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Fiscal Cliff Notes: A Boehner-Cantor Split?

The House yesterday approved the Senate’s solution to the fiscal cliff. “Solution” in the loosest sense, that is: tackling difficult items such as the sequester and the debt ceiling has merely been put off. In the short term, we get a payroll tax hike, an increase on marginal income tax rates above $450,000, and — what has most scandalized the GOP right — no spending cuts.

It’s not much of a victory for either Democrats or Republicans. Although Obama gets to raise income taxes, he’s set up a situation in which Republicans may use the debt ceiling as leverage for spending cuts. Republicans hope they’ll be in a stronger position for the next round, but they really have nothing to show for this one — other than the simple fact that they’ve evaded blame for the larger tax hikes, defense cuts, and other painful measures that would have gone into effect had they not scrambled back onto the cliff.

A majority of Republicans in the House voted against the compromise, including, most notably, Majority Leader Eric Cantor and whip Kevin McCarthy. Paul Ryan voted for the agreement, as did Speaker Boehner — which is noteworthy because speakers rarely vote when they don’t have to. Has Boehner lost his colleagues’ confidence, and is Cantor angling to replace him?

I suspect the opposite is closer to the truth: the leadership team has hedged its bets, and by dividing their votes Boehner and Cantor maximize their influence. Cantor can now tell House GOP insurgents that he’s really one of them — hasn’t he just proven that? — and if even he is willing to support and follow Boehner in the future, they should too. By having Cantor and McCarthy join the dissidents, the leadership team as a whole salvages a semblance of solidarity with the House right. It’s all about appearances, just like the fiscal cliff itself.

There’s no point in getting upset about the outcome. With a GOP House, there’s a limit on how high taxes will rise. And with a Democratic Senate and president, there can’t be very significant spending cuts. My guess is that the next round will be just as full of drama as this one, only to achieve a similarly modest outcome: a few cuts to domestic and defense spending and the inevitable lift of the debt ceiling.

Keynesian orthodoxy says that tax increases are counter-stimulative, even if Keynesians do tend to think that government spending is more stimulative than private spending by wealthy individuals. The optimal Keynesian stimulus strategy isn’t tax-and-spend, it’s borrow-and-spend, which is why Paul Krugman is quick to dismiss any fearful talk of “bond vigilantes” ready to trash U.S. securities on account of out-of-control federal spending. There are other progressive rationales for tax hikes, but the dominant economic thought in the Democratic Party doesn’t consider them the highest priority. (With the unfortunate exception of the payroll tax, since that feeds directly into Social Security — or at least into the notion of Social Security as merely an egalitarian savings system, rather than a redistribution and welfare scheme.)

Republicans are similarly flexible where spending cuts are concerned: they certainly don’t want the Pentagon to go begging. Boehner and McConnell this week demonstrated just how hellbent they aren’t on spending reductions. In the next round they’ll have to throw some kind of bone to right, but they’ll make sure it has as little meat on it as possible.

Again, rather than getting upset, it’s more important to look to the long term: there’s little that can be achieved in the way of reductions in non-defense spending when Democrats have this much power. The thing to prepare for is holding the GOP’s feet to the flames the next time they really have the wherewithal to do something. Complaining about spending in the midst of a fragile economy is unpopular, and doing so while the Democrats hold the White House and Senate amounts to mere symbolism — which is why Cantor can indulge in it. The real test comes when Republicans are holding the knife. But that’s a test they’ve failed every time.

The Tea Party is meant to ensure that the next go round will be different, but the Tea Party is part of the problem. In the absence of a real opportunity to shrink government, many of its activists would settle for wrecking government — which is what failing to raise the debt ceiling and let Uncle Sam to pay (or at least charge off) his bills amounts to. A wreck was also what some were hoping the fiscal cliff would produce. But there’s nothing conservative about that, and policy-by-catastrophe is detrimental to the cause of small government in the long run. A right that the American people can trust to govern has to be a right that shrinks government when it can, not one that tries to produce a big but bankrupt government when it can’t. To imagine that bankruptcy itself will reduce the size of government where Washington is concerned is an opium dream — all it will do is lead to “regime uncertainty” followed by novel uses and abuses of power (such as the trillion-dollar coin) and a backlash against Tea Party types at the polls. Patience and good strategy would serve the cause of smaller government much better than ceilings and cliffs.

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#1 Comment By nukev On January 2, 2013 @ 6:40 am

Well said. I concur.

#2 Comment By Process Server On January 2, 2013 @ 7:47 am

No House insurgent is going to believe that Cantor is “one of them”, Mr. Giraldi.

Cantor is disliked and distrusted by the Tea Party, which will never forget his votes for the bailouts in 2008 and his support for grossly mismanaged budget-busters like the F-35. That’s one reason that his margin of victory in 2012 was the lowest of his career. His support among other legislators isn’t even skin-deep; it comes from struggling Congressmen who he literally buys off by funneling them campaign contributions, many of which trace back to Wall Street.

#3 Comment By SDS On January 2, 2013 @ 9:03 am

I would suggest that, as you state-
“But that’s a test they’ve failed every time.”
The ONLY way to move any way BUT towards insolvency is to hold firm against the debt limit increase…..
What other tool do the few legit debt hawks have?
A “wreck” is not what was hoped for; but the promised spending cuts……which have now been kicked down the road again! I submit the tax hikes and across the board cuts would have been better for us….

#4 Comment By Georgina Davenport On January 2, 2013 @ 10:52 am

McCarthy brings out one important point here for the GOP and libertarian: Wrecked government is not small government.

In fact, the more effective a government is, the smaller we can make it. For example, if an effective government (of the people) is able to successfully champion the rights and welfare of the workers in terms of fair wages and decent and safe work environment, then less people will fall behind, therefore less people will need the safety net.

By the same logic, working people would generally be able save better for rainiy days, their kids’ education, retirement and so on.

If an effective government is able to minimally regulate businesses such that they have less incentive to monopolize and manipulate the market, to pollute, to commit fraud or sell defective products, then hopefully we can have a society with priorities on ethical values and healthy living, thus less need to prisons, securities, surveillance, and so forth of different kind of governmental interventions.

But such thinking requires that we abandon the assumption that wealthy people are always industrious and fair and poor people are always lazy and dependent. To build an effective government requires us to think about what works and what does not work, not left or right or liberal or conservative. It requires that we actually want a government by the people and for the people.

#5 Comment By KateLE On January 2, 2013 @ 11:18 am

“And with a Democratic Senate and president, there can’t be very significant spending cuts.”

Well that one just made me snort coffee down my nose – thanks. The idea that any significant cuts would be made if only we had a Republican Senate and President is laughable. The three places where cuts would actually produce significant results instead of window dressing are social security, medicare and defense. Those three are off the table as far as the members of the Tea Party and the Republican base are concerned, so good luck there.

Until you convince the Tea Party of the reality that they can cut PBS funding, welfare assistance, the Dept of Education and the EPA entirely and it would go completely unnoticed in terms of the deficit, cutting government spending is going nowhere, regardless of who is in charge. I’ll be interested to see how you go about convincing them that the elderly and the defense machine have to take the only punches that would count.

#6 Comment By Greg T. On January 2, 2013 @ 11:20 am

Rick Perry ran a terrible campaign and embarrassed himself greatly. Still,he had one of the best political lines I have heard in a long time when he said,”my goal is to make what happens in Washington as inconsequential as possible in your everyday lives”.

#7 Comment By Ryan On January 2, 2013 @ 11:56 am

“Patience and good strategy would serve the cause of smaller government much better than ceilings and cliffs.”

The tea partiers don’t have patience because they don’t have time. 2008 was probably the first full scale incling that the demographic winds are firmly in their face. 2012 was confirmation. If they are to preserve the America they know, at least as long as and as much of it that can be preserved, short time frames and high stakes are thought to be called for.

#8 Comment By Travis On January 2, 2013 @ 12:00 pm

That’s a terrible political line, because what the government does is vitally important to American lives. From the Clean Air Act to child labor laws, food stamps to highway safety, the federal government has implemented a wide range of programs that have made us a safer, healthier and more just society.

Perry and his type are dreaming of some laissez-faire libertarian utopia that does not exist and that Americans do not want.

#9 Comment By Virginny On January 2, 2013 @ 12:21 pm

I don’t get the logic of your piece at all. We can’t pay our bills. We are bankrupt. Pretending that we are paying our bills by incurring new ones to pay old ones isn’t conservative, it’s insanity. It must stop.

But the idea that Eric Cantor can be part of the solution is laughable. Cantor represents the worst of the GOP, interventionist, bailout-supporting, bankster-enabling, someone who seriously thinks that the most important thing a freshman Congressman can do is go on Cantor-led junkets to Israel.

#10 Comment By SDS On January 2, 2013 @ 12:42 pm

Don’t equate Perry with anything “libertarian”…..

But is is the great irony that the big cuts that need to come to make any difference are the same that the Tea party and Republicans in general will not touch….

SO- IF the debt means anything–
In the end we can either commit to raising taxes on everybody to get revenue up 40% more; or hold the debt ceiling; and cut the budget 40% to the existing revenue.

To solve the debt; one (or a combo) of the above MUST happen.

OH- that’s right- “Raise the taxes on those other guys; but mine are high enough”- right? Sorry; no longer possible.

#11 Comment By Dyspeptic On January 2, 2013 @ 1:09 pm

“With a GOP House, there’s a limit on how high taxes will rise. And with a Democratic Senate and president, there can’t be very significant spending cuts.”

Pure defeatist nonsense. The Constitution plainly gives the House of Representatives immense power over the budget. The real problem is that Republican leadership doesn’t care about fiscal restraint or smaller government at all. It gets lip service just long enough to get them re-elected, then it’s back to business as usual. As the author of this piece notes, when the Republicans do have majority power in D.C. they go on a spending spree and start wars all over the world to distract the permanently befuddled masses.

Neither party believes in fiscally provident or downsized government which might be why Republicans do so badly in Presidential elections. They simply have no credibility on these issues and their opponents will always attract the majority of low information voters with budget busting free stuff and catchy platitudes.

So, if Republicans can’t excercise spending restraint now and didn’t excercise any when they controlled Congress and the Presidency, then what good are they?

#12 Comment By Dan Phillips On January 2, 2013 @ 1:25 pm

I don’t believe that what has “most scandalized the GOP right” is the lack of spending cuts. What has most scandalized them is the increase in tax rates, although curiously they (and the media and punditocracy) have been more concerned about the income tax hike than the end of the payroll tax holiday. It is politically easy to be against tax increases and it is easy to be for “spending cuts” generically. It is hard to be for spending cuts in particular and especially entitlement cuts. So conservatives have done what everybody else does and taken the easy road. Here we agree.

But if you don’t believe that in the grand scheme of things that insufficient revenue is the problem then I don’t see how conceding that more revenue is needed ever helps you. It seems to me that the “budget hawk” who is willing to compromise on taxes is at least as ideologically blinded as the person who demands no tax increases in the name of “revenue is not the problem.” Who honestly believes that additional revenue will go toward deficit reduction and not be frittered away? That’s the real utopian. Do you really believe it is possible in the near or long term to create something like responsible and efficient government here. Some sort of catastrophic wreck is inevitable.

You say that holding the line on taxes is simply symbolic. Heck yeah it’s symbolic, which given the reality that nothing much is going to be done about the deficit anytime soon, symbolism remains critical.

#13 Comment By Wesley On January 2, 2013 @ 4:47 pm

KateLE and SDS:

As part of the original fiscal cliff deal, the Republicans wanted to raise the Medicare eligibility age and have a less generous cost of living adjustment for Social Security. Many Democrats, even Obama and Pelosi, came to accept these provisions. But there wasn’t enough support for these provisions from congressional Democrats, so these two provisions were taken out of the final deal.

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#15 Comment By KateLE On January 2, 2013 @ 6:13 pm

Wesley – raising the Medicare elibibilty age is another of those window-dressing cuts that does little to put a dent in the deficit. The really big spending part of medicare comes in an individual’s declining years, not the first few. Freezing social security would help, but it would still take years, if not decades, to have any measurable effect. There’s just not a way around current beneficiaries, big pharma, and big defense taking a hit in order to meaningfully cut spending (at least that I can see).

#16 Comment By Philip Giraldi On January 3, 2013 @ 5:12 pm

Why is process server citing me? I didn’t write the article. But now that you ask, since we are now in an age of unlimited executive authority given the court ruling two days ago that government kill lists are legal, I would like to see Obama have both Boner and Cantor walk the plank on some unspecified charge that cannot be revealed due to state secrets, followed by Reid, Pelosi, and Obama himself. Cannot everyone see that the whole system is hopelessly corrupt and broken and that all this talk about tactics is just a way of kicking the can down the road, which will continue endlessly until we run out of money?

#17 Comment By William Dalton On January 3, 2013 @ 5:54 pm

I can’t fault the Republicans for the “fiscal cliff” deal. They may have punted spending cuts under the Budget Control Act again, but only for two months. And in return, the Bush tax cuts of 11 years ago have been made permanent for those earning under $450,000.00. That’s an achievement. Henceforth any tax increases will have to be voted on by Congress – they can’t take effect automatically, or be threatened to do so.

But in two months time, unless Congress can balance the Budget for the coming year, hitting the debt ceiling again will mean that ceiling with have to be raised. If actually balancing the budget is beyond what is reasonable, sticking to the cuts required by the Budget Control Act is not. The GOP should insist on not passing any bill that spends more than that act would allow. They may join in moving around where those cuts must be made, but keeping to the amount of the cuts scheduled should be the price exacted to raise the debt ceiling.

The real failure of the Republican Party in this week, news avoided by the media on a bipartisan basis, was the passage of a renewed FDAA, an act which not only continues an affront to the Constitution, but also exacerbates a military budget which, above all, needs to be reigned in. It is clear pressure will need to be brought to bear by members of both parties upon their representatives in Congress in unprecedented fashion if the necessary revolution in how Washington operates is to be brought to happen. The debt ceiling legislation is certainly the place to take this stand.

#18 Comment By EngineerScotty On January 3, 2013 @ 6:03 pm

FWIW, the Constitutional requirement that appropriations bills originate in the House is generally of little practical import. Given that the Senate is free to add appropriations language to any bill sent over by the House, including to bills originally on an entirely different subject (a so-called “gut and stuff”), the effect of the requirement is almost nil.

Now, if the Senate were not permitted to add appropriations language to ANY bill, and could only concur (or not) with language specified by the House, the House would have a stronger hand. But that’s not the case; unless the House were to refuse to send ANY bills over to the Senate at all (essentially, a government shutdown), the House cannot prevent the Senate from starting budget work.

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#20 Comment By indyconservative On January 4, 2013 @ 4:09 pm

I agree with your comment about the Republican’s inability to control spending. What generally happens when one party or the other dominates power is that a lot of gifts are given to favored constituencies, adventures (such as wars) are more freely undertaken, and pet initiatives (think Medicare drug doughnut holes and health care) are pushed through. Let’s face it, our political systems today are driven more by loyalties than by philosophy, and it doesn’t really matter that much which party is in power. Perhaps I’ve just given a case for the power of divided government.

I do believe that much can be achieved through patience, but to be a true conservative you must be willing to gore one’s own ox. Since neither party is fully in control, neither party can win, which of course is why the debt ceiling will be raised with minor concessions. But if Republicans really want to achieve their goals, they will have to say no to some of their constituencies as well, because this is really the only way to get Democrats to sign off on anything of real importance. Defense is one obvious example, where there is a lot of screaming about the disaster which could occur if defense is cut. Poppycock! Over 40% of world defense expenses are incurred by the U.S. today, and a lot of U.S. defense spending is questionable at best and often functions as a thinly disguised jobs program. There are other examples as well. So my question to those who call them conservatives is, how committed are you really? Are you committed to being a conservative, or to your constituencies? Today most appear to be committed to their constituencies and hobbled by ideological purity and political correctness, which makes them easy prey to a Democratic party which appears more flexible and, at the moment, more popular.

#21 Comment By Jim K On January 5, 2013 @ 4:45 pm

I think Phil Giraldi is the only one that gets it.

#22 Comment By SecurityEcology.org On January 6, 2013 @ 12:34 am


. > since we are now in an age of unlimited executive authority
. > given the court ruling two days ago that government
. > kill lists are legal, I would like to see Obama have both
. > Boner and Cantor walk the plank on some unspecified charge
. > that cannot be revealed due to state secrets,
. > followed by Reid, Pelosi, and Obama himself.

. >> I think Phil Giraldi is the only one that gets it.

The political snuff list is a great idea — and best of all,
it’s now Constitutional. Out with those old
Alien and Sedition Acts; in with the new.

But Mr. Giraldi is far too pessimistic.

We can cure all our government financial problems,
merely by making the Deficit a State Secret!

#23 Comment By John On January 6, 2013 @ 7:21 am

This is all theatre and posturing. The most they can do is reduce the debt by ten percent. In reality the debt is so high and increasing at such a rate that it is impossible to bring it under control. Furthermore, nobody is going to cut military spending or the vast amounts of money we send to Israel in direct aid, loan forgiveness, aid in kind, and the underwriting of Israeli loans. Furthermore, the banks have been put on welfare by the bailout and the continued funding to the tune billions of dollars of fiat currency that will only stop if the ink funs out or the printing presses break down. This has the effect of transferring money form retirees and pension funds from the Middle class to the wealthy. And as far as Social Security is concerned it is funded and would be funded to the end of the century had the government not pilfered so much of the money in the first place. So the oldest and most vulnerable are the victims two times over: There Social Security benefits will be reduced by changing the way the cost of living allowance is determined; and the interest rates on their investments are kept artificially low and wealth transferred to the banksters. It’s war, the war amchine, and Israel that is the problem. And, by the way, Keynes did not comment on the wisdom of borrowing money form other countries to stimulate spending. His principles might make sense if the borrowing came from American savings accounts that were used to purchase government bonds, or in an America that had a positive trade balance. Even then it is a stretch to assume that government spending beneftis the country more that private spending.