Defy Grover Norquist and Advert Fiscal Cliff

Over the last view months, since the election, we have seen Washington in debate form over the so-called fiscal cliff.  The Congressional Budget Office (CBO) says that failing to advert the cliff would mean the nation is likely to go into a recession for the first half of 2013.  Will a tax pledge stand in the way of getting a deal done?  If the country does go over the cliff and damages the economy, will Republicans finally get it and drop Grover Norquist?

The fiscal cliff includes the expiration of almost every tax cut that were enacted since 2001: the so-called Bush tax cuts, the 2009 stimulus tax cut, a short-term fix that was designed to protect taxpayers from the Alternative Minimum Tax, the social security payroll tax cut, and a tax package with popular tax provisions that are supposed to encourage things such as charitable giving.  In addition to this, a law will expire that was designed to change the way Medicare pay’s doctors who treat seniors.  The debate also includes whether or not to extend the long-term unemployment benefits that help 2 million people.  Overall this could mean more than $500 billion in tax hikes and $110 billion in automatic spending cuts happening in 2013.

In February, the Treasury Department is estimating that the U.S. will again reach its debt limit.  The current limit is sitting at $16.4 trillion.  This means Republicans and Democrats will fight over whether or not to allow the government to borrow more money to pay down debts we already ran up.  On March 27^th, the federal government faces being shut down when the current funding runs out.

What’s the bottom line?

The CBO is estimating that the national gross domestic product (gdp) will shrink by 1.3% from Oct. 1^st, 2012, through the second quarter of 2013, which ends on June 30^th.  If the fiscal cliff is averted, then the CBO estimates the economy will grow by 5.3% in the same period. That a 6.6% difference. 

I do not know about most of you, but the last few months of politics have been excruciatingly stupid.  On one side we have a party (Republican) that does not seem to have gotten the memo, the majority of the country does not trust them, or even believe them when they talk (half the time I don’t).  On the other end we have the other Party (Democratic) that has yet to grasp that they are the only alternative and could just as easily start losing elections—much in the way they did in 2010.  The 2010 mid-terms was not what Republicans thouth it was—a center right country coming home after years of Bush/Obama big government.  If that were the case, then Democrats would not have won so many of those seats back.  Makes you wonder why they are acting like they are popular, or that these tax pledges are smart politics. 

However, Democrats are not exactly in the position they think they are either.

To some extent, the Democrats were just the other party this time around.  Take the mood of the country along with the demographic shift, add fear of losing the right to choose for women, you create a situation where the Democrats look strong on Election Day, but this strength is likely to be fleeting as many of them still seem to believe that the country is with them on every big government idea they can throw out.  This is simply not true, and it’s evident by their willingness to even talk about cutting entitlement spending.  However, the country does seem to be with them on taxes.  As bad as that is, what good does it do to fight so hard that it causes more damage to the economy and ends in higher tax rates anyways.

The latest news is that the White House and Republicans have reached a deal that would delay the sequestration (Spending Cuts) for two months.  The Senate approved the deal at 2 a.m. on New Year’s Day by a vote of 89 to 8, and at noon today the House is supposed to take the bill up.  We do not yet know if they will attempt to amend the deal.   

One thing to keep in mind for Republicans that are looking to nuance the situation.  Those that have pledged to never raise taxing can actually vote for this bill.  As of today, those making more than $250,000 are taxed at 39.6 percent because the Bush-era tax rates have officially expired.  If the GOP vote for the Senate version of the bill they will be voting for a tax cut and not tax hikes.

Grover Norquist’s anti-tax pledge would not be officially violated.  I think you know I am not fan of pledges (if you didn’t, you do now).  However, if a person must follow the stupid pledge, they have an out.   

I agree with what Sen. Olympia Snowe (R-ME) said on CNN’s Starting Point.  She says that Republicans and Democrats need to compromise, but the no-tax pledge is getting in the way of that.

I agree with this assessment, and from what I can tell, so do most Americans. 

Earlier this month a Quinnipiac University poll found that 85% of registered voters think it is a “bad idea” for members of Congress to promise to “never increase taxes on corporations or the wealthy under any circumstance”.  

Rasmussen found something very different, but telling never the less.  Let’s remember that Rasmussen polling was way off this election cycle.  What they found is that American voters are evenly divided about candidates that sign pledges not to raise taxes, but they found that Republicans represented by a congressman that signed a pledged want them to honor it.

“Forty percent (40%) of voters nationwide would vote for a candidate who signed a pledge not to raise taxes over a candidate who refused to sign. A new Rasmussen Reports national telephone survey finds that 41% would prefer the candidate who didn’t sign an anti-tax pledge.”

It is clear that the pledge is not that popular.  It seems to me that Rasmussen is finding that people want their congressman to be honest.  If they signed the pledge, then follow it.  That does not say anything about whether it was smart to sign the pledge in the first place.  Conservative are calling the Quinnipiac University poll biased because of the way they asked the question.

The Quinnipiac Poll asked “Do you think it is a good idea or a bad idea for a member of Congress to sign a pledge to an anti-tax group to never increase taxes on corporations or the wealthy under any circumstance?”

The pledge does not use the same wording, but the effect of the pledge does match up, so on this one we are just parsing words.  The Democrats are not attempting to raise taxes on the poor or middle class.  Republicans are fighting for tax cuts on wealthy individuals and businesses.  Additionally, the right have clearly lost this debate.  At least according to the same poll.   

The voters polled, 65% - 31%, support higher taxes on households making more than $250,000 per year, and 84% - 14% support from Democrats, while independents clock in at 66% - 31%.  Republicans are opposed 53% - 41%.

There is a trust issue going on as well.  Democrats are trusted to make a good faith effort to cooperate with Congressional Republicans on important issues, while 51% - 43% of voters think Republicans will not act in good faith. 

Gallup found that 67% of respondents think that leaders should compromise of their principles and beliefs on tax increases and spending cuts.  Only 22% think leaders should stick to their principles and beliefs, even if no agreement is reached before the fiscal cliff’s January 1^st deadline.  This has panned out in poll after poll too.

According to Gallup, “The results show significant majority support for the compromise position in four of the five ideology groups. The exception comes among the roughly 9% of the adult population who label themselves “very” conservative. These Americans tilt toward the “stick to your principles” position over the compromise position, by a 44% to 39% margin. “

“Those who label themselves as “conservative” but not “very conservative,” about 29% of the population, are slightly below the sample average of 67% favoring compromise. But they still strongly favoring compromise. More than seven in 10 moderates, liberals, and those who are “very” liberal favor compromise.”

It’s clear that compromise is what the people want.  Grover Norquist’s pledge is absolutely making compromise in the federal government almost impossible.  If Republicans vote for a deal, they may just put a dent in this stupid pledge.  This will go a long way towards repairing the image that has been cultivated over the last view years.  If they do not, then we have a situation where Republicans are fighting a losing war.  

That does not mean we do not need to cut spending, its actually the opposite.  It just means until the Republican Party gains some credibility with voters, true reform of our entitlement programs will never happen.  The fiscal cliff must be stopped, the spending cuts can come with the debt ceiling in February.