As I’ve said previously, I hate tax increases, but I’ll settle if a 10:1 deal is reached. Ten dollars of spending cuts, including welfare state cuts, for every one dollar raised in revenue. It’s a rational deal. If we can retake the Senate, and maintain our majority in the House; then perhaps we can discuss making other changes more palatable for the job creating and investing class. However, in this brief time where I am open to such compromise, the chances of such a deal is unlikely. But I’m still holding an optimistic grin.
Yes, Democrats will get what they want of we go off the cliff – and Republicans will be blamed for it. Joel Pollak at Breitbart described how Republicans were failing ‘negotiation 101.’ In his November 27 post, he wrote that Republicans need to focus on:
Framing the debate. The negotiations are now about the meaning of “revenue,” rather than about how to reduce runaway federal spending. President Obama says “revenue” and means increases in tax rates for the wealthy; when House Speaker John Boehner uses the same term, he means cutting loopholes and deductions while keeping rates the same. But both sides are talking about making the rich pay more to close the gap.
Aside from the fact that the wealthiest Americans bear a disproportionate share of the federal income tax burden–disproportionate even to their disproportionate wealth–and the fact that taxing the rich at a 100% rate would not solve the deficit and debt problem, there is a principle at stake here: that the government does not have an inherent claim to wealth and income that Americans have earned through their own labor and risk.
Arguably, the wealthy–like the rest of us–owe only for what provides the opportunity for all to earn and enjoy income in safety. Furthermore, too much of today’s public spending hurts the public–creating waste, reinforcing cronyism, and building dependency. But Republicans lost the chance to frame the debate around spending last year when they dropped the “Cut, Cap, and Balance” plan after obstruction from the Democratic Senate.
It’s true. The job creating and investing class pay a disproportionate share of the taxes, but Mitt Romney lost. President Obama campaigned heavily on raising taxes on the wealthy, and he won that argument on November 6. This was due to Republicans not making the argument against such hikes. Furthermore, there wasn’t even a single ad in the ’12 cycle that hit Obama on his hypocrisy surrounding the Bush tax cuts. He extended them in December of 2010, which was a tacit agreement of Republican economic policies, regardless of the ‘hostage’ talk – which was pure drivel. I agree with Pollak that the government is taxing too much of Americans’ hard-earned money, and that it’s immoral for members to say that those monies are government property, but there was an election about this – and we lost.
In short, the reason why Republicans will be forced to raise taxes is due to the fact that we have poor leadership and bad messaging.
Media and culture. Democrats blocked “Cut, Cap, and Balance”–but the Tea Party was blamed for obstructionism. Obama destroyed a grand bargain by insisting on increased tax rates–but House Republicans suffered more media criticism when ratings agencies lowered the U.S. credit rating a few days later. Today, more Americans blame the GOP for the fiscal cliff impasse even though the sequester was Obama’s original proposal.
More is at work here than simple media bias. The Democrats have consciously pursued a media and cultural strategy to reinforce the idea that Republicans are the guardians of the rich–even though the wealthiest are actually a Democratic constituency. In the summer and early fall of 2011, for example, after the downgrade and with the economy creating net zero jobs, Occupy Wall Street began–and the Democrats latched on.
The movement failed, but Democrats salvaged the “99% vs. 1% meme,” setting a trap that Mitt Romney fell into with his comments about the “47 percent” last spring. Obama has also made the effect of spending cuts visceral for many Americans; Republicans have failed to describe the cost of debt in similar terms. That media and cultural edge allows Obama to rig the game in his favor. It’s time Republicans found an answer.
Here is the answer is simple. It’s time to have a Reagan throwback. Not necessarily on everything during the Reagan administration, but reconnecting with middle class Americans. Conservatives and Reaganites were a coalition of blue collar, middle class, ordinary, and right-of-center Americans – who took a liking to a lot of Republican policies. For example, it explains the Arkansas bleeding of Democratic voters until Bill Clinton came into the picture.
Shifting away from Wall Street will also have a positive impact on our Hispanic outreach, since Latinos view Republicans as the party of the rich. Yes, it’s an incorrect assumption, but it’s not to say that we can do better with the folks in the American middle class. It’s time to challenge Democrats’ core constituency. I’m not saying we should be anti-wealthy, or engage in class warfare, but we need to find candidates who are popular both on ‘main street’ and ‘Wall Street.’ Let’s face it. Wall Street isn’t, and shouldn’t, come off scott-free from the ’08 financial meltdown. On the other hand, they didn’t deserve Dodd-Frank either.
Coming back to the fiscal cliff, Republicans should insist on entitlement cuts. After all, the president agrees with this position as well. It’s also put him at odds with his fellow party members – forty-two of which signed on to a deal that called for zero cuts to the welfare state. Sen. Patty Murray (D-WA), in Napoleonic stature, has found her Waterloo by leading a coalition of cliff jumpers in the U.S. Senate. To counter this, Republicans may have to take flak from the base by insisting that tax rates only rise for millionaires. There is a winnable argument to be made that $250,000 isn’t rich when all of the mitigating elements are factored in, such as location, utilities, property taxes, state income taxes, sales tax etc. For example, urban residents making this kind of money, and they should be congratulated on it, don’t feel rich once all the bills are paid – and they’re right. The GOP has a winning narrative in this period between elections.
On the other hand, they can fight to keep the 2% cut in payroll taxes. James C. Capretta wrote in National Review on November 27 that “this tax cut lowered the Social Security payroll tax from about 12 to 10 percent on all earned income (up to a limit of just over $100,000 annually). In January, if the cut is not extended, all 155 million American workers will see this two-percentage-point hike in their taxes. The Obama administration is ready to let it expire because it fears a long-term cut might create pressure for additional Social Security reform — which is precisely why the GOP should support keeping payroll taxes, as well as income taxes, as low as possible.”
Concerning entitlement reform, Capretta added that:
There should be no deal on long-term taxes without far-reaching reforms to health-entitlement programs. And what’s far-reaching? For starters, the entirety of Obamacare should be on the table for revision and retrenchment. The law sets in motion the largest entitlement expansion in a generation. It’s far better to scale the program back now before it gets started than to wait and hope it can be scaled back later.
Republican governors have substantial leverage in these negotiations because they can opt out of the Medicaid expansion in Obamacare, thanks to the Supreme Court. If 25 or so Republican governors refuse to put more people into an unreformed Medicaid program, it will put tremendous pressure on the Obama administration, which is desperate to see the Medicaid expansion occur during the president’s second term. The congressional GOP should use this leverage to move Medicaid toward fixed financing and maximum state flexibility.
Most importantly, if there are any cuts, they need to be immediate. Conservatives stress this because in such fiscal deals during the Reagan and Bush 41 days, they were promised – but never implemented. While those on the left, like Matt Yglesias, think a grand bargain is impossible, and negotiations towards one is hurting the country.
Jennifer Stefano, PA State Director for Americans for Prosperity, stated in a news release on November 20 that she thinks:
…it is funny people are criticizing the president for being abroad in Asia during this crisis. The President can be abroad in Asia and do exactly what he has been doing in the White House; which is absolutely nothing to prevent the economic calamity that will come on all Americans because of his fiscal policies..at the end of the day there are issues. And on the issues there are things that are right and there are things that are wrong. President Obama’s tax hikes are going to continue to crucify small businesses in this country… along with Obamacare, it is a crushing blow to the entrepreneurial spirit and as well as to the bottom line.
Matt Kibbe, President and CEO of FreedomWorks, aptly noted in Forbes on November 29 that such reforms to get our fiscal house in order will take more time, and that Congress should extend all the tax cuts for one more year. This would provide a buffer from the cliff, and give representatives the necessary cushion to come up with a comprehensive long terms plan to tackle our debt and deficit.
This is why FreedomWorks has activated its grassroots members to call Congress with a two-part message. 1) Keep your promise on the sequester savings. 2) Pass a one-year extension of all current tax rates, so America has time to pass serious tax and entitlement reforms.
By the way, there is some good news hiding in all the dust of the “fiscal cliff” fracas. The coalition of committed fiscal conservatives in Congress has grown in the past two elections. Constitutional conservatives in the House held on to the historic gains of 2010, while the Senate just picked up three principled fiscal conservatives in Ted Cruz, Jeff Flake, and Deb Fischer to replace GOP establishment types Kay Bailey Hutchison, Jon Kyl, and Olympia Snowe.
This new generation of legislative entrepreneurs is re-populating Washington with innovative energy. Expect these principled leaders to put real specifics on the table, craft thoughtful budget solutions, and carve pathways to needed tax and entitlement reforms next year – all things Senate Democrats haven’t seen fit to do for the past 3 years.
Fiscal conservatives are once again at the table, but we won’t bargain with ourselves against an arbitrary deadline. Your move, Harry Reid.
Extending the tax cuts for one more year – I’m for it! However, there’s a fat chance that will happen. Reid, Pelosi, and liberal Democrats won’t back a deal with such extensions. As I’ve said, politically, Republicans have little to stand on without getting blasted by the media, and the American people. We need to stand our ground with the spending cuts for sure. No compromise there, but concerning taxes – they’ll have to go up. It’s time to face reality for now. Come 2014, hopefully, we’ll have a comprehensive tax reduction and reform plan that is palatable to everyone, and we can return to a sense of fiscal sanity.