Wednesday, December 19, 2012

What If The Republicans WANT Us To Fall Off The Fiscal Cliff?

Pretty much everyone has been wondering how congressional Republicans can be so boneheaded as to allow this country to "fall off the fiscal cliff," i.e., allow the Budget Control Act of 2011 to take effect that would raise taxes on all Americans and massively cut government services. Economists unanimously agree: this would have a devastating effect on our nation's economy, possibly plunging us into another recessionary period. Look at the effects of Greece's austerity measures, which have resulted in chaos and the rise of Nazi-like fascism.

Jonathan Chait of New York magazine writes, "we are not dealing with rational people here. We are dealing with House Republicans." He, and others have argued that the Republicans have nothing to gain by letting us go over the fiscal cliff. Taxes rise, which is every Republican's nightmare, and then Obama has all the leverage he needs to maintain high taxes on the rich while cutting taxes for middle class Americans, which is the plan he prefers. Republicans wouldn't dare to oppose a tax cut for the middle class just because it doesn't include one for the rich. Such a move would be unpopular. Chait argues that the Republicans have nothing to gain by holding out.

But there's a hole in this logic. And its a big one. What if the Republicans secretly WANT to go over the fiscal cliff? Is there something in it for them?

Hear me out. It makes sense.

Ignore the taxes for a second, and look at what else happens when the Budget Control Act goes into effect January 2nd:

"According to Barron's, over 1,000 government programs - including the defense budget and Medicare are in line for "deep, automatic cuts."

Think about this for a second. Sure, Republicans are big national defense boosters, and they don't want cuts to our war machine. According to the White House, Army operations and maintenance would lose nearly $7 billion next year, the Navy more than $4 billion, and diplomatic programs and embassy security would lose $1.2 billion. 12.2 billion. That's not pocket change, and Republicans will not be happy about that part.

But what else will be cut? "Over 1,000 government programs and Medicare." To the tune of $87.8 billion. $87.8 billion!!!!!!

Now we're talking about something Republicans want, badly. They've wanted to cut those programs for decades. As my friend Robbie Republican puts it, "It's time to stop giving those communist hippie freeloaders money for their drugs, their spinning shiny rims and ghetto subwoofers. Let them work for a living. I hear McDonalds is hiring." One huge part of the Republican platform is smaller government, cutting "entitlements." And this would be the largest cut in government programs for lower-income Americans in history.

Let's enumerate some of these cuts...

-Most domestic programs would be sliced by 8.2 percent

 -Total payments to hospitals through Medicare would be cut by more than $5.8 billion next year, while prescription drug benefits would be trimmed by $591 million.

-The Library of Congress stands to lose $4 million for its books for the blind and handicapped.

-The National Institutes of Health would lose $2.5 billion. Rental assistance for the poor would fall by $2.3 billion; nutrition programs for women, infants and children would lose $543 million.

-Inquiries and investigations, a mainstay of the Republican House, would lose $11 million. Salaries and expenses in the House of Representatives would drop by $101 million. However, under the terms of the budget law, salaries for lawmakers would be exempt. 

And these are just the bare bones detailed in The New York Times article. The list is much longer. Billions longer. Maybe even Big Bird isn't safe.

I repeat-- these are things the Republicans have been trying to cut for decades. And they get it all, in one fell swoop. They don't even have to lift a finger.

Yes, taxes go up. Yes, defense spending is cut drastically. But both of these issues are temporary, and everyone knows it. It's very, very easy to cut taxes. It's very, very easy to justify defense spending with the global threats America faces. If no deal is struck by January 2nd, taxes will rise and defense budgets will be cut, sure. But by next January 2nd, it's very likely that taxes and defense spending will be restored to somewhere near their current levels.

The other programs? Programs for the poor and middle class? Programs for the arts and sciences? Programs for education? The Democratic desire to restore funding to these initiatives will be met with fierce resistance from the Republican caucus, and the public support behind them will not be strong enough to overcome it. Many of these programs were created back in the salad days of the Clinton Presidency or other Democratic administrations, and have had their funding slowly stripped during the Bush years. It will be very hard to get that funding back with the current makeup of congress.

Obama could try to save these programs, refusing to lower any taxes until the Republicans agree to end or reduce these doomsday cuts, but the Republicans will then argue he's holding Americans hostage, making them pay more unless he can increase the size of government. And they'd be right. That would be a tough position to be in.

When viewed in this way, it makes perfect sense for Republicans to sit on their hands and wait for January 2nd. They get all the cuts they've always wanted, and the things they don't like--higher taxes, lower defense spending-- can be and will be fixed within months. Once taxes are lowered again (even if taxes remain on wealthy Americans), Republicans believe that the "entitlement" cuts won't significantly impact the economy--THIS HAS ALWAYS BEEN THEIR BELIEF. So they look forward to rolling into the November elections being able to say they took a stand against big government and won. And if the economy doesn't crash and burn, the Democrats will be hard-pressed to argue they're wrong.

Of course, if these spending cuts do have a devastating effect on the economy, as the Democrats and most economists say, the plan goes awry. But even then, Republicans will pivot, and argue the fiscal cliff wasn't to blame. They'll say Obama got the tax plan he wanted. They'll point to billions in government savings, helping to move toward a balanced budget (even if a slow economy has hurt government revenues and isn't reducing the national debt). They'll sell any downturn as a continuation of the previous recession, and you know what? Enough people will believe it to help the Republicans remain relevant.

It's a gamble, but what's the alternative? Make a deal with Obama and give him everything he wants? That's not flying with this group of "boneheads."

Democrats agreed with the Budget Control Act because they thought there was no way it would ever be put into action. To me, this seems to be a very bad miscalculation. They've played a game of chicken with the Republicans-- but the Republicans are willing to get hit by the train, if it means getting what they want in the long run.

Hope you've saved up a nest egg and packed a parachute. Because we're going over this cliff, and it's going to cost a lot to climb back up again.

UPDATE: It appears that I was right.

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