GOP Pushes for Higher Spending
The other part of the fiscal cliff is spending cuts, which were authorized by the very Republicans who now warn against them. The 2011 fight over extending the Debt Ceiling was resolved with a compromise. Democrats and Republicans would agree to draconian cuts in defense and entitlement spending, which was intended to force a “supercommittee” of Republicans and Democrats to forge a deficit-reduction plan.
The supercommittee ended up deadlocked, with Republicans refusing to consider any tax increases to balance the budget. This meant the “sequestration” cuts suddenly became law, effective in 2013.
Republicans have reacted with panic, as the most immediate impact would be to defense spending. The entitlement cuts were structured to reduce compensation to providers, but not impact health care for people receiving federal care.
This has an asymmetric impact. While Democrats don’t support the sequestration cuts in Medicare, they can live with them, and many Democrats in Congress are quite fine with cutting Defense. Republicans, meanwhile, are forced to abandon their claimed opposition to the deficit, and acknowledge that cutting government spending could adversely impact the economy.
For Democrats, then, this is another case where they hold the leverage. Republicans are desperate to avoid the cuts in defense spending that they voted for.
Republicans also lose their biggest hammer if the cuts do go into effect, even temporarily. Republicans have threatened to refuse to extend the debt ceiling again, which would force yet another crisis over government funding. If the tax cuts are not renewed and spending cuts go into effect, however, the debt ceiling vote will be pushed back.
A “Grand Bargain” in the Works?
Since the Republicans hold such a weak hand, there’s every indication that they will seek to work with the Obama Administration to pass a deficit-reduction plan that both parties can support. Republicans know that some tax increases are all-but-inevitable; the question becomes whether they can compromise with Democrats to limit those increases, and perhaps win concessions on spending.
Any bipartisan compromise is likely to disappoint partisans on both sides, but that doesn’t necessarily mean it’s a bad idea. There is no question that the deficit is large, and that it will need to be addressed at some point. The main question is whether we can balance the budget sensibly, without harming the economic recovery, and without doing so on the backs of the poor, sick and elderly.
While it’s entirely possible that Republicans will continue to be implacably opposed to President Obama, they are at a decided disadvantage going into these negotiations. If nothing is done, we will go over the fiscal cliff — but that is likely to harm Republicans politically far more than Democrats, something the GOP is well aware of.
Image Credit: Martin Abbeglen
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