Debate on year-end fiscal issues sets stage for fall showdowns

July 19, 2012

Five and half months before the deadline for potential disaster, Congress broke into heated debate this week over a January fiscal meltdown that could lead to nearly $600 billion worth of tax hikes and automatic federal spending cuts next year.

The skirmishes included hours of floor speeches in the Senate and a House vote on related legislation Wednesday. Most unusual was the relatively long lead time of the debate, since this Congress has shown repeatedly its eagerness to avoid serious debate except as a last resort, when a deadline and calamity are close at hand.

Not even the most hopeful players expect the tax-and-spending issue to be resolved until after the November elections. But this week’s tit-for-tat served to set the terms of the debate for the fall elections in both the presidential and congressional campaigns.

Democrats accused the GOP of risking economic calamity to the middle class to protect lower taxes for the rich. Republicans accused Democrats of wanting to raise taxes and being soft on national security.

“Republicans’ top priority is to protect tax breaks for that top 2 percent, even if fighting for this causes a tax hike on middle-class families,” Sen. Charles E. Schumer (N.Y.), the No. 3 Democratic leader, told reporters Thursday.

“The president’s small-
business tax hike will hit nearly the same time as our military’s being hit with arbitrary cuts that will endanger our security,” House Speaker John A. Boehner (R-Ohio) said 20 minutes earlier. “Now some of those same Democrats are threatening to drive us off the fiscal cliff and tank our economy, all in their quest for higher taxes.”

Each side is trying to tell voters that it is helplessly riding shotgun as the other party is behind the wheel, steering the country toward disaster.

The situation is driven by the failure last fall of a specially empowered congressional “supercommittee” that had been tasked with finding $1.2 trillion in budget savings as part of a broader deal cut last August. With the supercommittee’s failure, the law requires the first wave of 10 years’ worth of automatic spending cuts to kick in Jan. 1 — at the same time that the income tax cuts approved during the George W. Bush administration, along with a host of other tax benefits, are set to expire.

The combined effect of those tax hikes and spending cuts would send the already limping economy back into a recession, according to the nonpartisan Congressional Budget Office.

At both ends of Pennsylvania Avenue, the gridlock on how to structure a massive debt deal meant that the issue would be dealt with in a lame-duck session after the two sides delivered their pitches to voters in the November elections, a feeling epitomized by President Obama’s declaration last summer to GOP leaders that he would “take it to the people.”

In the absence of any serious negotiations of the fiscal issues ahead, the legislative agenda on Capitol Hill had become particularly light, which created the opening for each side to begin firing at the other on the tax-and-spending issues. Democrats said that in preparing for what they believed would be several weeks of Republican attacks accusing them of wanting to raise taxes and decimate the military budget, they decided to fire the first shots.

Obama began last week by restating his support for extending the 2001 and 2003 tax cuts only for the first $250,000 in income, offering such an extension for an additional year to buy time for a broader effort to reform the entire tax code next year.

On Monday, Sen. Patty Murray (Wash.), who is overseeing the Senate Democrats’ campaign effort, declared in a speech that Democrats were willing to let the tax-and-spending deadlines pass in order to force a ”balanced deal” that included higher taxes from the top 2 percent of income earners.

Polling has consistently shown that a majority of voters believe the wealthy should contribute a larger percentage of taxes, and the traditional large GOP edge on the handling of taxes has turned into a draw between the parties. In the most recent Washington Post-ABC News poll, voters favored Obama, 46 percent to 45 percent, over GOP candidate Mitt Romney on who would best handle taxes.

“The politics of taxes has changed, and for 30 years Republicans won the argument because they conflated middle-income taxes and wealthy taxes,” Schumer said Thursday. ”And when middle-class incomes were going up, the middle class sort of shrugged their shoulders and said okay. With middle income going down, and with us being a lot smarter about this, we are separating the middle class from the wealthy and for the first time in 30 years winning the tax argument.”

“At a moment when more Americans are signing up for disability than finding jobs, Democrats said they think it’s a good idea to drive the country off what economists are calling America’s fiscal cliff this coming January,” Senate Minority Leader Mitch McConnell (R-Ky.) said Thursday morning. “You might call it ‘Thelma and Louise’ economics — right off the cliff.”

Paul Kane covers Congress and politics for the Washington Post.
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