Fiscal cliff crisis: Made in the GOP
11/29/2012 4:44 PM
07/30/2013 5:26 PM
Both major political parties may have their fingerprints on long-simmering problems in the federal budget, but just one created the current crisis known as the fiscal cliff.
Blame them or thank them, it was the Republicans who forced a series of budget moves over the last decade that now are bringing the government to a breaking point that threatens sweeping tax increases and indiscriminate spending cuts that could plunge the country back into recession.
Part of it was a political gimmick, working the rules of the Senate to push through sweeping tax cuts in a way Republicans later would lambaste when President Barack Obama’s Democrats used the same tactic to enact the new health care law. The legislative gimmick got the tax cuts through Congress, but it made them the first such tax cuts with an expiration date. Those temporary tax cuts are expiring.
And part of the Republican approach was by design, risking the first-ever default on U.S. debt to force a change in Washington and rein in runaway deficits. That 2011 showdown led to the automatic spending cuts that will start going into effect Jan. 2 – and which none really wants in their current form.
It started in 2001, when the government was running its fourth straight year of surplus and President George W. Bush moved to cut taxes as he’d promised in his campaign. He faced a serious hurdle, a Senate split 50-50, far short of the 60 votes needed to clear Senate rules and enact his sweeping tax reduction.
There was a way out, but it was a tactic that the staid Senate was reluctant to use, called reconciliation.
Created to make it easier to deal with budgets, it also became a tool for skirting the 60-vote threshold since only 51 votes were needed. There was a major catch: Any such bill could only make changes in federal revenue for a maximum of 10 years.
With support from some Democrats, the Bush tax cuts passed the Senate with 58 votes. They were temporary.
The precedent was set, and when Bush came back with a new, more controversial round of cuts in 2003, the Republicans used the reconciliation rule again. This time, the bill passed with 51 votes, as Vice President Dick Cheney broke a 50-50 tie.
In May 2001, White House Press Secretary Ari Fleischer was confident the cuts would be extended forever. “To do anything other than that is to raise taxes on the American people,” he said.
The tax cuts contributed to a decade of record deficits and debt, aided by rising spending on a new Medicare benefit and wars in Afghanistan and Iraq. The national debt, $5.7 trillion when Bush took office in January 2001, had grown to $10.6 trillion by the time he left eight years later. It grew more under Obama.
“Republicans set up the deadlines feeling voters would move in their direction. But in the last election, they didn’t move in that direction,” said Steven Schier, an author of books on budget politics and a political scientist at Carleton College in Minnesota.
The deficits topped $1 trillion a year as the country suffered through the Great Recession spanning the Bush and Obama administrations, and they have stayed at that level since.
Attempts to curb that debt were stymied in part by the tax cuts. When they first were to expire at the end of 2010, Obama backed a two-year extension, despite opposing the lower rates for the wealthy, because he feared a tax increase would threaten the still-fragile economic recovery.
“My sense here is that the GOP was hoisted on its own petard, in that Bush and congressional Republicans constructed the end date of the tax cuts to kick in after the end of the Bush administration, so that Republicans could either continue them or Democrats would be ‘forced’ to raise taxes,” said Burdett Loomis, a professor of political science and congressional expert at the University of Kansas.
“To a large extent the strategy has worked re taxes, but has clearly helped to produce a huge structural deficit,” he said.
Republicans had a bold idea to bring down that deficit. As the debt limit approached its legal ceiling of $14.3 trillion in 2011, party leaders saw the need to raise the limit as a way of forcing massive spending cuts.
“There hadn’t exactly been much restraint in spending, and Bush had a lot to do with that,” said Michael Franc, vice president of government studies at the conservative Heritage Foundation and a former top aide to House Majority Leader Dick Armey, R-Texas.
By 2011, with the government running trillion-dollar annual deficits, Republicans were emboldened. They won control of the House of Representatives in 2010 with support of the grassroots tea party movement, which pledged tough action to slash spending. The party had modest success in winning cuts early in 2011 and by summer saw a bigger prize: Give us massive cuts, its leaders said, or we’ll resist efforts to increase the debt limit.
“We need to have a showdown at this point that we are not going to increase our debt ceiling anymore. We are going to cut (spending) necessary to stay within the current levels. . . . This needs to be a big showdown,” Sen. Jim DeMint, R-S.C., told Human Events, a conservative magazine, as the 2011 congressional session began.
The conservative stand led to White House-congressional negotiations in the summer of 2011. They eventually agreed to raise the debt ceiling – avoiding default – but only with the promise that a congressional “supercommittee” would seek $1.2 trillion in reductions from projected deficits.
As a hammer to force that committee to produce the promised savings, the deal set automatic spending cuts as the alternative.
The committee failed, and the automatic cuts now are set to start on Jan. 2.
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