Watch out, folks, this could get bumpy.
With the release Monday of a proposal, or something approximating one, from House Republican leaders on a way to avert the "fiscal cliff," we now have the opening positions from both parties, neither of which has any chance of becoming law. That is to be expected; no deal is going to be accomplished without a lot of political posturing from both sides and without some serious deadline pressure. But despite what in some respects is a step forward, there is real reason now to think that we will, at least briefly, go over the cliff.
There are many flaws with the proposal House Speaker John Boehner and several of his lieutenants made on Monday. Its promise of $800 billion in new revenue over the next decade relies on the closing and limiting of unspecified loopholes and deductions but rejects higher tax rates on the wealthy. Higher tax rates on the top brackets are the only way to ensure that those with higher incomes are actually the ones paying more.
And much of the projected savings from budget cuts comes from unspecified program cuts — as if all federal spending were created equal — and from increasing the eligibility age for Medicare, a proposal that would save perhaps $100 million in that entitlement program over the next decade but in the process increase the nation's overall tab for health care.
Furthermore, the Republicans remain insistent on making Social Security reforms a part of the fiscal cliff conversation, even though that program's finances are relatively sound, and it is not a driver of current budget deficits. The proposal is, in key respects, a rehash of the ideas that lost Mitt Romney the presidency.
On the plus side, it does dispense with the notion that deficit reduction should center on a radical restructuring of Medicare and Medicaid, and it suggests that Republicans are willing to accept real revenue increases, not the fantasy increases they have previously insisted would spring from a growing economy. And Rep. Paul Ryan, the House budget chairman, signed on.
Given the reality of the situation — on Jan. 1, tax rates on everyone are going up if nothing gets done — and the recent suggestion by some Republican lawmakers that the party should just pass tax cuts for the middle class now and worry about the rest later, Mr. Boehner's proposal might seem like so much political throat-clearing before the two sides get down to some earnest, smoke-filled-room deal making.
But there is one big problem here, and it is the same one that drove the debt ceiling debacle of 2011. Mr. Boehner may find he has little room for honest negotiation with President Barack Obama because even the tiny steps he is taking toward the center are being blasted from the right.
A Heritage Foundation blog called his proposal "utterly unacceptable" and "categorical, pre-emptive capitulation." The president of Americans for Prosperity, a key backer of the tea party movement, said in a statement Monday, "This plan leaves conservatives wanting." Erick Erickson wrote Tuesday morning in his blog RedState that Mr. Boehner's offer makes him a sell-out. "The opposition is not just across the aisle, but in charge of our own side in the House of Representatives," he said. The Club for Growth is calling three Republicans Mr. Boehner removed from their committees martyrs to the cause of true fiscal conservatism. South Carolina Sen. Jim DeMint, a key figure in conservative circles, is calling the plan "Speaker Boehner's $800 billion tax hike," and Sarah Palin admonished Republicans not to be "wusses" and compromise with Democrats on the fiscal cliff. (She later apologized for her choice of words but not the sentiment.)
The reality is that President Obama's bargaining position only strengthens on the other side of the cliff. His goal of higher tax rates for the rich would then automatically become law, and his desire to maintain lower tax rates for the rest of the nation would be next to impossible for Republicans to oppose. The president could also likely limit the immediate damage from the across-the-board spending cuts due to take place in the new year until a broader deal could be negotiated.
There is, however, real risk that even a brief fall over the cliff could roil financial markets, sap business and consumer confidence and send the economy back into recession. For that reason, the president must still put forward a good faith effort to strike a deal before Jan. 1. But he shouldn't accept anything close to what Mr. Boehner is proposing.
Republicans, meanwhile, should realize that they aren't ever going to get a better deal than now, and that if we do go over the fiscal cliff, they'll get the blame — a new Pew poll says 53 percent would blame the GOP and only 29 percent would blame President Obama. It's in the party's best interests — and those of the nation — to strike a deal much closer to the political center. The question now is whether they have the will to do it.