A new breed of House Republicans play hard ball
Analysis: Just a few years ago, the tax deal pushed through the Senate in the early hours on Tuesday would have been a Republican fiscal fantasy, a sweeping Bill that locks in almost all of the Bush-era tax cuts, exempts almost all estates from taxation and enshrines the former president’s credo that dividends and capital gains should be taxed gently.
Times have changed, President George W Bush is gone and House Republican leaders had to struggle on Tuesday to quell a revolt among Republicans who threatened to blow up a hard- fought compromise that they could have easily framed as a victory. Instead, they were in danger of putting themselves in position to be blamed if the nation’s economy goes into a tailspin under the weight of automatic tax increases and spending cuts.
The latest stalemate on Capitol Hill surprised even many Senate Republicans, who just hours before voted overwhelmingly for a deal hashed out in large measure by their leader, Mitch McConnell of Kentucky. The Bill passed 89-8, with only five of the Senate’s 47 Republicans voting No.
But House Republicans have again proved themselves to be a new breed, less enamoured of tax cuts per se than they are driven to shrink the government through steep spending cuts. Protecting nearly 99 per cent of the nation’s households from an income tax increase was not enough if taxes rose on some and government spending was untouched.
A party that once disputed that there was any real “cost” of tax cuts was shocked when the nonpartisan Congressional Budget Office estimated that enacting them in place of the “fiscal cliff” provisions would cost $4 trillion over 10 years.
“I personally hate it,” John Campbell, a Republican representative for California said of the Bill. “The speaker the day after the election said we would give on taxes, and we have, but we wanted spending cuts. This Bill has spending increases. Are you kidding me?”
By all accounts, the tax deal negotiated by McConnell and vice-president Joe Biden is one of the most sweeping fiscal policy changes in a decade, a measure that would bring a certainty to the tax code long demanded by the financial community and taxpayers.
$4 trillion price
The Bill’s heft was confirmed on Tuesday by the Congressional Budget Office, which said the mix of income and business tax cut extensions, new capital gains, dividend and estate tax rates and unemployment compensation would add an estimated $4 trillion to the federal deficit compared with where the government would be if Congress did nothing to halt automatic tax increases and spending cuts that were triggered at the start of the year.
The independent Committee for a Responsible Federal Budget said that measured against extending all current policies, the Senate deal would cut the deficit by $650 billion over 10 years. It said the biggest cost, a “patch” to the alternative minimum tax to prevent it from suddenly affecting much of the middle class, should not be considered a cost at all because Congress has adjusted it each year anyway. However, the Congressional Budget Office’s estimate gave even some Democrats pause, especially since the Bill would make permanent almost all of the Bush tax cuts.