Skyfall at the Edge of Fiscal Cliff
Abandon all hope, ye who watch the “fiscal cliff” drama.
There has been serious pressure on House Republicans to buckle and pass the extension of the Bush tax cuts for 98 percent of income tax filers demanded by President Barack Obama.
I would have cried, “Uncle.” Polls show that voters are predisposed to blame Republicans if Washington falls off the fiscal cliff. I don’t see how House Repubs can withstand the onslaught likely to follow Jan. 1, when, thanks to past budget deals, income taxes rise on all workers. Voters might well perceive — as per a Democratic talking point — that Republicans raised taxes on 90 percent of working families in a misguided attempt to shield the top 2 percent from paying more.
Last week, House Speaker John Boehner went for a compromise of sorts. He introduced Plan B, which would have extended the Bush-era tax cuts for all households except those earning at least $1 million annually. But Boehner didn’t have enough GOP votes to pass the bill. You can laugh at him for pushing a bill when he didn’t have the votes. On the other hand, once Senate Majority Leader Harry Reid said his weighty chamber would not vote on Plan B, some GOP members saw no reason to vote for a measure that, after all, signified a tax increase.
My fear is that some Democrats want to go off the cliff. Back in July, Tax Policy Center co-director William G. Gale wrote that if Congress doesn’t act to prevent the “fiscal cliff,” Washington wins an extra $2.8 trillion in tax revenue over a decade. It’s a Democrat’s happiest dream — huge tax increases without having to vote for huge tax increases.
If America goes and stays off the cliff, Tax Foundation chief economist Will McBride told me, the hit on the gross domestic product would be 9.6 percent, and American wages would fall 7 percent.
To counter any negative effects of going over the cliff, Gale proposed more stimulus spending.
As for Obama, he seems more interested in beating Republicans on the issue of the top 2 percent than he does in repairing a teetering economy. During the election, the president argued that he sought balance. But, The Wall Street Journal reported, the White House’s initial offer to avoid going over the fiscal cliff presented $1.6 trillion in tax increases over 10 years but a mere $400 billion in spending cuts. During negotiations, the president wouldn’t agree to more cuts.
A White House aide told Team Boehner that the president was “probably overextended” in 2011 when he pushed for a “grand bargain” with considerably more spending cuts. It seems Obama also couldn’t seal the deal, either.
There’s more pressure on Republicans, who control the House, to give on taxes than there is on Democrats, who control the White House and Senate, to give on spending. If the final deal — whenever it happens — cuts more than $400 billion over a decade, it will be a miracle.
So now the pressure is on Senate Minority Leader Mitch McConnell. If the country goes off the cliff, spokesman Don Stewart conceded, “everybody’s going to get blamed.” But: “We’ll get blamed a whole lot more cutting a really bad deal.”
Email Debra J. Saunders at: [email protected].
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