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Republicans Set to Cave?

Byron York passes on what he is hearing from Senate Republicans on the fiscal negotiations in DC. What he is hearing isn’t good:

The word among some Senate Republicans is that a fiscal cliff deal is likely to be struck by Sunday, or Monday at the latest. …

Those Senate Republicans hope the final deal will make permanent current tax levels — Bush tax cut levels — for everyone who makes below $500,000.

The $500,000 figure is not set in stone. It could be $400,000, as President Obama is reportedly willing to agree to, or it could be higher, as some Senate Democrats have suggested in the past. … In addition, big spending cuts, the sequestration cuts scheduled to go into effect in the new year, would not be affected and would go forward as planned.

Some Republicans would be open to the change, but would only want to give up their position in return for serious spending concessions from the administration. And some Republicans would be open to giving in on top-earner tax rates in order to get a deal done now, and worry about spending later.

It appears that it is the last group, working with Democrats and the White House, that will prevail. Under the most likely scenario, Republicans will get nothing — nothing — in return for giving in on tax rates for the highest-income Americans. No spending cuts, at least no serious spending cuts beyond what are already included in sequestration, would be part of the deal done on Sunday or Monday, if that is indeed what happens. …

As for spending cuts, particularly in entitlements, some Senate Republicans say they will press for those in January or February, during the coming battle over raising the nation’s debt ceiling.

This is baffling. Why would Republicans agree to tax increases without getting spending cuts in return? Sure, on this scenario the sequestration cuts remain; but they are tilted heavily toward defense, as a result of the last lousy deal the Republicans negotiated. If Republicans want to restore a reasonable defense capability in a later negotiation, they will have to give something up–either more taxes or restoration of the non-defense sequestration, presumably.

Regardless of how this plays out–and I agree with Byron that the result is likely to be unhappy–it will vindicate what we have been saying for weeks, if not months: stop making secret, last-minute, back room deals! Stop moving from one manufactured crisis to the next with lousy fiscal policies that are jointly endorsed by the parties, and with respect to which there is no accountability! Stake out a conservative position–less spending, lower taxes–by passing legislation in the House, and challenge the Democrats to make their preferences clear to voters through legislation, not secret negotiations.

This approach only works, of course, as long as Republicans control at least one house of Congress. It remains to be seen how long that will continue to be the case.

UPDATE: Ramesh Ponnuru thinks my dismay is unreasonable:

John Hinderaker comments on York’s article:

This is baffling. Why would Republicans agree to tax increases without getting spending cuts in return? . . . Regardless of how this plays out–and I agree with Byron that the result is likely to be unhappy–it will vindicate what we have been saying for weeks, if not months: stop making secret, last-minute, back room deals!

Hinderaker’s post doesn’t even acknowledge the fact that taxes are scheduled to go up–the unbaffling reason any agreement will be an unhappy one for conservatives. The reason we’re not going to get spending cuts beyond those already scheduled in return for tax increases smaller than those already scheduled is that current law doesn’t force larger spending cuts and does force larger tax increases.

Ramesh is correct, of course, that the Republicans’ current poor bargaining position is the result of the deal they made in the summer of 2011, together with the scheduled expiration of the “temporary” Bush tax rates and other tax provisions. But the question remains whether the GOP could have negotiated something better than the agreement York suggests they are likely to get. As I have argued many times, I think they could have done better if, instead of pursuing back room negotiations, they had, months ago, passed appropriate tax and spending legislation in the House and put pressure on Harry Reid to do likewise in the Senate. That would have led (I think) to a more traditional conference committee negotiation which would have taken place in the light of day, with the parties accountable for their respective policy preferences, and with the legislation passed by the two chambers as the starting point, rather than the 2011 debt ceiling deal and other aspects of existing law. Would that approach have worked? We will never know for sure, but I think it would have produced a considerably better result than we are likely to see in the next few days.

Even in the context in which the parties have been bargaining, I think it is reasonable to believe that the GOP should do better than what Byron describes as the most likely result: tax increases for those earning more than (say) $500,000, combined with the scheduled spending cuts (sequestration). Why? Because with that deal, the Republicans will be giving Obama something better, for him, than current law, including what the Democrats negotiated for in 2011. As has been widely argued, Obama would probably be quite willing to accept tax increases on everybody. But his first choice is to increase taxes on upper income taxpayers only, making our tax code even more ridiculously progressive–something he could never achieve without Republican consent. That is what the GOP appears poised to give him. It will be, in Obama’s eyes and those of the public, a victory for the Democrats. Republicans should have been able to get something for not making Obama and the Democrats take at least partial responsibility for raising taxes on all taxpayers, eliminating the payroll tax holiday, increasing the death tax, and so on. That “something” could have taken the form of deeper spending cuts or a reallocation of the scheduled cuts toward domestic rather than defense spending.

After all of the drama of the “fiscal cliff,” its resolution, on whatever terms, will be trumpeted as a significant step toward solving the federal government’s fiscal problems. In fact, the projected tax increase on upper-income taxpayers will do almost nothing to close the deficit, and the sequestration savings will amount to only around one-tenth of the $1 trillion-plus annual federal deficit. A great deal of energy and political capital will have been expended to accomplish very little. So, yes, I think the Republicans could have done better.

FURTHER UPDATE: I discussed this post with a Washington insider who is familiar with the thinking of Congressional Republican leaders. He noted two factors that are driving the Republicans:

1) As a matter of policy, the fewer taxes that are raised, the better. Republican leaders don’t think they can save all taxpayers from higher rates, but a deal along the lines being rumored would save the vast majority.

My comment: Understood. But the political reality is that the Republicans aren’t going to get credit for “saving” anyone. The perception will be that Obama and the Democrats kept most people’s taxes the same, but socked it to the rich. That will be broadly popular.

2) Moreover, Republican leaders are concerned that their position will be worse in January than it is now, for a number of reasons. Once the “cliff” is past, Obama and the Democrats can put together whatever tax package they choose, and pose as tax cutters. It would be politically difficult if not impossible for Republicans to oppose a proposal which cuts most people’s taxes, especially once a few months of higher tax rates have gone by and voters are clamoring for relief. So even though the GOP’s bargaining position is currently weak, it is likely to get weaker, not stronger, if nothing happens between now and Monday.

My comment: This could well be true. But is that scenario really so attractive to the Democrats? Sure, the Democrats and their minions in the press would blame Republicans for the fact that everyone’s taxes have gone up. But a president doesn’t get off that easily. I think President Obama would take a significant hit if January 2 sees a raft of major tax increases. And the post-January scenario gives the Republicans a mulligan on their failure to make their case effectively to the public. They, too, would have a free hand to craft legislation. They could belatedly remind voters that they are the ones who want lower taxes for everyone, and less spending. Washington Republicans think everyone already knows that, but I don’t believe that is the case. It has been quite a few years since the differences between the parties were starkly drawn, in voters’ minds, on taxes and spending–strange as that may seem to Washington insiders who fight these battles every day. I continue to think, as I have said many times, that Republicans are better off fighting legislative battles in the light of day than crafting secret, ostensibly bipartisan deals.

All of that said, John Boehner, Mitch McConnell and their colleagues are better able than pretty much anyone else to judge the complex tactics and politics of the current moment. I just hope they are giving adequate consideration to 1) the desirability of returning to an open, transparent budgeting process; and 2) the Republicans’ need to re-establish themselves in the public mind as the party of smaller government and lower taxes.

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