Tuesday, December 4, 2012

"Fiscal Cliff" - In Case You Forgot

Now that the election is over, media and politicians are all abuzz with the desperate need "address the 'fiscal cliff' by the end of the year."

What all these media and pundits are focused on is the very real deadline (Dec. 31) in which the Federal government must decide how to make progress on the budget deficit. If they miss that deadline or in some way do not address the issue, automatic massive spending cuts will be triggered along with a number of tax increases. Speculation is that such measures could (or certainly would) put the economy back into severe recession.

But, what is NOT being talked about is why we're in this situation. Remember that? If not, I'll remind you because as this is being debated over the next few weeks in Congress, I think it'd be helpful to remember who brought this to our nation and why.

The first thing to know is that this situation is not some crazy thing that just came up. No. Rather, this is the result of a) a purposefully manipulative political maneuver by the Republicans and b) the inability of Obama to get a deal made.

OK, it starts with the debt ceiling.

Congress has over the decades quickly, easily and repeatedly raised the debt ceiling in order to keep the government solvent and running. This has been done under the leadership of both parties. While nobody would say they wanted to raise the debt ceiling, its been done as a practical matter to keep things going. Republicans certainly did it reflexively when they ran the House from 1995-2006 and the Senate for 10 of those same 12 years. And as we know, our nation went from budget surplus to the biggest deficit to date between 2001 and 2008 with Bush as president and Rs in control of Congress most of the time. No issue with raising the debt ceiling then.

Then something changed. A Democrat was elected President and Democrats had majorities in both the House and Senate. Talk of eliminating the big tax breaks for the rich and corporations proffered during the Bush years started to be serious. Movement to regulate of out-of-control markets like finance and housing started gathering steam. Bailouts were made to the auto industry and action started to be made to end the wars in Iraq and Afghanistan.

None of this made conservatives happy. To retaliate, their leadership proudly and publicly stated that their number one goal was to make the Obama Presidency a failure such that he would be defeated in 2012. And their number one tactic in that mission? Pin the deficit they created over a decade on him...make him pay the price for it.

Flash forward to the elections of 2010. Things were only marginally better in the US economy two years into the Obama administration. Stabilized, but not great. This was poor enough that the mid-term elections delivered a House majority to the Republicans. Their voter based was energized by their distaste for Obama's 2008 win, their apparent belief that the deficit suddenly appeared over the previous two years and a dislike for the "Obamacare" health care law. Meanwhile, large numbers of Democratic voters sat at home. Many of the Republicans elected that year were the ultra conservative Tea Party/Ayn Rand types Hell bent on "shrinking government," "lowering taxes" and investing in defense.

And therefore, the next time it came around to raise the debt ceiling, those newly elected hard core conservatives (and their moderate but politically pragmatic Republican colleagues) decided they'd use their power in the House over whether or not to raise the ceiling (and therefore, effectively, keeping government open and running or not) as a way of getting concessions they wanted...or else. This was a big portion of the "weaken Obama" agenda.

The concessions Rs wanted were more tax cuts, huge spending cuts on domestic programs (but not defense) and further deregulation. In other words, doubling down on what got us into our economic mess...but hey, that's Republicans for you. They're nothing if not consistent. Ah ha they thought, here is our chance to get what we want or pin the deficit problems on Obama...or both.

Through a nasty set of negotiations and name calling between both parties, the big resolution they arrived at was that they'd raise the ceiling in the short term, but if nothing could be worked out over the year, the big cuts and tax increases would automatically go into effect on Jan. 1, 2013. They put it off...and put it off until after the 2012 national elections. They built the "cliff" we're now talking about in the form of automatically triggered budget cuts and tax increases that would kick in if no resolution was arrived at by the end of the year.

For President Obama, this situation showed that he could not really work with Republicans in the House. Now, that probably is because the Rs had not taste to work with him on anything whatsoever. But, through our history, great leaders have got things done in tough times. Putting off problems for later is not getting the job done. His bad.

As for Republicans, it seems pretty clear to me that they gambled big on winning the Presidency and/or majorities in both the House and Senate...something we now know that they were quite confident they'd get. They felt they could toe the hard line in negotiations with Obama over raising the debt ceiling...conceding nothing, pinning the deficit on him and positioning him as intractable. To them, delaying until the end of the year was not an indication of weakness. Rather, it was a "I dare you" tactic to position Obama negatively. Then, after winning the elections in November, they'd have the upper hand and mandate to get what they wanted out of a deal with a lame duck Obama and Ds in the Senate.

You see, what I'm trying to say here is that the "fiscal cliff" issue is not some principled argument for fiscal responsibility. No. It's easy to tell based on the past history of the debt ceiling and in a cursory review of conservative actions in 2011 and 2012 that this "crisis" is a carefully curated and stage managed result of political hard ball strategy by Republicans in Congress, boosted and empowered by Obama's inability to deal with them effectively. The only thing that went wrong in "the script" was that Obama was re-elected. Now, both parties have to give.

Overall, the above history is something I think people need to keep in mind as they decide which side they support or which ideas they want to get behind. Sadly, to me...the whole thing is just one big political play inflicted American people. I'll just end by saying that hopefully the Rs see this and Obama has grown a back bone. Early indications are that conservatives are sticking to their guns and Obama is trying to position/paint them as the problem. Not too promising.

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