Has leverage switched to Republicans on spending cuts?

posted at 12:11 pm on January 4, 2013 by Ed Morrissey

Peter Orszag argued as much yesterday, and Byron York continues the same argument today.  By splitting the fiscal cliff into two different debates — one on taxes, the other on spending and debt — Republicans shed their worst political position with a one-off concession and can now concentrate on a political strength.  Or at least that’s what they hope:

Their thinking was this: The GOP was on the wrong side of the polls in the battle over raising taxes on the highest earners. Surveys showed substantial public support for the president and Democrats on that issue. But Republicans are on the right side of the polls in the battle over fiscal responsibility. The GOP, the party trying to put sensible limits on Obama’s runaway spending, is better positioned to make the case for cuts.

“We’re making a hard pivot to spending,” says a senior GOP Senate aide. “Our view is that the revenue question has now been settled. It’s behind us. Now we fight on spending, and we’ve got two good opportunities to do so coming up — the debt limit and the continuing resolution.”

The Republican strategy is more than just positioning. It’s the right thing to do. Everybody knows Obama’s tax increases will do little to reduce deficits in coming years; they’ll add about $60 billion in revenue a year, turning a $1.2 trillion deficit into a $1.14 trillion deficit. And everybody knows entitlement spending is on its way to eating the entire federal budget. It has to be reduced or disaster awaits.

Byron notes that Barack Obama will try to get more tax increases in the next round too, demanding the deduction elimination the GOP proposed in this round as an alternative to raising rates.  However, Obama undermined his own argument on that point repeatedly over the last few weeks by deriding it as too little to make an impact on the deficit.  Ever since September 2011, Obama has insisted that the so-called Buffett Rule rates would make the system “fair” and relieve the deficit problem.  In two months, it will be clear that revenues aren’t rising enough to even make a noticeable dent in the trajectory of the deficit, and that will further strengthen the GOP’s hand.

Jim Geraghty also points out that the tax-rate argument has been the Democrats’ only answer for the deficit since Obama was a backbencher in the Illinois state legislature:

Looks like a pretty slam-dunk counter-argument for Republicans: “Why the hell are you guys talking about raising taxes on the richest Americans again? We just did that at the beginning of the year! We haven’t even reached the annual tax-filing deadline of April 16, and your calcified one-track minds are coming back with the exact same policy recommendations that you insisted would fix the problem before!”

And just think, this debate will occur as everyone in America sees their paychecks get 2 percent smaller (at least on the first $110,000 of income) because of the expiration of the temporary reduction in the payroll tax from 6.2 percent to 4.2 percent. (Here’s one Democratic Underground commenter exclaiming with surprise, “My paycheck just went down by an amount that I don’t feel comfortable with.”)

One of the fundamental reasons that “raise taxes on the rich” is less popular than Democrats want is the public’s well-founded wariness of just what income level constitutes “rich” in the eyes of lawmakers.

Obama is proudly proclaiming that he saved the middle class from a tax hike, and that he only raised taxes on the rich. But since most voters perceive their taxes in aggregate – that is, what’s left on their pay stub after everybody takes their bite – they’ll probably perceive the opposite, that an income tax hike supposedly targeting the rich made their paychecks 2 percent smaller. Thus, they’ll be even more skeptical than usual, since they’ll think the last tax hike on “the rich” hit them instead.

So the Republicans have better leverage for the spending fight in two months.  That doesn’t mean they’ll have all the leverage, or even most of it, since Obama and Harry Reid outnumber John Boehner.  However, there won’t be any more appetite for tax hikes, especially if the economy takes a hit from the rate increases and other changes passed on Tuesday.  That’s what Investors Business Daily expects to see — and they’re not alone, either:

Let’s look at what Obama has managed to achieve with his $620 billion tax hike on the wealthy and the boost in the payroll tax rate.

• They’ll hurt the economy. Economists are admitting the fiscal deal will slow the already sluggish economic growth.

Moody’s Analytics chief economist Mark Zandi says the higher taxes on the wealthy and the increase in payroll taxes will shave close to 1 point off GDP growth this year and result in 600,000 fewer new jobs.

Pantheon Macroeconomic Advisors chief economist Ian Shepherdson figures the deal will cut GDP by 1.5 points. And Gallup’s chief economist Dennis Jacobe says the deal has created a “higher probability of recession — just the opposite of what fixing the fiscal cliff was intended to do.”

• They’ll do nothing to fix the debt crisis. Even with the Obama tax hikes, deficits are likely to reach nearly $1 trillion this year and top $6 trillion over the next decade (see chart). Worse, by slowing economic growth, the tax increase makes tackling the nation’s debt crisis all the harder. Getting deficits under control means tackling the massive growth in entitlement spending. But Obama still hasn’t put forward a credible plan to do so. If he fails again, he’ll pay a price with the public. And if he does put forward a plan, he’ll find himself at war with his own party.

The problem that underlies both debates is the national debt, which is soaring to Greece levels and shows no sign of abating under Obama’s perpetual trillion-dollar annual deficits.  Michael Ramirez captures the issue perfectly for Investors Business Daily, and warns Obama that it may not be safe to go back into the water.  Obviously, Michael is a big fan of Jaws:

As Glenn Reynolds is fond of writing, that which cannot be sustained … won’t be.

Also, be sure to check out Ramirez’ terrific collection of his works: Everyone Has the Right to My Opinion, which covers the entire breadth of Ramirez’ career, and it gives fascinating look at political history.  Read my review here, and watch my interviews with Ramirez here and here.  And don’t forget to check out the entire Investors.com site, which has now incorporated all of the former IBD Editorials, while individual investors still exist.


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Happy Nomad on January 4, 2013 at 2:20 PM

I don’t think Generational Theft will play with the uneducated voters. If someone is going to vote based on what they get for “free”, there is no way they are going to be concerned with burying future generations in debt. Those voters are far too selfish. You could hold up a photo of their own kid and their response would probably be “I got mine, I raised them, they will have to figure out how to get theirs.” Another way to think about it. A voter who can’t see the effects of the last 4 years and can’t see the looming issues for the next 4 years can’t possibly buy into effects seen 20-30 years down the road.

Although, I like the overall idea and message, I just don’t see that messaging being effective with Low Info voters.

I say push a message to the moderately interested voters and educated voters and let them filter the message to the lower information voters. Having a few conservatives who could break the liberal monopoly on pop-culture and education wouldn’t hurt either.

weaselyone on January 4, 2013 at 2:41 PM

Looks like the conservative bloggers are just as delusional as they were with the “skewed polling samples” which put Obama ahead of Romney.

The Republicans gave up their leverage and sold their soul, they are now a party of tax hikes. It doesn’t what they were trying to do or how good you think their intentions are, all that matters is the easy political rhetoric. We once again raised taxes before cutting spending, we learned nothing from the mistakes of Reagan and Bush.

Obama will run more ads of Paul Ryan tossing grandma off a cliff, and he will win. The fact is, we had to hold the American people hostage with the fiscal cliff.

Daemonocracy on January 4, 2013 at 2:46 PM

The fact is, we had to hold the American people hostage with the fiscal cliff.

Daemonocracy on January 4, 2013 at 2:46 PM

The fact is, politicians are holding future American people hostage with ever increasing debt. When everyone finds out that our debt is unsustainable, the politicians will be given or take more power and authority than ever before.

weaselyone on January 4, 2013 at 2:49 PM

*yawn*

The War Planner on January 4, 2013 at 2:57 PM

I don’t know how this is working elsewhere in the USA, but this afternoon our payroll mangager sent out an email telling everyone about the new payroll tax rates. In it she explained “Changes are happening to all employers and employees regardless of their income levels.” She also felt compelled to add a p.s. saying “Don’t kill the messenger!”

This will be a big deal.

The majority of people had NO IDEA that the Tax Increases for the Rich that the Republicans were opposing because they are heartless bastards who don’t want people to Pay Their Fair Share were actually for everyone reguardless of their income levels.

They will know now.

Lily on January 4, 2013 at 3:00 PM

I don’t think Generational Theft will play with the uneducated voters. If someone is going to vote based on what they get for “free”, there is no way they are going to be concerned with burying future generations in debt. Those voters are far too selfish. You could hold up a photo of their own kid and their response would probably be “I got mine, I raised them, they will have to figure out how to get theirs.”

weaselyone on January 4, 2013 at 2:41 PM

Exactly! 52% of Democrats would rather pass on trillions of dollars of debt to their own children and grandchildren than make ANY changes whatsoever to Medicare or Social Security. Half of Democrats also believe that America’s fiscal problems can be solved by just taxing the ‘evil rich.’

Resist We Much on January 4, 2013 at 3:03 PM

I’ve come to the conclusion that the only thing that politicians in either party care about is getting reelected. It’s all well and good that the “next round(s)” will be focused on spending cuts – but what cuts? Unless it involves medicare it’s a waste of time (as all the spending growth charts show). And there’s no way the Republican party is going to be painted as the party who demands cuts to medicare while allowing the Dems to be the party trying to “save” medicare. Tea party or no, that ain’t going to fly at the voting booth.

jdp629 on January 4, 2013 at 3:54 PM

“Why the hell are you guys talking about raising taxes on the richest Americans again? We just did that at the beginning of the year! We haven’t even reached the annual tax-filing deadline of April 16, and your calcified one-track minds are coming back with the exact same policy recommendations that you insisted would fix the problem before!”

Have every member of the GOP in the House and Senate call a press conference separately, and repeat this phrase everyday until the end of time itself…

Seven Percent Solution on January 4, 2013 at 4:18 PM

The fact is, politicians are holding future American people hostage with ever increasing debt. When everyone finds out that our debt is unsustainable, the politicians will be given or take more power and authority than ever before.

weaselyone on January 4, 2013 at 2:49 PM

I agree, but I’ve come to the conclusion that the american people are holding themselves hostage by burying their faces in their ipads and gossip mags and expecting everything to just work itself out magically in the end.

This is why the GOP should have held firm on the fiscal cliff and demanded spending cuts over tax hikes, because all the hysteria would have forced at some people to get their faces out of their ipads for at least a few moments.

Daemonocracy on January 4, 2013 at 4:20 PM

Daemonocracy on January 4, 2013 at 4:20 PM

I bury my face in my Ipad, but it is usually to come lurk here.

I am beginning to think that the only cuts that will work will have to be an across the board (including entitlements, defense, and discretionary spending) cuts. Any other way makes it too easy to demagogue proposed cuts. If our “leaders” are incapable of prioritizing spending as a group, then they don’t have to. Cut it all.

weaselyone on January 4, 2013 at 4:49 PM

Just another “Golden Opportunity Passing-by” for the party of no-brainers.

chickasaw42 on January 4, 2013 at 5:23 PM

Has leverage switched to Republicans on spending cuts?

No.
Any cuts will actually be increases in spending.

albill on January 4, 2013 at 5:56 PM

I bury my face in my Ipad, but it is usually to come lurk here.

I am beginning to think that the only cuts that will work will have to be an across the board (including entitlements, defense, and discretionary spending) cuts. Any other way makes it too easy to demagogue proposed cuts. If our “leaders” are incapable of prioritizing spending as a group, then they don’t have to. Cut it all.

weaselyone on January 4, 2013 at 4:49 PM

Sequestration would have been broad cuts, particularly in defense.

Daemonocracy on January 4, 2013 at 6:23 PM

Byron York continues the same argument today

Yes, yes, Byron the big conservative journalist. Explain this idiotic nonsense, Ed? 10 to 1 spending cuts, my ass. What a joke.

Jaibones on January 4, 2013 at 6:23 PM

Sorry but you don’t have any leverage when you have no bollocks.

redware on January 4, 2013 at 6:23 PM

weaselyone on January 4, 2013 at 2:41 PM

It’s not generational theft anyway – it’s something an order of magnitude much worse.

There is too much debt to be paid off – literally, you need think about how big that number – $17 TRILLION is. Then – you have to realize that, by 2020 – we will be spending more $$ on the dead horse interest payments than we will our military.

Somehow – the debt has to be “wiped” off the books. But how? Forget about “forgiving” debt – that creates winners and losers. The only way to equalize the pain and make sure everyone pays is to MONETIZE.

You can then pay the debt off – but what’s the impact of MONETIZING $17T in debt? Well, that is a massive undertaking and would leave our currency in a shambles. Currency values will collapse catastrophically and the price of goods will shoot through the roof. It will be an economic “dark age”.

The cool thing is … WE, the people who have to endure that pain – don’t have to worry about it!! Our kids will! They’ll pay it for it with an America that is economically bankrupt with skyrocketing unemployment and never before seen levels of poverty.

BUT THANKS TO THE RINOS AND THE DIMS – WE WON’T HAVE TO SACRIFICE JACK SH1T – THAT IS …

UNLESS MAYBE WE’RE SPENDING MONEY SO FAST THAT WE’LL GET CAUGHT IN THIS TSUNAMI ALSO!!

HondaV65 on January 4, 2013 at 6:38 PM

Zero faith in these republicans. They face the greatest evil our nation has ever known and they are not up to the task. No ethics,
backbone or principles. Not sure they even have souls. At least the libs have a soul they’ve sold to Satan.

Sad that we didn’t lose out country in battle. We gave it away to libs who would spend our kids and grandkids money to push their evil regime and principles. May they all rot in hell.

acyl72 on January 5, 2013 at 12:14 PM

To be fair, it isn’t just Boehner and the current cast of the House. This has been going on for 30 years.

How did it go when Reagan negotiated with Tip O’Neill on taxes and amnesty? Reagan got punked by the Dems. So did Bush I with “read my lips…”; he got schooled too.

We just don’t like to think about our heros like Reagen getting his butt handed to him. Unfortunately, Boehner used the same stale tactics in response to the same Dem strategies and got the same results.

Maybe Boehner has finally wised up with his pledge of no more one-on-one negotiations with Obama.

We’ll see soon enough.

right of the dial on January 5, 2013 at 12:32 PM

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