The fiscal cliff, the combination of automatic tax increases and spending cuts which would likely send the economy into a full-blown recession, is little over a month away. With the policies set to go into effect at midnight on January 31, debate over how to solve the crisis is growing heated. Republican lawmakers are at the center of this debate, while being in a very weak position to promote their solutions to the problem.
If the fiscal cliff is not stopped, the Bush-era tax cuts will expire, and at the same time Obamacare taxes will go into effect. One of the most dramatic tax increases will be on the estate tax, which Republicans strongly oppose and even some Democrats see problems with. The payroll tax reduction, too, will expire. This reduction has been promoted by the Obama administration in the past as a form of stimulus, but the administration has stopped advocating it, instead focusing on raising taxes for the “rich.” Sequestration will also go into effect in January, causing tax cuts across the board except for Medicare, Medicaid and Social Security. Democrats have said that they structured the sequester in a way that was “more comfortable” for them than for Republicans, and that they would use this as leverage to push for tax increases for the wealthy. This entire structure favors Democrats, with most of the tax increases being ones they support, anyway. In terms of spending cuts, Republican priorities such as defense will be highly affected, while Democrats were able to prevent some of their priority programs from being cut in previous negotiations. Even the new set of tax increases associated with Obamacare are set to go into effect in this climate, with Democrats resisting any changes to them, though Republicans, including John Boehner and Eric Cantor, have insisted they be on the table.
Polls have shown that Republicans will be blamed for whatever happens, removing the last reason for Democrats to compromise. In fact many have said they would not compromise on Democrat priorities. Paul Krugman advocated this stance, saying Obama and the Democrats would be “better positioned to weather any blowback from economic troubles.” He was soon followed by several liberal media outlets. Democrats have followed this advice and refused to offer any meaningful compromises or substantive cuts, and some, like Harry Reid and Dick Durbin, have specifically said there would be no entitlement reform. Meanwhile, Barack Obama has warned that if Republicans reject his tax offer, they would ruin Christmas.
This situation puts Republicans in a very weak position, and one in which they have two likely courses of action. The first is to compromise. This would involve raising taxes in some way, which will put them at odds with the people who elected them, with the Grover Norquist ATF tax pledge most signed, and with their own ideology. The accepted way of doing this, which many Republicans have already said they are open to, is to close tax loopholes without raising rates, themselves. They may, however, do this through an “if-then” strategy, in which Republicans agree to immediate concessions in exchange for future Democrat cooperation with budget cuts. This was done in the Budget Control Act of 2011, in which Republicans agreed to raise the debt ceiling in exchange for later entitlement reform, but information has recently showed that Democrats intend to increase federal spending by $137 billion more than the act allows. Pursuing another if-then strategy would be weak and the only possible reason to do this would be to lessen the effects of actually hitting the fiscal cliff. The compromise would not be Democrats making a few concessions and Republicans making a few concessions, it would be raising taxes less than would automatically happen, and Republicans would have to decide whether this was worth the political fallout and perceived legitimacy of the increases.
The second option is to sit it through, let the cliff happen, or similarly to go along with any solution the Democrats propose, and force Democrats to be held accountable for the results of their policies. The Republicans can’t, however, let their constituents suffer to make a political point, even though some people are tempted to advocate that.
All Colorado Republican Congressmen have signed Norquist’s tax pledge, and Cory Gardner, Doug Lamborn and Mike Coffman have publically stated they would not break the pledge. Lamborn stressed the need for entitlements, which take up 2/3 of the budget, to be on the table. Gardner, like many Republicans including Speaker of the House John Boehner and GOP presidential candidate Mitt Romney, said that he would be open to closing loopholes without raising tax rates. “We’ve come to the table, and I think the American people will now expect them to come to the table as well.” Coffman said that “whether I like it or not tax revenues are on the table because the Bush tax rates are set to expire at the end of the year.” Scott Tipton has declined to directly answer questions about the pledge, calling such discussion “premature and counterproductive.” Neither of Colorado’s Democrat congressmen, Jared Polis and Diana Degette, have spoken about the issue.
Both Colorado Senators are Democrats, and both have been targeted by unions who have launched ads in Colorado telling supporters to lobby, urging them to take a hard line on the fiscal cliff dealings and urging the Senators to “support jobs not cuts.”
There is the possibility of postponing the fiscal cliff, though these negotiations also offer terms which put Republicans at a disadvantage in the future. For instance, along with some Republicans some Democrats, like Senator Bennet, advocate postponing the cliff, but then formulate the plans giving extra power to the Senate Majority party (the Democrats) to go through with their solution at a later date. Ultimately the problem will have to be dealt with, and conditions are growing less and less favorable for Republicans.
Whatever happens, and regardless of how much they might support economic growth rather than higher taxes as a source of increased government revenue, Republicans are powerless to prevent hikes. If they compromise, taxes will go up, and if they hold firm, taxes will go up even further, spending will be haphazardly and dangerously cut, and they will be portrayed as obstructionist. Democrats will not be held accountable by the majority of people either way, either for the problems with their ideas or for their unwillingness to compromise. Republicans also control only the House of Representatives, not the Senate or the Executive Branch. The negotiations present a no-win scenario for the GOP, and will be followed in March by another conflict over the debt ceiling, and with some Democrats now advocating abolishing it altogether.
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