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Cohen writes: "The United States economy will undergo the first stages of shock therapy - $85 billion in across the board spending cuts to defense and other domestic spending programs that will have devastating consequences in the US economy."

Cohen: 'There is one constant in the repeated failure to reach agreement: GOP obstinacy over tax increases.' (photo: unknown)
Cohen: 'There is one constant in the repeated failure to reach agreement: GOP obstinacy over tax increases.' (photo: unknown)



Thank Republicans for the Sequester Showdown

By Michael Cohen, Guardian UK

03 March 13

 

oday the United States economy will undergo the first stages of shock therapy – $85 billion in across the board spending cuts to defense and other domestic spending programs that will have devastating consequences in the US economy. By some estimates the cuts will cause a half-point decline in GDP and will cost the economy a million jobs over the next two years. There is a very simple reason why this is happening: Republicans don't want to raise taxes.

Seriously, that's the reason. If we go back to the beginning of the manufactured fiscal and budgetary crises that have dominated American politics since Republicans took over Congress in January 2011, there is one constant in the repeated failure to reach agreement: GOP obstinacy over tax increases. It has become line in the sand issue for modern Republicans – not deficit reduction; not reducing government size. Those are talking points. It is taxes – above all – that gets Republican blood pumping.

While the country narrowly avoided a government shutdown in the spring of 2011, our current dilemma really begins with the debt limit crisis of the same year. Republicans declared their intention to hold the country's debt limit hostage – and raise the possibility of debt default – in return for massive deficit reduction from the Obama White House.

President Obama, perhaps wrongly, agreed to meet them halfway. He proposed cuts in domestic spending and even endorsed the controversial notion of increasing the Medicare eligibility age from 65 to 67. In return, he demanded that Republicans meet him not even halfway with an equal mix of tax increases and spending cuts, but rather a third of the way with a proposal for $3bn in spending cuts and $1bn in revenue hikes.

But the so-called Grand Bargain failed not because Obama didn't go far enough, but because Republicans simply wouldn't budge on tax increases. As John Boehner said at the time about debt limit talks, "These conversations could continue if they take the tax hikes out of the conversation." According to House Majority Leader, Eric Cantor, "There is not support in the House for a tax increase."

Simply put, as long as Obama demanded tax increases – even minimal ones – there would be no opportunity for a deal. Not surprisingly the so-called Super Committee, assembled to avoid sequestration, could not reach a deal because of continued GOP intransigence on taxes. The rigid dogmatism of the GOP position was placed in even sharper relief in August 2011, when candidates were asked at a Republican presidential debate in Iowa to raise their hand if they would accept a deal that cut ten dollars from the deficit in spending for every one dollar in tax increases. None raised their hand.

This uncompromising position on taxes didn't win Republicans the White House, but that still had little impact on Republican officeholders. Only when faced with the possibility of a far larger tax increase with the expiration of the Bush tax cuts were 85 Republicans in the House willing to swallow the reality of higher taxes (Senate Republicans were far more amenable). Although it should be noted that the GOP fought tooth and nail for a deal, not that reduced the deficit (a key stated goal of Republicans) or cut spending (an ideological touchstone for conservatives), but rather ensured that couples making between $250,000 and $450,000 a year were protected from a slight increase in their tax rate. The fact that the final fiscal cliff deal actually increased the deficit by $4tn was of less concern.

Now we have the latest showdown. A key demand of Republicans is that the president puts spending cuts, particularly those to social insurance programs, on the table. He's done this. Indeed, the president's current proposal, which is available on the White House website, has about $930bn in new spending reduction – approximately $400bn of that to Medicare and Medicaid, and more controversially, $130bn in reduction to Social Security benefits.

The catch, of course, is what is also being demanded - $580bn in tax increases. These aren't even rates hikes, but rather reducing deductions utilized by wealthier Americans – the sort of tax reform measure that Republicans have long said they support.

Even though such a balanced approach is supported by three-quarters of all Americans; even though Americans will, if polls are correct, hold the GOP responsible for the impact of sequestration; even though Obama's strategy would reduce the deficit; even though cuts to social insurance programs would inflame the president's liberal supporters; even though Obama's plan would stop defense cuts (which Republicans hate); even though it would prevent widespread damage to the economy, which has the potential to boomerang against GOP incumbents on the ballot in 2014 … Republicans are not interested.

It is perhaps the most remarkable example of political folly, combined with political delusion and a healthy dose of political surrealism, that Washington has seen in quite some time – and that is truly saying something. Obama's proposed plan is, considering the circumstances, not a good deal for Republicans, but IT'S A GREAT DEAL. It is highly unlikely that they can do much better than this if sequestration happens, and, in fact, they are far more likely to find themselves under pressure to make a worse deal once the effect of billions in spending cuts go into effect. But anti-tax dogmatism drives all.

Honestly, it sometimes feels like the zealots at Masada were more open to compromise than House Republicans. And while the zealots fought for god, Republicans are staking their ground on more temporal ground – namely ensuring rich people do not pay a penny in additional taxes. The only story that one needs to understand about the sequestration is that it will happen because Republicans won't raise taxes. End stop. Period.

Yet this simple message is not getting through to the pundit class, who appear to be searching for every reason other than GOP anti-tax inflexibility to explain the failure to reach a deal avoiding sequestration. The fairy of political equivalence and "bothsidesaretoblame" punditry necessitates that responsibility for budgetary crises must not be affixed. For example, David Brooks denied President Obama even had a proposal for replacing the sequester (a position he later backtracked on –ish). It's right here. The Washington Post editorial page also accused Obama of not having a serious negotiating strategy. Again it's right here – and features elements that the Post has long supported. Indeed, the Post criticized Democrats for being "increasingly intransigent on entitlement reform" – even though they have put forward approximately $500bn in proposed entitlement cuts, which is about $500bn more than Republicans have proposed.

Ron Fournier of the National Journal, who has become the poster child for policy agnostic, "bothsidesaretoblame" centrism argues that Republicans "aren't telling the truth" when they say there is no possibility of compromise. "Even in this era of stubborn partisanship, both Obama and the GOP-controlled House have incentive to bend," says Fournier, even though every piece of evidence suggests the opposite is true. According to Fournier, "it is not leadership to merely blame the GOP and attack the media." Actually, he's right. It's not leadership – it's a fact that Republicans don't appear to have any interest in reaching a deal.

The reality is that whether one likes Obama or thinks he is the Antichrist, facts are facts: he has offered Republicans a Grand Bargain compromise repeatedly over the past 18 months. He has made concessions on key liberal priorities, like Medicare eligibility and Social Security benefits. He signed into law huge cuts in domestic spending without matching revenue hikes. And in return, all he has asked of Republicans is to support rather tepid increases in taxes. They have refused; and they have refused for the same reason every time.

Why is this so hard to understand?

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