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Obama’s Checkmate

by on January 3, 2013

‘Fiscal cliff’ ends with Republicans caving on everything.


President Obama’s objective in the “fiscal cliff” battle was make Republicans break their pledge not to raise taxes. The GOP entered the game with the goal of winning real spending cuts and no higher tax rates. They lost on both counts as the lame-duck session of Congress came to a close minutes before the stroke of midnight on New Year’s Day. Over the next 10 years, the deal they approved will hike taxes and spending, adding nearly $4 trillion in red ink. Mr. Obama gloated over his victory just before walking across the South Lawn to return to his vacation in Hawaii. “A central promise of my campaign for president was to change the tax code that was too skewed toward the wealthy at the expense of working middle-class Americans,” he said. “Tonight we’ve done that.”

The measure, which raises taxes on small businesses and individuals who make over $400,000 a year, passed on a bipartisan vote in both chambers. Republicans were split. In all, 151 rank-and-file House Republicans declined to go along with Speaker John A. Boehner in supporting the bill with Majority Leader Eric Cantor and Majority Whip Kevin McCarthy among the highest profile “no” votes. In the Senate, Minority LeaderMitch McConnell lost five of his members: Sens. Chuck Grassley of Iowa, Mike Lee of Utah, Rand Paul of Kentucky, Marco Rubio of Florida and Richard Shelby of Alabama. Mr. Paul explained his position before the Senate voted in the wee hours Tuesday morning by saying, “We’re going to raise taxes. We’re going to raise spending. Tell me what’s good about that.”

Spending goes up by $300 billion over 10 years in the final deal, and the $110 billion sequestration is punted for another two months. Congress is once again delaying the spending cuts it had agreed to in August 2011 in exchange for lifting the country’s borrowing limit by more than $2 trillion. As is standard operating procedure in Washington, the borrowing was immediate, while the “cuts” were phased in over 10 years. Predictably, the cuts effectively won’t happen as net spending will surely rise this year.

While Grover Norquist said Republicans didn’t break their pledge not to raise taxes, he’s offering an escape based on a technicality. Republican leaders strategically scheduled votes in both chambers after going over the cliff at midnight on Dec. 31 so they could say they only voted to cut taxes while the upper levels reverted to the Clinton-era rates. Lawmakers who signed the pledge to their constituents to not raise taxes or cut deductions and credits without lowering rates are not showing much integrity by accepting this excuse.

On a positive note, the GOP did make the tax rates permanent, limiting the Democratic ability to use this tactic again. The death tax threshold stays at $5 million, indexed for inflation, and the alternative minimum tax is fixed for good.

Republican leaders insist their strategy is to leverage this deal to fight for spending restraint when the sequestration returns, the current continuing resolution runs out and the debt ceiling is hit. Mr. Obama pre-empted the GOP Tuesday night by declaring, “We can’t simply cut our way to prosperity.” Actually, we can, but this deal showed Mr. Obama has what it takes to win the endgame. It’s a bad move for the nation’s economic recovery.

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