The Fiscal Cliff: It Really Is the Fault of Republicans

The Fiscal Cliff: It Really Is the Fault of Republicans
December 13, 2012

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)

There's a lot of handwringing among some grassroots Republicans over Republicans in Congress starting to cave to Obama administration demands regarding tax increases to avoid the fiscal cliff. Have they forgotten this angst over higher tax rates that could hit the nation in January is largely the doing of Republicans?

Republicans during the administration of President George W. Bush pushed for temporary tax rate cuts, and Bush signed into law tax cuts with expiration dates. President Obama — Democrat President Obama — signed an extension of the tax cuts two years ago.  What's about to expire at the end of this year is the extension, which would put tax rates back where they were just before Bush took office in 2001.

Obama has been beating Republicans over the head with the possible expiration. He says he wants to further extend the existing tax rates except for high-income earners. He wants them to pay more. Unless he gets his way, he and other Democrats say they'll let all the tax cuts expire, raising tax rates in all tax brackets. They'll peg the blame for higher taxes on everyone on Republicans who held out to protect a relative handful of high-income individuals.

Some Republican lawmakers recently have declared their willingness to raise taxes on high earners, but with a twist: Instead of raising tax rates, they are willing to limit tax deductions and exemptions. This would have the effect of raising tax rates even though they'd stay the same, because more money would be subject to tax.

Here's Breitbart.com reporting on comments from a recent Sunday television talk show. The pledge you'll see in the lawmakers' quotes is the one offered by Grover Norquist of Americans for Tax Reform, which says signers promise not to raise revenues:

“If you cap deductions around the $30,000, $40,000 range, you can raise $1 trillion in revenue, and the people who lose their deductions are the upper-income Americans,” said [Republican Senator Lindsay] Graham.

Graham wasn’t the only Republican to backtrack on his pledge not to raise taxes. Rep. Peter King (R-NY) said he’d vote, too, to cap deductions on NBC’s Meet the Press. “I agree entirely with Saxby Chambliss. A pledge you signed 20 years ago, 18 years ago, is for that Congress,” King stated. “The world has changed and the economic situation is different.”

All of this follows on the heels of Sen. Saxby Chambliss (R-GA) announcing last week that he’d vote to cap deductions. Chambliss said, “I care more about my country than I do about a 20-year-old pledge. If we do it his way then we’ll continue in debt, and I just have a disagreement with him about that.”

Here's CBS News the other day:

Imagine, if you will, that you are a returning Republican member of the House of Representatives. You want to do what you believe is right for the country; you also want to avoid a vote that will keep you from the opportunity to win reelection two years from now. And you will soon have to make a decision on the issue that has dominated Washington since Election Day: How to avert the looming combination of spending cuts and tax hikes that has come to be known as the "fiscal cliff."

It won't be easy. The clearest sticking point between Republicans and Democrats comes on taxes: Democrats largely want to allow the Bush-era tax cuts to expire on income above $250,000 - effectively raising taxes on the highest earners - and Republicans don't. Many Republicans, in fact, have signed Grover Norquist's pledge promising never to vote for tax increases of any kind. According to "the pledge," they could only vote to close loopholes and deductions in the tax code if they are coupled with reductions in overall income tax rates. Anything that would increase "revenues," in the terminology of Washington - that is, the amount of money the government takes in from taxes - is off the table.

There has been some pushback to Norquist's pledge in recent days from Republicans who say they will not be held hostage by it. They have not expressed support for raising tax rates on the highest earners - an issue that President Obama campaigned on - but they say they are willing to at least raise revenues by closing deductions and loopholes.

It's high time people recognize the Republicans have brought this on themselves. They lacked the conviction to cut tax rates and be done with it. No, they made the tax cuts temporary. By the Republicans' own design, the tax rates already should have gone back up. Now they're fighting over whether to keep tax cuts they declared during the Bush administration should expire.

The election earlier this month pitted President Obama against Republican challenger Mitt Romney, who proposed cutting tax rates but limiting deductions to just $17,000 to offset the rate cuts. Romney also instituted "Romneycare" in Massachusetts while he was governor there. By Obama's own admission, his Obamacare was modeled on Romneycare.

So the race was between the man who gave us Obamacare and the man who gave Obamacare to the man who gave us Obamacare.

The "two-party system," which exists nowhere in the Constitution, has given us a choice of the horrible party or the atrocious party. I'm not sure which is which.

 

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)