GOP Got Its Way in Fiscal Cliff Deal

Despite arguments to the contrary, Republicans largely got what they wanted out of the deal to avert the fiscal cliff.

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America went over the fiscal cliff on Jan. 1, 2013. Just as promptly, as though attached to a bungee cord, it snapped right back up to the edge thanks to an agreement hastily hammered out between Vice President Joe Biden and Senate Republican Leader Mitch McConnell.

The deal is done, approved by both the Senate and the House and tax rates, which went up when the country went over the cliff, have for the most part come back down.

It's the culmination of a fight that began shortly after the most recent election when the House GOP leadership, led by Speaker John Boehner and seconded by Majority Leader Eric Cantor, promised conservatives they were going to fight the White House … on taxes. Not, as some had hoped, on the size of government, Obamacare, or total federal spending but on whether the Bush-era tax cuts—which Barack Obama had previously agreed would remain in place for an additional year—would be allowed to expire.

[See a collection of political cartoons on the fiscal cliff.]

As much as some people may argue to the contrary, the GOP largely got its way. The agreement is not perfect; indeed it is far from it. The marginal tax rate still goes up, from a growth standpoint and in a weak economy counter-productively—for individuals earning more than $400,000 per year. Nonetheless, there's finally some certainty on important issues like the marginal rates for the middle class, on the capital gains tax rate, the death tax and the size of the exclusion, and the tax on dividends.

Obama also gets to claim credit for preserving, for at least five years, some of the most egregious elements of his stimulus package that put cash in the hands of his political constituency. In the most literal sense however, what Congress passed is a tax cut since the rates actually went up as the New Year dawned.

As is typical with these kinds of grand Washington bargains, no one claims they are happy with the final outcome. Everyone, it seems, has some reason to complain. Most commentators have focused on what they don't like rather than what the legislation does that may be good for the economy. Some conservatives in particular have expressed strong reservations—and very loudly—that the agreement pushes off the mandatory sequester for several months while doing almost nothing to bring spending under control.

[See a collection of political cartoons on Congress.]

This criticism is correct and appropriate, but only as far as it goes. Conservatives, and,for that matter Americans of all political persuasions, need to keep up the pressure on Congress and the president to do something about the out-of-control spending which, those much wiser than I have observed, continues to threaten the nation's economic stability and credit rating. They also need to do more to promote economic growth but that fight, everyone should realize, is in the future. Only now it can be fought by the Republicans from a position of relative strength, either when the continuing resolution funding the government runs out or the federal debt ceiling is once again reached. At these two points Congress now has more leverage, since it has much more control over federal spending, than it did in preserving the Bush-era tax rates, which no one should forget were allowed to expire, even if it was just for a few hours.

Why do the Republicans have a stronger hand? By law, Congress must affirmatively vote to spend tax dollars. It must authorize them. It must appropriate them. If Congress fails to act, no money can be spent. In the tax fight just concluded, the result of inaction would have been higher rates going into effect without a vote. There was no way to block the increase without some kind of an agreement in which the president and Senate Democrats would agree to take part. That die was cast more than a decade ago, when Arizona Republican Sen. John McCain single-handedly kept the Bush tax cuts from becoming permanent. After that, it was not a matter of if the rates would go up under current law but when.

[See 2012: The Year in Cartoons.]

The next two years will be equally as contentious as the last two if not more so. Recognizing this, the House should go about its business and pass a series of reforms—of the budget process, of regulatory policy, and of the tax codes to name but three—and send them over to the Senate. True they will probably die without action in the upper chamber but the Republicans need to be proactive rather than reactive. They need to chart a course toward an alternative future for America, with all the slings and arrows that will no doubt be sent their way as a result, in order to remain relevant. 

The just concluded confrontation over the so-called "fiscal cliff" was the first of many. The next fight, over spending, is just over the horizon and, with the tax question out of the way, it will be easier for the GOP to get more of what it wants out of the White House in the form of concessions. Obama, no one should forget, regards the record increases in federal spending achieved on his watch as the reason for his presidency rather than a regrettable, unforeseen occurrence. He's not likely to back down unless he has to and, without tax rates to hold hostage, he has less to bargain with while Boehner and the Republicans in the House have more.

  • Read Susan Milligan: Hillary Clinton's Blood Clot Isn't a Benghazi Cover-Up Conspiracy
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