. Progressives have pushed back on this idea and it is now reportedly off the table, which is a perfect example of why both sides don’t want to name specific cuts.
But the president has been specific on taxes — he wants all the Bush tax cuts on incomes over $250,000 to end, along with the breaks on investment income that primarily benefit the rich. If the GOP doesn’t give in, he’ll get what he wants anyway on January 1, 2013. Plus the GOP will be blamed for tax increases on the middle class.
And as of now, that’s what seems most likely to happen. Here’s why.
Photo credit: AP Photo/J. Scott Applewhite
House Republicans Have Nothing To Lose But Primaries
House Republicans have rejected a plan floated by Rep. Tom Cole (R-OK) to just approve the middle-class tax cuts and go home. For a House Majority that’s gerrymandered into job security until at least 2022, there’s only one fear: a primary challenge. Groups like Grover Norquist’s Americans For Tax Reform and the Club for Growth haven’t given anyone the okay to vote for any bill that doesn’t include continuing the Bush tax breaks for the rich. And they likely won’t. With Senator Mitch McConnell so in fear of a primary challenge that he hired Ron Paul’s former campaign manager to head up his re-election bid, you can bet that House Republicans are doing whatever they can to stay to the right of anyone who might oppose them.
Photo credit: AP Photo/J. Scott Applewhite, file
Speaker Boehner Has Nothing To Lose But His Job
Boehner has already walked back a challenge to his Speakership from Tom Price (R-GA). But Price couldn’t even win a leadership position in the GOP caucus earlier this month. A long-standing rumor is that Majority Leader Eric Cantor (R-VA) is after Boehner’s job and nixed the “grand bargain” of 2011. Whether that’s true or not, if Boehner presents a bargain that doesn’t get at least the majority of his caucus, his days as Speaker are numbered. And given that his caucus only fears primary challenges, getting them to sign off on anything that raises rates seems very unlikely.
The Senate Wants To Save Mitt’s Tax Cuts, But That’s Not Good Enough For The House
Several Republicans in the Senate have indicated that they understand that tax rates on incomes over $250,000 will go up. Even Tea Party leader/Senate quitter Jim DeMint admits that’s going to happen. Senate Minority Leader Mitch McConnell is reportedly floating a compromise that would end the tax breaks on incomed over $250,000 but keep the low rates for investment income and possibly even lower them. These are the tax breaks that make it possible for a multi-multi-millionaire like Mitt Romney to pay a lower tax rate than a bus driver. The president and Democrats and the Senate would likely never go for this. But that doesn’t matter — the House GOP probably won’t either.
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The President Says He Won’t Do Another Debt-Limit Battle And The GOP Seems To Believe Him
The conventional wisdom for why the House GOP would just extend the Bush tax cuts for 98% of Americans and come back to fight for spending cuts is that he still needs the debt limit raised in February. But, buoyed by a clear victory in November, the president says he will not get into another debt-limit battle like the one that ended with America’s credit rating being cut in 2011. Whether that means that would go as far to invoke the 14th amendment to pay debt without congressional approval is unclear. But for now he’s insisting that raising the limit be part of any deal and the business community, a huge GOP constituency, agrees with him.
Photo credit: AP Photo/Matt Slocum
Lame-duck sessions combine the distance between the next election with retiring or defeated members, with the added spice of the heady distraction of the holiday season. The stock market still believes that a deal is eminent and until we get to Christmas Eve without one, they probably will continue to buy this premise. In a logical world, there would be. But chances are we’ll have to get to January and witness the sudden impact of over $500 billion in tax increases and spending cuts to get a true sense of the panic that’s going to be required to get House Republicans to say yes to the kind of deal the president demands.
In 2013, when the world wakes up to a defeated Republican Party holding the economy hostage — again — suddenly an embattled Boehner may be able to find enough safe Republicans to pass something. Or he’ll decide to rely on a deal passed by mostly Democratic votes.
Until then — unless the GOP decides to that repeating failed strategies isn’t a great plan of action — look out below.
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