The president campaigned on ending the Bush tax cuts and won. House Republicans may not have gotten the message
John Boehner waited until the afternoon after to speak publicly about the election, and his words conveyed one basic message: Nothing has changed.
The House speaker offered his congratulations to Barack Obama and Joe Biden and expressed his desire to work productively with them. This wasn’t anything new. Americans like to hear their leaders talk about reaching across party lines to solve pressing problems, and Boehner has certainly paid his share of lip service to the idea of bipartisanship these last few years. This has always broken down, though, when the details have come into focus, which was the case once again Wednesday afternoon.
Now that the election is over, the political world’s attention is shifting to the fiscal “cliff,” a catchy term that’s a misnomer in that it suggests a sudden, catastrophic outcome if no deal is reached before scheduled tax hikes and spending cuts go into effect at the end of the year. In fact, as economist Chad Stone has argued, the cliff is really more of a slope, with the expiration of lower payroll tax rates and the Bush tax cuts and the implementation of Pentagon cuts set to gradually take effect as next year unfolds.
This is an important point, because it puts Boehner’s side at a negotiating disadvantage. For more than two decades, a bottom-line concern for the Republican Party has been opposing any and all tax rate increases, particularly for upper-income “job creators.” Not since 1990 has a single Republican member of the House or Senate voted to raise income tax rates, and Republicans spent the run-up to this week’s election vowing to keep all of the Bush rates in effect going forward. Had Mitt Romney won, they would have been able to keep this pledge, but in defeat they have no official power to do so. No matter what Republicans say or do over the next two months, all of the Bush tax cuts will go away if Democrats simply do nothing.
So the name of the game for the GOP is to create public pressure that will compel Democrats to cut some kind of deal that spares wealthy taxpayers and averts the Defense cuts that most Republicans don’t want. The problem is that Obama was just reelected after campaigning on ending the Bush rates on income over $250,000. What was striking about Bohener’s comments on Wednesday was his unwillingness to acknowledge this.
“We aren’t seeking to impose our will on the president,” he said, “we’re asking him to make good on his ‘balanced’ approach. A ‘balanced’ approach isn’t balanced if it means higher tax rates on the small businesses that are key to getting our economy moving again and keeping it moving.”
Translated, this means that Republicans aren’t changing their posture at all. Boehner stressed that he and his fellow Republicans are open to a deal that includes new revenue, but this doesn’t quite mean what it sounds like. As the above comment indicates, the GOP remains as opposed as ever to rate hikes – especially on the wealthy, which is whom the speaker was referring to when he talked about protecting small businesses. What Boehner was endorsing was the basic tax reform framework that Romney just campaigned on and that some congressional Republicans put forward during last year’s debt ceiling drama. Their idea is to cut rates for everyone (and the wealthy especially) and then to “broaden” the tax base by closing some loopholes and ending or capping deductions. Pat Toomey, one of the most conservative Republicans in the Senate, floated this idea last year and a bipartisan group of senators spent this year trying to create a compromise around this framework.
Those discussions were derailed last month by New York’s Chuck Schumer, who declared that Democrats shouldn’t sign off on any deal that doesn’t include a return to the Clinton-era rates on the wealthy. From a Democratic standpoint, Schumer’s stance makes sense, especially in light of this week’s election. Obama can claim a mandate to raise rates on the wealthy, and he has the negotiating leverage to insist on it. So why on earth would he and Democrats sign off on the kind of deal Boehner is suggesting?
The question is whether the White House shares Schumer’s resolve, or if the desire to strike a grand bargain with the opposition will win out. As Jonathan Chait noted, Obama will also face “a concerted persuasion campaign by the business lobby and the cries of the fiscal scolds” to cut the kind of deal Boehner seems open to. But if Republicans refuse to consider higher rates on the wealthy, Obama has the option of waiting them out until Jan. 1, when all of the Bush rates will automatically go away. Then, with a more liberal Senate arriving days later, he could push for a grand bargain much closer to the vision he just campaigned on.
We don’t know yet if Obama will go this route. But as Boehner made clear yesterday, it’s probably his only option if he’s going to fulfill a promise he’s now made in two national campaigns to get rid of the Bush tax cuts for the rich.