The John Boehner Fiscal Cliff, and everyone is now Keynesian
There are a few lingering thoughts I need to get out of my head from the 2008-2012 era, one of them being how Republicans were right that political polling in 2012 was systemically biased (albeit biased against Democrats.)
The other being the many absurdities of the unnecessary and anthropological fiscal cliff (AFC?). What’s missing from the “debate” thus far is how the cliff was almost entirely invented by the Republican Party and represents what — not even two years ago — John Boehner proudly said he wanted and was thrilled to achieve.
For that, I take you back to the debt limit fight of August, 2011, and an interview that Boehner gave to Scott Palley of CBS News:
Pelley: Give us a little bit of insight. How did the grand bargain fail? What was the breaking point? How did you tell the president you were walking away?
Boehner: It really boiled down to two issues. President was insisting on more taxes. President never got serious about the kind of spending cuts that were necessary in order to get America back on a sound fiscal footing.
Those spending cuts didn’t sound so bad in 2011, but those are the same spending cuts that make up the bulk of the fiscal cliff right now. In that interview, Boehner bragged about getting the fiscal cliff cuts and attacked President Obama for opposing them (before he caved.)
Before continuing, remember that the tax “increases” due to expire in 2010 (extended until Jan 2013) were crafted by the Republican Party alone in 2001 and 2003. Democrats filibustered the cuts on the basis that they weren’t paid for and would add to the deficit and national debt. Dick Cheney had to cast a tie breaking vote in the Senate to pass one of the packages of cuts (Republicans passed the cuts under reconciliation, what the GOP would later call an unconstitutional act and the “nuclear option” when Democrats used it to pass health care reform.)
The combined 2001 and 2003 tax cuts weren’t paid for and were projected by the non-partisan CBO to add trillions to the national debt between 2001 and 2009, and trillions more between 2009 and 2019. Had they not passed, the national debt would be anywhere from $1.4 to $2 trillion less than it is today, just because of that. The cuts if extended again are projected to cost upwards of $4 trillion in new debt before 2019.
In order to hide the bulk of the devastating damage the cuts would do to the debt, Republicans crafted the cuts to expire at the end of 2010, forcing the CBO to only project the new debt added through 2010, after which the GOP planned to simply renew them again and again, hiding their true (and increasing) costs.
And that’s exactly what happened, although Democrats ended up caving on the 2010 dispute over only renewing the middle-class cuts. Boehner and Mitch McConnell demanded that the cuts for the wealthy be renewed, or there would be no renewed cuts at all. President Obama caved, as did Senate Democrats, and we got a half trillion or more in unpaid tax cuts (a half trillion in new debt) just for 2011 and 2012.
The key thing to understand is that the Bush tax cuts were only expiring (the supposed increase Boehner was whining about to Palley) because the GOP wrote them to be that way in 2003. So the supposed biggest tax hike in history (it wouldn’t be) in 2011, delayed until January of 2013, was designed from the ground up by the Republican Party.
That’s just a little reminder of how dishonest the GOP was being during the debt limit fight (and in 2001 & 2003). But now on to this part, which is equally important right now:
Pelley: You were unable to get your own caucus behind your bill a few days ago. Do you intend to remain Speaker of the House?
Boehner: I do. When you look at this final agreement that we came to with the white House, I got 98 percent of what I wanted. I’m pretty happy.
In August of 2011, John Boehner — leader of the Republican Party and third in line for the Presidency — was “pretty happy” and had gotten “98 percent of what I wanted” the day after his party invented the “fiscal cliff” from thin air. Republicans wanted huge, devastating cuts to government spending and that’s exactly what they got. They won in 2011. Everybody knows they won. Boehner hit the news circuit and bragged about winning.
The only reason this mess isn’t 100% the fault of the Republican Party is that Democrats, as they usually do, caved at the wrong time — when they had leverage — and agreed to extend all the tax cuts in 2010.
The fiscal cliff is:
A. The full expiration of the 2001 and 2003 George W. Bush tax cuts, written to expire by the GOP.
B. The massive spending cuts secured by the GOP in August of 2011, prompting John Boehner to brag to CBS News that “I got 98 percent of what I wanted”.
Simple enough, so why is anyone in this country listening to what the Republican Party has to say about any of this?
I was prompted to write this because Fox News is predictably trying to rewrite history so that the GOP fiscal cliff is somehow “The Obama Cliff”. They literally want to call it that.
If ever there was a lie so bold faced, so critical to the future of the country that the first amendment should take a day off, this would be it.
America only has the “fiscal cliff” because Republicans created it as a weapon of partisan political warfare, and they were absolutely thrilled when they got it.
Never forget that.
* * *
On a side note, it’s always worth pointing out that the fiscal cliff represents the best evidence yet that Republican (e.g. faith-based) economics is both dangerous and false. Paul Krugman has already gone over this, but for those who don’t read him, it goes like this.
If Republican/conservative economics were correct, the fiscal cliff would represent a miracle of economic growth waiting to explode all over our faces next month, bringing massive job and GDP growth and prosperity over the next six years that would have made Bill Clinton (22+ million new jobs during his administration) jealous. Government spending would be cut sharply (reducing the deficit from ~9% of GDP in 2012 to ~1.9% by late 2014, and ~1% by 2018). That alone, according to conservative economics, should make the confidence fairies very happy which will magically spur economic growth all on its own.
But it gets better. Because every dollar of government spending crowds out a dollar of private spending (never, ever proven), private sector spending should grow by an equal amount to the drop in government spending.
You know, just… because.
That’s not what anybody is predicting, though. Everyone is scared shitless over the cliff precisely because everybody (including the lying conservative economic blowhards) knows what the true economic reaction will be, and they blowhards can’t lie their way out of its consequences if we go over the edge. (In a way, it’ll be an economic correction in the minds of conservatives the same way the election was a poll/political correction, because like the election, you can’t delude yourself over the results of the cliff once you’re plummeting towards the bottom.)
Virtually everyone (I believe including the Heritage Foundation, which has been lying to America about economics for generations) is saying the same thing. Such a quick and massive drop in government spending will send shock waves throughout the economy, dragging down GDP and causing significant job loss. The reason why is simple: you can’t believe that the fiscal cliff will harm the economy without endorsing Keynesian economics by proxy.
If government spending crowds out private spending, then the cliff is a good thing and the economy will literally explode with growth. If that’s false, and government spending is inherently stimulative, then a sudden cut in spending will retard growth at best, and cause a recession at worst.
The CBO, private markets, and economic experts all seem to agree that the fiscal cliff probably will lead to a recession in 2013. (The upside is that growth in 2016 and beyond will be fantastic, especially if the Bush tax cuts go away in full.)
The fiscal cliff has served two vital functions, even if we go over the edge and suffer its consequences. First, it has proven beyond any reasonable doubt that Keynesian economics is correct (again!). Second, it proves beyond any doubt that modern era conservative economics is bad for the economy, because the fiscal cliff is “98 percent” of what John Boehner wanted in 2011, and even including the expiring tax cuts, is at least 98% the invention of the GOP, and virtually everyone thinks it will result in another recession.
Without the GOP, there’d be no fiscal cliff. Without the fiscal cliff, there’s be no threat of a double dip recession looming next year. And with all of that, you’ve got the best evidence yet that economics is simply beyond the abiliities of the modern Republican Party.