What You Think Of The Debt Deal Depends On What You Prioritize More: Lower Taxes Or Controlling Spending
This year the morning after hangover came on January 2nd. The Senate partied into the wee hours of New Years’ morning before passing the McConnell-Biden compromise package before the House relieved them and spent all day deciding what to do with the Senate bill. In the end, they didn’t do much and wound up passing it un-amended at around 11pm.
Today we wake up to survey the damage and begin to clean up the mess.
Some Republicans like Jen Rubin hail the deal as a great victory for conservatism.
The answer to why the Democrats did so badly is three-fold. For starters, the president has never been able to rally the public on a major policy initiative and he failed to do so again here, merely annoying his opponents, who dug in their heels. Second, Sen. Mitch McConnell (R-Ky.) knew exactly what he was doing — seeing that Democrats were so focused on one big item (raising the rate for the very wealthy) he recognized that he could scoop up a lot of goodies (estate tax relief, a two-month buydown on the sequestration). And finally, once House Speaker John Boehner (R-Ohio) let on that there would be flexibility on taxes, he found the Democrats’ weakness: a total lack of credibility on spending cuts. Well, if they are not really going to cut much, then the tax hikes have to be moderated, and indeed they were.
Making 98% of the “Bush tax cuts” permanent is the supposed victory. In an ideal world this would be a great accomplishment. But this is far from an ideal world. In reality, the de-coupling of taxes from spending is a huge trap for the conservatives (whether or not it is for Republicans is a different story). As Rubin notes, the Democrats have shown themselves to be entirely disinterested in spending cuts. The “victory” has disconnected 98% of tax payers from the direct consequences of supporting big government.
Oh but the GOP will have the leverage of the debt ceiling hike to extract concessions on spending, Republicans will say. There’s no reason to believe this is true.
First, the concession the GOP got from the last debt ceiling hike was $1.2 trillion in cuts that have now been postponed. Assuming the next debt hike is in the same range that means we’ll have to get another $1.2 trillion in cuts for a total of $2.4 trillion just to keep pace with the debt hikes.
Does anyone honestly believe that’s going to happen in two months when we couldn’t find the first set of cuts in over 15 months?
So these “huge” $2.4 trillion cuts (that will never materialize) won’t even begin to touch the $16.5 trillion and growing debt we already have rung up.
And even in some fairy tale world where these cuts are made and are real, the Democrats will want more revenue as part of any deal (remember the $800 billion Boehner offered up instead of a tax rate hike? Now it will be in addition TO that hike).
And what leverage does the GOP have to get anything for a debt hike? The threat to not raise the ceiling? Well they blinked last year on that and they blinked at going over the cliff when the stakes were “only” tax hikes that could easily be undone quickly. Yet we’re supposed to believe the GOP is willing to hold firm on the ceiling, even if it means irreversible damage such as the “full faith and credit” of the US, an interest rate spike that will balloon our out of control debt exponentially overnight and a global recession as the cherry on top?
It’s not going to happen and everyone knows it.
The last pressure point the GOP will have is the upcoming fight on a Continuing Resolution to fund the government through the end of the fiscal year in September. The only leverage they will have then is the threat of a complete government shutdown.
After blinking on the fiscal cliff and debt ceiling, do you really think they will shut the government down? Really?
So yes, the GOP “won” as much as they could on taxes but the Democrats win on what’s important…the continuing growth of government.
Suddenly my hangover headache is back.