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November 17, 2012

Brinkmanship at the edge of the fiscal cliff

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The Daily Star

---- — If you were hoping last week’s elections might lessen the odds of a high-stakes game of chicken over the economy-wrecking “fiscal cliff” of tax hikes and spending cuts set for Jan. 1, don’t hold your breath.

The federal status quo remains largely intact, with President Barack Obama winning another term and slight Democratic gains in the House and Senate. That means we again will enjoy the same cast and crew whose reckless impasse last summer over the debt ceiling set the stage for this winter’s cutoff.

Obama wasted no time making his case – correctly, according to myriad exit polls – that most Americans would prefer a budget plan that includes not only spending cuts but also tax hikes on the wealthy.

“I just want to point out this was a central question during the election,” Obama said Nov. 9. “It was debated over and over again. And on Tuesday night, we found out that the majority of Americans agree with my approach.”

House Speaker John Boehner, R-Ohio, struck a conciliatory tone in his post-election comments, saying he’s open to a plan that would increase federal revenue. However, he said, the plan must cut income taxes for those in the highest bracket below the current 35 percent rate, not the 39.6 percent rate looming on Jan. 1.

Senate Minority Leader Mitch McConnell, R-Ky., was more strident, saying: “Now it’s time for the President to propose solutions that actually have a chance of passing the Republican-controlled House of Representatives … To the extent he wants to move to the political center, which is where the work gets done in a divided government, we’ll be there to meet him half way.”

McConnell’s head-scratching conclusion that the elections had somehow validated or increased his leverage with Obama was echoed by Rep. Paul Ryan, R-Wisc., who said the president has no mandate to raise taxes because if you “keep raising tax rates on job creators, it will cost us jobs.”

It’s doubtful Ryan paid any attention to the report a week earlier from the non-partisan Congressional Budget Office, which said nixing the Bush-era tax cuts for those earning $250,000+ annually would not significantly weaken economic growth in 2013.

Nor is it likely that Ryan read the non-partisan Congressional Research Service’s September report that concluded income tax cuts for the highest bracket have no correlation with increased economic growth. This might be because McConnell and other Senate Republicans pressured the CRS to remove the study from its website, over the objections of its research staff.

But studies and statistics matter only to empirical thinkers and realists, not to doctrinaire idealists such as Ryan, who’s known for handing out the works of objectivist philosopher Ayn Rand to his staffers. Rand’s misanthropic worldview was succinctly summed up by the protagonist Kira in her novel We the Living who said: “What are your masses but mud to be ground underfoot, fuel to be burned for those who deserve it?”

It might seem that the fiscal cliff is mainly a squabble over the Bush-era tax cuts. But it’s really a battle over two almost diametrically opposed views on the state’s economic role.

Ryan, McConnell and the other supply-siders believe growth is fueled by a special class of John Galt-types known as “job creators.” These folks, the argument goes, would love nothing more than to hire away and send unemployment plummeting – if only we’d shift the tax burden off of them and onto the middle class.

By such logic, it makes perfect sense to sign lobbyist Grover Norquist’s cultlish Taxpayer Protection Pledge, which forbids not only income tax increases on the wealthy, but requires that any tax loophole closed must be offset by opening another loophole.

And since every dollar in the Treasury is one that would always be better allocated by a private individual, it’s sane and rational to mount a fanatical ni shagu nazad last stand in defense of the Bush tax cuts, no matter the cost. Exhibit A: Last year’s Republican presidential primary debates, when all eight candidates flatly rejected a hypothetical deficit deal that would have offered $10 in spending cuts for every $1 in tax hikes.

In such a world, veterans who need health care; police, firefighters and teachers who’d like a living wage and pension; seniors who’d prefer not to be dragged out of their government-run nursing homes; and students who need federal loans to build a career fall into one category: “entitlement” seekers, all of whom should quit whining and tighten their belts.

Older Republican readers might remember a more rational era before their party donned this ideological straightjacket. Tried and true demand-side economics, wherein a robust middle class with plenty of expendable income is the engine of economic growth, was once a staple of both major parties, before the GOP bought into what George H.W. Bush famously derided as “voodoo economics.”

In truth, the only real “job creator” in the history of human civilization is demand for goods and services. Demand has slipped in recent decades as the American middle class – the goose that lays the golden economic egg – has been squeezed, swindled, bilked and cheated out of most its expendable income. A budget solution that puts consumers first isn’t just a matter of fairness, it’s a matter of prudent fiscal policy.

JUSTIN VERNOLD is a copy editor at The Daily Star. Contact him at jvernold@thedailystar.com