1 Jan

The Left and the Cliff

Yuval Levin @ NRO:

For Republicans, the question presented by the fiscal-cliff deal was fairly straightforward: Is the bill better or worse than the plausible alternatives? The answer was not self-evident, and it depended in part on one’s trust in the Republican congressional leadership. The peculiar structure of this particular showdown, with tax rates expiring and higher ones automatically taking effect, meant that taking no action at this point would have sent taxes far higher for far more people than this deal would. And what we know about congressional Republicans suggests to me that the ensuing public, press, and voter pressure would have led them to accept a far worse outcome than the bill congress passed. Those who think that opposing any deal would have somehow created the conditions for Republicans to insist on reinstating all the Bush tax rates after they expired have a far higher opinion of the backbone of Republican leaders than I do. But that’s a prudential debate about how, as the minority party in Washington focused on keeping taxes and spending down, to minimize the harm of a uniquely bad set of circumstances. Maybe Republicans did that, maybe they could have done a little better, but they probably couldn’t have done much better.

But the Democrats could have, and the story of their failure here has not yet gotten the notice it deserves. In the long run, when the dust has settled, I think that will be the real story of the fiscal cliff. For liberals, this was not a moment of danger to be minimized but by far their best opportunity in a generation for increasing tax rates (which is the only fiscal reform they seem to want) and for robbing Republicans of future leverage for spending and entitlement reforms. And it is likely the best one they will encounter for another generation. Many on the left have seemed convinced lately that the politics of taxes had changed dramatically in their favor, and that the opportunity presented by the cliff could result in the kind of surge in revenue that could put off the coming fiscal crunch for years (until, they seem to think, it will just magically go away at some point) and so could save our entitlement programs from the need for reform. Their politicians gave up a lot of that leverage well in advance, when they announced they would repeal the Bush rates only for people making more than $250,000. But some liberals believed this could be overcome through much expanded caps on deductions in addition to higher rates for the wealthy (that is, a broader base with higher rates), which would both raise more revenue and make Republican-style tax reform (a broader base with lower rates) much more difficult later. And they believed that the Republicans’ opposition to tax increases would also give Democrats an opportunity to score some other points, like forcing Republicans to sign on to Obamacare-style counterproductive provider cuts in Medicare, so that Republicans couldn’t criticize those anymore.

The White House at first tried to do all of that. They wanted about $1.6 trillion in revenue—a trillion from rate increases and $600 billion from the elimination of deductions. They wanted $400 billion in exactly the wrong kind of Medicare cuts—provider cuts that not only make the health-care system less efficient but also tend to increase spending in the long run due to increases in the volume of services—to blunt Republican criticism of Obamacare and to make real (if incremental) structural reform far more difficult. And they wanted control of the debt ceiling, so Republicans would never have that leverage again. That would not only have given them relatively significant new revenue, it would also have strengthened their hand to get even more later.

But that hasn’t happened here.

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About Curt

Curt served in the Marine Corps for four years and has been a law enforcement officer in Los Angeles for the last 24 years.

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