Between a fiscal cliff and a hard place

(Centennial Fellow) In the course of perusing the “fiscal cliff” rhetoric dominating the political world recently, I came across a story about deliberations over the Times magazine “Person of the Year.” While meditating on the issues surrounding the fiscal cliff, it occurred to me the perfect nominee for the Times cover is Julia — the haplessly dependent animation the Barack Obama campaign used to show the joys of cradle to grave handouts. Sure, Sandra Fluke does a mean real-life impression, but I doubt her actual impact.

I’ll get back to that. First, the fiscal cliff. The American economy faces a lose-lose proposition. Absent some kind of deal between President Obama, Senate Democrats and House Republicans, tax rates will rise across the board, including those for the middle class, and send the economy back into recession.

Well, we don’t want that. So what is option B? Unfortunately, the only option seems to be Obama’s vengeance tax on the wealthiest. Oh dear.

One thing that’s curiously absent from any of the current bedlam surrounding the “fiscal cliff” negotiations is any proposal to actually deal with the provenance of this theatrical mess — debt and spending. Neither of these options address the problem, let alone repair the beleaguered economy.

Democrats remain intoxicated with “tax the rich” hysteria fueled in part by their election victory. Their blood lust for a tactical victory in the Great Class War has blinded them to much else. So we are left with a Democratic president and Senate whipped into a frenzy to punish the rich with tax increases and a largely ignored spending crisis.

It’s unlikely a deal will be hammered out that isn’t economically harmful, let alone beneficent. As conventional wisdom suggests, Democrats have little to lose.

If we do plunge off the cliff, they can blame Republican intransigence. If a deal is struck, they get their tax increases — nothing else is on the table — and still blame the resulting economic disaster on whatever token concessions they might have thrown to “ideological” Republicans.

Still, lurking in the background as the Dems raise celebratory glasses will be the persisting situation of stagnant growth, ballooning debt and unsustainable spending — problems freshly compounded with higher taxes.

So what are Republicans to do? Holding firm and insisting on real solutions will send the economy over the cliff — and they will be blamed for it. Caving in to White House demands for tax hikes makes them responsible for the outcomes of such irresponsible policies and lends credence to complaints of Republicans being no better than Democrats.

Well, it might not be quite as bleak as that. Yes, it’s stinging after the election, but the GOP has more leverage than conventional wisdom would suggest.

First, President Obama no longer has another election to worry about, but a legacy – one he has no desire to see tarnished by renewed recession.

Second, even if the Republicans take the brunt of the blame for cliff-induced consequences, Democrats won’t be immune. They are, after all, the party in power. Continued or worsening economic malaise will offer the GOP the chance to demonstrate they were right all along.

The Republicans, as I eluded to in my previous column, need to present an alternative, a real solution — pro growth tax reform that doesn’t raise anyone’s taxes; cuts to federal spending based on an analysis of what the federal government is really for; and meaningful, even revolutionary, entitlement reform — a conservative program that can position the GOP as a reasonable and wise alternative to the status quo … if the GOP is adroit enough to make the case. That’s a big “if.” In any event, it’s the Republicans’ best, perhaps only, play in addition to being proper policy.

Yet, I remain pessimistic an economically acceptable deal can be reached. What’s ultimately driving the U.S. off this coming cliff is an electorate comprised of real-life “Julia’s.” Obama appealed to Julia. Julia voted en masse for Obama. Obama will either steer us off the cliff or into the mountain. And Julia is who the GOP needs to speak to after her taxes and costs rise in inverse proportion to her economic prospects.

Julia, therefore, receives my nomination for most influential person of the year — for better or, I fear, worse.

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