“The damage may have already been done,” starts a Wall Street Journal news story about the fiscal cliff. This is damage a fix at this point can’t fix. That Washington couldn’t stop big automatic spending cuts and tax increases in an orderly manner marked another hit on the psyche of American business and consumers.
Feeling captive to a bizarre political game is not pleasant, and yes, the damage can already be measured in dollars.
Consumer confidence has crumbled, as Republicans insist progress can’t be made except when wrestling Democrats on an outcropping over an abyss.
The problem isn’t Republicans, exactly, but the wrong kind of Republicans — those who won’t let the good kind negotiate absent a terrifying threat to everyone’s well-being. President Obama proposed deep spending cuts and retaining marginal tax rates for all but the top 2 percent, so where’s the problem in making a deal, unless you’re the problem?
The wrong Republicans forced a death match in 2011 over raising the debt ceiling.
Before that remarkable spectacle, raising the country’s debt limit was a routine vote (defaulting on America’s debt having previously been unthinkable). A temporary agreement was reached — leading to the current cliffhanger — but not before consumer confidence cratered, and Standard & Poor’s lowered America’s credit rating. In a few weeks, another debt-ceiling vote is coming along, and the wrong Republicans want the matter back in play.
Traditional Republicans believed in paying the bills, and if they didn’t like the bill, would reduce it first. That was before the radical right came up with the free lunch of “starving the beast.” The magical thinking revolved around the idea that shrinking revenues would force cuts in spending. That theory failed in spectacular fashion during the George W. Bush years, not that the wrong Republicans seem to have noticed.
Put simply, good Republicans felt a double duty to put a lid on taxes but also keep deficits in check. The last Republican president to take that responsibility seriously was George H.W. Bush. He made a foolish no-new-taxes pledge while running for office, but when deficits started piling up he showed the political courage and fiscal discipline to raise taxes.
For his efforts, the party base hounded him into losing re-election. Fortunately, he lost to Bill Clinton, who both benefited from policies the elder Bush had left him and oversaw another tax increase without a single Republican vote in the House.
In the following year, 1994, Republicans won majority control of the House. That gave them a tiny hook on which to hang credit for the budget surpluses Clinton bequeathed to his successor.
Deficits shrunk under Clinton, they say, because House Republicans would not let him spend. Actually, Republicans didn’t officially take over the House until early 1995, by which time deficits had already fallen from $290 billion when Clinton took office in 1993 to $203 billion.
Some Republicans say their 1997 cut in capital-gains taxes brought about Clinton-era prosperity. (They don’t explain why the even lower capital-gains tax rates of the George W. years didn’t make us fat and happy.) But do note that the lower capital-gains tax rate Republicans claim spurred investment under Clinton was 20 percent.
This is the same number that the wrong Republicans insisted would mark the end of capitalism as we know it, but fortunately is part of the New Year’s Eve deal. (It is also lower than the 28 percent top effective tax on capital gains left by Ronald Reagan.)
With the recent election showing a public weary of Republican dramatics — and polls finding folks fully prepared to blame the Grand Old Party for this latest round of damage — the party traditionalists should have strong self-interest in curbing the house wreckers. So should we all.
FROMA HARROP is a columnist for The Providence Journal. Her column is distributed by Creators Syndicate Inc.