Phony drama over phony deal to resolve phony crisis
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The stock market soared on the news a deal had been reached to avert going over the "fiscal cliff," providing yet more proof John Maynard Keynes was right when he said "the market can remain irrational far longer than you can remain solvent."
There was a dreary familiarity to the phony drama over the phony deal to resolve a phony crisis. Politicians in Washington have been dancing variations of this kabuki dance for years.
"It's a rotten deal, filled with precisely the sort of sad-sack posturing that we've come to expect and maybe even demand from our elected officials," said Nick Gillespie of Reason magazine.
This "historic" deal will last for only a few weeks -- until the next kabuki dance, on raising the ceiling on the national debt. Hardly cause either for celebration or for angst.
The Bush income tax rate cuts will be "made permanent" for all who earn less than $400,000 a year. Taxes will rise $620 billion over the next 10 years, chiefly because the 2 percent payroll tax holiday will expire, estimates the Joint Committee on Taxation. But taxes would have risen about $3.2 billion more if there had been no deal.
The terms are closer to what Republicans proposed than to what President Barack Obama wanted. His "first offer was for a $1.6 trillion tax hike and an infinite debt limit hike," noted Conn Carroll of the Washington Examiner. "[Speaker John] Boehner countered with $800 billion. The final deal was for only $600 billion."
But the deal stinks, because it doesn't address runaway federal spending, the cause of our mammoth budget deficits. Taxes will rise $41 for each $1 of spending cut.
That's because elections have consequences. Mr. Obama campaigned on raising taxes on the wealthy. He won.
There are no meaningful restraints on spending because Democrats won't agree to them. The president plans more crippling regulations on business. So bad things will happen to the economy. The relatively modest tax hikes in the "fiscal cliff" deal will hurt, too.
"There is simply no way Republicans could extract a good, or even mediocre, deal from this situation," said former Bush aide Peter Wehner. The best they could do was minimize the damage.
Which they did. Mr. Boehner played a weak hand well. But some conservatives wanted to oust him because he made any concessions at all.
"They learned nothing, and have forgotten nothing," said Talleyrand of the Bourbons after the restoration of the monarchy in France. The GOP Bourbons haven't figured out yet that elections have consequences, or why Republicans lost the last one.
With Mr. Obama in the White House and a larger Democratic majority in the Senate, Republicans can't stop the economy from going over the real fiscal cliff in a year or so. But they can prepare for a comeback after it does.
Republicans lost the election in large part because "the public has bought into the notion that they exclusively care about keeping taxes on the rich low," notes Douglas Holtz-Eakin, another former Bush aide. The chief political effect of a deal in which Democrats embraced 98 percent of the Bush tax cuts could have been to shift the spotlight away from taxes and onto runaway government spending. Then, when the Democrats' chickens come home to roost, a chastened public would be ready to turn to the GOP.
This won't happen if Republicans get blamed for the consequences of Democratic policies. Which is what will happen if the Bourbons get their way.
If Republicans are seen as the obstacle to compromise, the news media will blame any subsequent downturn on the GOP. This won't be the truth. But that hasn't stopped a journalistic meme before.
Republicans dodged a bullet when the House voted, 257 to 167, to approve this dog's breakfast. If there had been no deal, everybody's taxes would have gone up a lot, the stock market would have plunged, and the GOP would be going the way of the Whigs.
This was just the first of many battles. The next, as noted above, is over the debt ceiling. Republicans should be plotting strategy on how to highlight the dangers of Democratic spending without seeming "obstructionist." Instead, the Bourbons plot a palace coup. You can't defeat your enemies by attacking your friends. But Bourbons never learn, and never forget.
First Published January 7, 2013 3:39 pm