Negotiating the Fiscal Cliff: Chess or Blackjack

Right From the Start

If Congress represents the “best and the brightest” that America has to offer, then we are in deeper trouble than any of us have imagined. Normally I reserve my derision for the Democrats who have a seemingly unquenchable thirst for serving up some of the dumbest people in the country while cloaking themselves in this imaginary web of intellectual superiority. Whenever one of your Democrat friends adopts this posture – almost all do during a political discussion – simply begin reciting the litany of doofuses (or is it doofi) that represent or have represented the Democrats in Congress – Joe Biden, Nancy Pelosi, Harry Reid, Christopher Dodd, Max Baucus, Maxine Waters, David Wu, Earl Blumenauer, etc. Most of these people would have trouble putting together two sentences if they weren’t already printed on the “talking points” from the Democrat National Committee. To be sure, a lengthy list of Republicans could be easily identified to join them. But that’s the point.

These are the people to whom we have entrusted the resolution of the substantial financial issues facing the government and our economy. And while the approval rating of Congress hovers around ten percent we re-elect over ninety percent of them every election cycle. That may speak volumes about our collective intelligence.

But today, criticism is appropriate for the Republicans. Look, we all know that the members of Congress would like the American public to think that the fight to avoid the “fiscal cliff” is some monumental chess game where each side seeks to maneuver the other into an opportunity for checkmate. But this isn’t a chess game, it’s more like Blackjack – you either have the cards or you don’t. And in this case, the Republicans do not have the cards and they are looking at the Democrats who have an ace showing.

The Republicans are holding tight to their refusal to raise taxes on the wealthiest Americans. They prefer spending cuts and entitlement reform. With regard to the latter I am with them one hundred percent – the federal government has a massive spending problem and no amount of tax increases will cure it. In contrast the Democrats want to increase taxes on the rich and have no plans to reduce spending. President Obama has alternatively proposed increasing taxes and delaying any work on spending and entitlement reform until an indefinite “later” (which in Democrat terms means “never”) or increasing taxes and increasing spending for another “pork barrel” stimulus package.

But Mr. Obama and the Democrats own the ace. They hold the tax increases on the middle class inherent in the expiration of the Bush/Obama tax cuts as hostage for increasing the taxes on the rich. And they are sucker punching the Republicans left and right over the notion that the Republicans are willing to drive the government over the fiscal cliff in order to protect the rich. The mainstream media, once again serving as the press agents for the Democrats, pound away on the outrage of benefiting the rich while remaining predictably silent on the free spending of the Democrats. Not one of them has had the temerity to mention that even with the tax increase on the rich, the national debt will continue to grow unchecked for the foreseeable future.

Okay, the Republicans are right that by increasing the taxes on the rich you will remove capital needed for economic growth. Anyone who has passed freshman economics understands that. The result of removing that capital is a further delay in what should be a robust economic recovery. But four years of Mr. Obama’s policies have already repressed that robust recovery and four more years of the same will simply reinforce the “new normal” – a European style anemic economic growth coupled with a rapidly growing debt. On the other hand, forcing the government over the fiscal cliff will probably result in a re-entry to a recession – one that for most working men and women has never ended. (I remain unconvinced that going over the fiscal cliff would be all that devastating. In fact there may be a salutary effect from the general tax increase accompanying the sequestration – it might remind all those people who have been immunized from the effects of the tax and spend policies of the Democrats that there are consequences to government deficit spending and thus causing the political focus to turn to the deficit and entitlement reform where it should have been all along.)

But be that as it may, the Republicans are missing a golden opportunity to force Mr. Obama’s hand – ace and all. Give Mr. Obama his tax increase (in fact double down on that tax increase solely for Warren Buffet and the pack of Hollywood phonies supporting Mr. Obama by raising their tax rate to seventy-eight percent) but require that the tax increase be dedicated solely to the reduction of the deficit. In doing so, that would require that the current budget be balanced and that the current debt limitation be reduced annually by the amount the tax increase on the rich produces. Balancing the budget requires spending cuts and entitlement reform. The methods for achieving both of those are found in Rep. Paul Ryan’s budget proposals and/or the Bowles/Simpson report.

Should the Republicans do that, they will prove the lie attendant to Mr. Obama’s arguments. The question is whether Mr. Obama, having attained his cherished tax increases on the rich, is prepared to drive off the cliff because he refuses to engage in any dialogue on spending controls, entitlement reform or deficit reduction.

So, Speaker Boehner and Sen. McConnell throw away your chessboard – it’s useless. Force Mr. Obama to turn over his hole card. In all probability you will find he’ll be forced to draw and go bust.