SALON

Monday, Aug 6, 2012 3:33 PM UTC

Over the fiscal cliff we go

The GOP's insistence in protecting low taxes for the rich has businesses putting off new investments and hiring

By

Topics: Budget Showdown, U.S. Economy, Taxes, Fiscal cliff,

Over the fiscal cliff we go

From inauguration day onward, a favorite GOP go-to attack on Obama has been that his tax, spending and regulatory policy proposals were causing “uncertainty” about the future. This uncertainty about the shape of things to come was supposedly impelling business executives towards excessive caution, dampening their enthusiasm for hiring and investment.

This criticism, especially in the early years of Obama’s administration, always seemed precipitate. What could possibly cause more uncertainty about the future than a massive economic crash responsible for half a million layoffs a month during the worst of the crisis? Wouldn’t a decision not to pass new regulations on the banking sector after a systemic crash seem more scary than the possibility that some of the new rules might have costs? But the attack was still effective because it contains a nugget of truth. There seems little question that the debt ceiling showdown during the summer of 2011 — an incident entirely created by House Republicans — did indeed cause economically damaging uncertainty about the future.

Cue the déjà vu machine: On Monday, the New York Times provided new, distressing proof of the destabilizing impact of “uncertainty.” Look out, everyone, we’re about to tumble over the “fiscal cliff”!

A rising number of manufacturers are canceling new investments and putting off new hires because they fear paralysis in Washington will force hundreds of billions in tax increases and budget cuts in January, undermining economic growth in the coming months….

Hubbell, a maker of electrical products, has canceled several million dollars’ worth of equipment orders and delayed long-planned factory upgrades in the last few months, said Timothy H. Powers, the company’s chief executive. It has also held off hiring workers for about 100 positions that would otherwise have been filled, he said.

“The fiscal cliff is the primary driver of uncertainty, and a person in my position is going to make a decision to postpone hiring and investments,” Mr. Powers said. “We can see it in our order patterns, and customers are delaying. We don’t have to get to the edge of the cliff before the damage is done.”

So who gets the blame this time around? A cynical person would note that an economic downturn, right now, increases the GOP’s chances of moving into the White House. So from a realpolitik point of view, it’s hard to see a downside for Republicans. They can claim they’re acting on principle while executing a hugely advantageous strategic maneuver.

Judging by the Times’ reporting, however, business leaders are feeling extra apprehension this time around because Democrats are acting like Republicans!

Business leaders say the latest fight feels different. Last summer, during a confrontation over raising the debt limit that risked a government shutdown, Mr. Powers of Hubbell did not alter course at his company, as he is doing now. “We never expected the government to shut down,” he said. “This bluff carries much more weight.”

So why would Democrats willingly fling themselves over a fiscal cliff that threatens their own party more than the opposition? The answer to that requires a close look at what this struggle is really about. If no action is taken, taxes will rise by nearly $400 billion. But that scenario can only happen if the GOP sticks to its guns in refusing a tax hike on the wealthiest Americans. This whole fiscal cliff nightmare just goes away if Republicans are willing to make a deal that includes some revenue increases.

The closer you look, the more untenable the GOP’s negotiating position becomes. A majority of Americans support higher taxes on the rich. But the GOP is willing to crash the economy to defend historically low taxes on the Americans who have prospered the most over the last 30 years.

There’s only one reason why the GOP is refusing to budge. As history has shown again and again, Democrats will cave. So far, that doesn’t seem to be the case, a fact that justifiably has the business community worried. Executives are freaking out because Democrats are signaling that they can be crazy too. Maybe it’s time for them to pressure their GOP proxies to cut a deal — in the interests of everyone.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21. More Andrew Leonard.

Next Article

Related Stories

More Related Stories

Featured Slide Shows

The week in 10 pics

close X
  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11
  • Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
    Credit: AP/LM Otero

  • Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
    Credit: AP/Matt Rourke

  • A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
    Credit: AP/Jenny Aicher

  • Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
    Credit: AP/Molly Riley

  • Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
    Credit: AP/J. Scott Applewhite

  • Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
    Credit: AP/Carolyn Kaster

  • O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
    Credit: AP/Las Vegas Review-Journal/Jeff Scheid

  • Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
    Credit: AP/NASA/Chris Hadfield

  • When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
    Credit: AP/Jacquelyn Martin

  • A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
    Credit: AP/The Duluth News-Tribune/Clint Austin

  • Recent Slide Shows

  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11

Related Videos

Comments

 12 Comments

Comment Preview

Your name will appear as username

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>

follow salon

Most Read

Popular on Reddit

links from salon.com

From Around the Web

Presented by Scribol
listener_new_rect The Listener: So long, Sookie Stackhouse

Recommendations