The election is over. The balance of power has shifted hardly at all. The perpetual war in Washington continues.
On January 1st America will hit the ‘fiscal cliff.’ This term refers to a huge cut in military and entitlement spending coupled with across-the-board tax hikes that will take effect if Congress fails to reach a deficit-reduction agreement. For all the talk of Obama’s supposed hyper-partisanship and the GOP’s calculated obstructionism, neither party has an interest in letting this happen. Both sides will bluff and posture in an effort to secure the best deal for their party, and neither will be entirely happy with the result. Nevertheless, the likelihood is that an unhappy compromise will be reached.
Democrats want to increase revenue by raising taxes and cutting some military and entitlement spending. Republicans want to increase revenue by cutting a lot of entitlement spending and making the Bush Tax Cuts permanent. Both insist that their stance on taxes is non-negotiable, and that they have a mandate from the American people to prove it.
The election results seem fairly unambiguous – the Democrats won by almost every metric. The President ran on the promise to increase taxes and was easily reelected. They increased their majority in the Senate by two seats in a tough cycle. They won the popular vote in the Presidential, Senate and House totals.
The only metric by which the House Republicans can claim a mandate is the only one that matters: they won the majority of House seats. Through a combination of the rural advantage – Republicans tend to control the less populated rural constituencies, Democrats the larger urban ones – and rampant gerrymandering they still command a solid majority despite losing the popular vote. No bill can pass without the votes of at least 20 Republicans, and so far Boehner has been an effective marshal. Each party will have to give up some of the things that are supposedly off the table.
What will the final bill look like? All the noise that has come out of the White House suggests that Obama will not allow the top-rate tax cuts to be extended under any circumstance. Given that 60% of the electorate agrees with him they will very likely expire. Military and entitlement spending will be cut, but to a far lesser extent than they would under the current arrangement. The deficit will drop slightly, and the economy will continue its shaky recovery.
The GOP faces a stark choice – raise taxes on the wealthy or allow the sequestration to go into effect and raise taxes on everybody. Going over the fiscal cliff would slow or stop the current rate of growth and almost certainly put the country back into recession. The deficit would be halved, but at a price that nobody wants to pay.
Despite the anxiety over the short timeframe and the apparent gulf between their positions, the President and House Republicans are likely to find an acceptable middle ground. The consequences of failure to do so are too great for either party to overlook.