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Cliff Averted but Quicksand Ahead

January 3, 2013

In the end, the best Congress could do was a narrow compromise to avoid everybody’s taxes from going up. In the modern polarized political age, I guess that constitutes some sort of victory. But any true deficit reduction — and remember this is supposed to be about cutting the deficit — will only come through some combination of more revenue and less government spending. And this deal to avoid America’s so-called ‘fiscal cliff’ merely kicked the spending can down the road for two more months.

Republicans Give on Taxes

The tax issue is largely settled, at least for the moment. This is thanks in large part to the fact that Republicans, the party known for decades for its desire to cut taxes, were put in an impossible situation by President Obama and the Democrats. House Republicans failed to come up with an alternative to the Obama tax cut plan and that meant action shifted to the Senate where pretty much nothing gets done anymore unless there is some level of bipartisan support.

Once the Senate approved the compromise measure by an overwhelming 89-8 margin, it put House Republicans in the difficult position of either going along to prevent a tax hike for everyone or standing alone on principle, killing the deal and suffering the political consequences from millions of angry voters looking for somebody to blame.

House Democrats supported the compromise joined by 85 House Republicans to ensure passage. One-hundred-fifty-one House Republicans voted against it, showing a clear split within the House Republican caucus as to what political factors they felt were most important. Those Republicans who supported the compromise were afraid they would be blamed for plunging the country over the fiscal cliff if the deal was killed. But the other 151 Republicans who opposed it were upset at the lack of spending cuts and are more fearful of conservative challenges in Republican primaries where any votes in support of tax increases of any kind could be seen as heresy.

Congressman Spencer Bachus of Alabama spoke for many of his House Republican colleagues when he told the Washington Times, “I know the president won his election, but I also won my election.”

To open the new Congress, House Speaker John Boehner narrowly won re-election after several Republicans defected and voted for more conservative choices. House Republicans are divided, but conservatives and Tea Party supporters are already signaling to Boehner that there will be trouble ahead if he tries to ignore their wishes in the battles to come.

Old School Politics

Numerous press accounts of the behind the scenes maneuvering gave credit to two old Senate hands for coming up with a compromise and preventing a dive off the fiscal cliff. Senate

Republican leader Mitch McConnell, who is no slouch in the partisan gamesmanship department, wasn’t getting anywhere with either Senate Majority leader Harry Reid or the Obama White House. So he put in a call to his old Senate colleague, Vice President Joe Biden, and the two men were able to work out a deal that kept taxes lower for individuals making less than $400,000 and couples making less than $450,000.

McConnell was forced to reach out to the vice president because the relationship between Speaker Boehner and the White House was bad, and the one between Boehner and Harry Reid was even worse. At one point a few days before the January 1st deadline Reid took to the Senate floor and accused Boehner of acting like a “dictator” in the House. When the two men later went to the White House for talks as part of a larger group, Boehner went up to Reid and told him, “Go f— yourself,” according to the Washington Post.

Whoa, fellas, take it easy. Can’t we all get along?

Spending Battles Ahead

For those who thought the fiscal cliff battle might solve the differences between the two parties once and for all, forget it. It turns out it was merely the latest skirmish. Remember, the Tea Party-backed Republicans who came to town in 2010 felt it their mission not only to cut spending and permanently reduce the size of government, but to no longer engage in Washington compromise either.

So we can look forward to another battle over spending as early as next month when Congress will need to raise the debt limit so the government can borrow more money to pay its bills. A similar showdown in 2011 resulted in Standard & Poor’s downgrading the U.S. government’s bond rating.

And just beyond the debt ceiling fight, we can expect more battles over spending when Congress will have to grapple with mandatory cuts to defense and domestic spending that were delayed for two months as part of the fiscal cliff compromise. And just in case we make it through those two challenges, the funding measure that temporarily is funding the U.S. government since last year expires on March 27th, forcing Congress to come to an agreement or risk the possibility of a government shutdown.

Clash of Worldviews

President Obama won a second presidential term and hoped it would give him political leverage in his future dealings with Republicans. The jury is still out on that. The president and his Democratic allies were in a very favorable position on the tax hike issue. No politician wants the risk of being blamed for raising somebody’s taxes. But the coming battles will focus on spending and that is an area where Republicans are likely to be much more united. The president will likely not have the same kind of leverage in these upcoming spending debates, even though he has already laid out a marker that he will not negotiate with Republicans over the debt ceiling limit.

Despite all the talk from Republicans, however, they still offer little in the way of specific spending cuts they would like to consider. That’s because specifics in this debate will spark an outcry from any number of special interest groups that would suffer from the proposed cuts.

Democrats have played their tax card and will be pressured now to get serious about finding common ground on cuts. But it’s likely the Democratic strategy will be to force Republicans to get specific on cuts first, putting them on the defensive and letting them take the heat. I’d say, “Let the games begin,” but the fact is the game has been on for a while and will continue through much of this year.

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