Heading into New Year’s Eve without a deal on the “fiscal cliff,” President Barack Obama ripped Republicans for obstructing what he called a generous offer to extend Bush-era tax cuts and reduce government spending. When the Bush-era tax cuts expire Dec. 31, 2012, taxpayers will see the largest tax increases since 2001, despite returning to the same rates under former President Bill Clinton. Faced with sluggish growth climbing out of the worst recession since the Great Depression, most economists believe keeping Bush-era tax cuts are essential to prevent a double-dip recession. House Republicans, led by House Speaker John Boehner (R-Ohio), refused to sign onto any tax increases, causing the current stalemate. Obama had wanted the GOP to agree to increase taxes on couples making over $250,000 or $200,00 individually, something the GOP insists would stifle the economy.
Senate Majority Leader Harry Reid (D-Nev.) sounded cautiously optimistic that something could be done to bridge the differences on New Year’s Eve. “There is still significant distance between the two sides, but negotiations continue,” Reid said. Republicans want to link “fiscal cliff” negotiations to reforming Medicare and Social Security, believing that nothing seriously can be done with the nation’s $1.1 trillion federal budget deficit without entitlement reform. Republicans don’t like to look at Labor and Commerce department reports indicating that the unemployment rate has been dropping, pushing the Gross Domestic Product to 3.1% in the Third Quarter. As the GDP rises, so does U.S. Treasury tax receipts, whittling down those ominous federal budget deficits. “There is still time left to reach an agreement and we intend to continue negotiations,” said Reid.
Now that the clock’s run out, Obama must let Reid or Vice President Joe Biden find a fix that works for both sides. Whatever political capital Barack earned from his Nov. 6 reelection, he’s dealing with unprecedented divisions between Democrats and Republicans. Playing hardball won’t work to fashion the kind of compromise that protects U.S. taxpayers. Whatever the political scorecard, it’s too late to continue scoring partisan points. If the GOP holds the White House over a barrel, Barack must outsmart them by giving in now to live to fight another day. All the arguments are irrelevant now. Only continuing the Bush-era tax cuts matter, whether or not he gets any concessions on taxing the rich. As the GDP improves, federal budget deficits shrink, reducing the need for more federal spending cuts. House Republicans refuse to raise taxes, even on the mega-rich.
Obama seems poised to compromise on incomes above $400,000, not his recommended $250,000. Republicans hoped to recalculate the Cost of Living Index for Social Security recipients. While it appears they’ve let go of that demand, they want to drag entitlement reform into “fiscal cliff” discussions. “We’ve all been told not to make any plans for New Year’s Eve,” said Sen. Claire McCaskill (D-Mo.), whose Nov. 6 victory over Rep. Todd Akin (R-Mo.) gave her another six years. “Now that they’re [Republicans] backing off of it, maybe we can make some progress—I hope,” said Sen. Dick Durbin (D-Ill.). Democrats and Republicans look for a face-saving way out of the current dilemma that’s left the economy dangerously close to a double-dip. With Nov. 6 history, both parties look toward the 2014 mid-term elections, where it’s possible Obama could end his second term controlling Capitol Hill.
Before Obama’s reelection, Republicans hoped that a deteriorated economy would give former Massachusetts Gov. Mitt Romney a fighting chance. When Obama won an Electoral College landslide, it was clear that voters didn’t hold him responsible for the nation’s anemic economy. When Reid and Senate Minority Leader Mitch McConnell (R-Kt.) meet tomorrow, there’s only one goal left: Preserve the Bush-era tax cuts. If Republicans have to give a little on taxes and Democrats a little on entitlement reform, then the middle class taxpayers win. Calling the last-ditch “fiscal cliff” talks a “travesty,” Sen. Olympia Snowe (R-Maine) didn’t like either Party’s strong-arm tactics. Snowe thinks it’s unacceptable that both sides continue to argue at the expense of U.S. taxpayers. Divided government is what led S&P to downgrade U.S. credit Aug. 5, 2011, triggering a stock market sell-off.
When the clock strikes twelve tomorrow night, the American public will get treated to the dismal reality of Washington’s politics. Former GOP Vice President nominee Paul Ryan (R-Wis.) and House Majority Leader Rep. Eric Cantor (R-Va.) have led the Tea Party charge against not only the White House but 98% of U.S. taxpayers. Lapping up the Supply Side Cool-Aid, Ryan and Cantor have no intention of compromising on tax hikes, even if it means undermining the recovery and plunging the nation into a new recession. Looking to fight the White House, the anti-tax lobby led by Norquist wants to go down swinging, not acquiescing to a president seen as the reincarnation of Karl Marx. Fighting against entitlements, the Tea Party has only one mission: To return to the colonial days before a national constitution and federalism wrecked America.
About the Author
John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He’s editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.