Now that the debate over the “fiscal cliff” has concluded and Congress has passed legislation, it is time to evaluate the consequences. This column explores three consequences: consequences for the Republican Party, consequences for ordinary citizens, and consequences for the fiscal health of the nation. In each case, the failure of the Republican Party to offer principled opposition to the President’s ideas represents not only a failure of the Republican Party, but a failure of our system of government. The Democratic Party did an effective job of coordinating its arguments and controlling its members. This is unusual for a majority party in the Congress.
To begin, what are the consequences of this legislation for the Republican Party? There are three. The first consequence is that by all accounts, the Republican Party lost this fight. Polling data indicate that 57% of the population believes that President Obama won this political battle (all statistics come from The Pew Research Center’s Jan 7, 2013 release). This view is held across party lines: 74% of Republicans believe the President won; 55% of Democrats believe the President won; and similar numbers of Independents believe Barack Obama prevailed..
The second consequence for the Republican Party is that most people view this loss as a direct consequence of the failure of Republican political leadership. Sixty percent of Republicans blamed the failure on Republican Congressional leaders, while 81% of Democrats attribute the success to their congressional delegation. Seventy-seven percent of Republican voters disapproved of the job Republican leaders did in these negotiations. Despite strong public disapproval of the job the Speaker has done, Congressional Republicans have voted John Boehner back into office as the Speaker of the House. This situation is reminiscent of Bob Dole’s ascent to the position of Majority Leader in 1984. Dole came into office claiming that he would not lose the Republican majority. In 1986, he did just that. The Republican Party faces a leadership crisis much like it did in 1975 and 1976. The only difference is that there is no Howard Baker waiting in the wings to redeem the Party’s reputation.
The final consequence for the Republican Party is that 60% of Americans believe they lost the policy argument. It is not enough that they lost the vote and have perhaps lost the confidence of their supporters: they were unable to make a moral argument that raising taxes must be coupled with cutting the budget. It is not as if they are unfamiliar with this argument: Ronald Reagan successfully made this very argument in 1981 and 1982. The failure of the party even to attempt to justify their positions makes it far more difficult for the Party to campaign successfully in the future. It is clear that they have forgotten the Thatcher Rule: “first win the argument; then win the election.” Their unwillingness to make an argument, to say nothing of their inability to do so, bodes ill for the Party over the next four years. Perhaps we are facing a new “Era of Good Feelings” for Democrats.
Ordinary citizens are already feeling the impact of the fiscal cliff legislation. Despite promises that taxes would go up only on the wealthiest of Americans (specifically, those making $400,000 or more), paychecks this January showed decreases from 4 percent to as much as 10 percent. And this does not include the tax increases that are going to come once the Affordable Care Act (Obamacare) is fully implemented this year. As the Medicare and Medicaid taxes increase, people will begin to see how much the failure of the Republican Party to present a logical, disciplined and intelligent argument about tax policy has cost them. Ordinary Americans seem to be aware of this—a majority believes that the fiscal cliff bill is going to hurt them rather than help; more Americans believe that this legislation is going to hurt the budget deficit rather than help; and few people believe it is going to help the economy. Americans are right on all counts. What they have yet to realize is that, like the Bailouts and the “stimulus” bills, the only people who will benefit are those who supported the President financially—Big Banks and Big Pharma, as well as the President’s cronies in Chicago.
Perhaps the greatest impact will be on the fiscal health of the nation. Passing tax increases without passing real spending controls will discourage investment and growth. This does not mean that we will necessarily slide into another recession (especially since we haven’t really climbed out of 2007 recession).But it does mean growth will be much slower, and will benefit fewer ordinary Americans than it would have with a real effort to address budget concerns, concerns every American knows need to be addressed.
Much like Greece in the 1990s, American policymakers refuse to see that America is facing a fiscal crisis and perhaps collapse. Most Americans are aware that the budget for 2013 contains a deficit of $1.5 trillion, but they are likely unaware of what that means. To understand the budget crisis better, consider the 2011 budget figures(data comes from Thomas.gov). The total outlays from federal spending in 2011 were around $3.6 trillion. Total revenues (all the money raised from taxes, fees, penalties and the like) were $2.3 trillion, leaving a deficit of $1.3 trillion. Approximately$600 billion of that was paid by bonds (essentially money borrowed from US citizens) but the rest was money borrowed from China, Japan, and Brazil (The Guardian, July 15, 2011). Of the top ten creditors to the United States, only four would be considered Western allies (oil exporters own as much of our debt as does Brazil). To put this in perspective—the U.S. raised $2.3 trillion, but spent $2.23 trillion on Medicare, Medicaid and Social Security alone in 2011. This means that the money we borrowed– largely from China—paid the salaries and bought the equipment for the US military. Were China to demand immediate repayment, the U.S. would have to choose between military salaries and Medicare. The fiscal cliff bill does nothing to address this, and in fact makes it worse.
The Republican Party has many arguments to make for fiscal responsibility. These arguments affected the Budget in the 1980s and 1990s. The Party used to know how to address this issue and persuade Americans that fiscal responsibility is not just good politics; it is the moral and responsible thing to do. Today’s Party has either forgotten this, or rejected it. The long-term consequences may spell disaster for the Republican Party—and even worse for everyday Americans..