Taking it to the President on the Fiscal Cliff

President Obama believes he has boxed-in Republicans with the fiscal cliff negotiations, and is playing hardball, causing some Republicans to urge capitulation, certain that otherwise blame for the presumed financial crisis to follow will fall on their shoulders. But the GOP-controlled House can play this game too.

Appropriate actions would be for the Republican controlled House (where all revenue measures must originate under Article l, Section 7 of the Constitution) to pass one of the following:

(1) a bill that would freeze the current tax rates and delay the spending cut sequester until March 31, 2013, to allow until at least March 31, 2013 to negotiate and evaluate a grand bargain of spending cuts and comprehensive tax reform; or

(2) a bill to make the Bush tax cuts permanent; or

(3) a bill incorporating a Bowles-Simpson type revenue and spending cut mix. 

Whichever of these approaches, the bill can be designed and advertised as a backstop or safety measure to prevent going over the fiscal cliff that would be triggered if no other agreement is reached before yearend.  As long as what the House passes is simple enough for the media and public to grasp, any of these would put the onus on the president and Senate to act on this safety measure, present a reasonable alternative, or make them susceptible to the Republicans tossing the blame for doing nothing right back to Obama.

Unlike the Senate Democrats who have not passed a budget in over 3 1/2 years, the Republican-controlled House passed its own budget blueprint under the leadership of Budget Committee Chairman Paul Ryan that would have addressed the fiscal cliff and much more; but it seems to have been forgotten because it was passed back in March, before we entered crisis mode and it was too comprehensive to be easily understood by the media and the public free of liberal demagoguery. 

If the House were to pass a new law as outlined above that would resolve or at least delay the fiscal crisis, its positive action could not be ignored and would get the Republicans out of the defensive position they are now in.

One final point:  Republicans should refute the nonsense from Obama that "the math tends not to work" in terms of their preference for substituting revenue increases from limitations on itemized deductions for his growth-stifling proposal to raise tax rates on the successful.  The math either works at a reasonable limitation level (e.g., $40,000, $50,000, $60,000) or it doesn't and it is no more difficult for the government to simulate the impact of various deduction limitations using the tax return databases and models employed by the Joint Committee on Taxation and others than it is to simulate the impact of raising marginal tax rates.  In fact, since personal deductions are less sensitive to changes in economic activity than adjusted gross income, projections of the impact of limiting deductions will be more accurate than changing tax rates in the face of the dynamics of economic activity that would result in the real world.

President Obama believes he has boxed-in Republicans with the fiscal cliff negotiations, and is playing hardball, causing some Republicans to urge capitulation, certain that otherwise blame for the presumed financial crisis to follow will fall on their shoulders. But the GOP-controlled House can play this game too.

Appropriate actions would be for the Republican controlled House (where all revenue measures must originate under Article l, Section 7 of the Constitution) to pass one of the following:

(1) a bill that would freeze the current tax rates and delay the spending cut sequester until March 31, 2013, to allow until at least March 31, 2013 to negotiate and evaluate a grand bargain of spending cuts and comprehensive tax reform; or

(2) a bill to make the Bush tax cuts permanent; or

(3) a bill incorporating a Bowles-Simpson type revenue and spending cut mix. 

Whichever of these approaches, the bill can be designed and advertised as a backstop or safety measure to prevent going over the fiscal cliff that would be triggered if no other agreement is reached before yearend.  As long as what the House passes is simple enough for the media and public to grasp, any of these would put the onus on the president and Senate to act on this safety measure, present a reasonable alternative, or make them susceptible to the Republicans tossing the blame for doing nothing right back to Obama.

Unlike the Senate Democrats who have not passed a budget in over 3 1/2 years, the Republican-controlled House passed its own budget blueprint under the leadership of Budget Committee Chairman Paul Ryan that would have addressed the fiscal cliff and much more; but it seems to have been forgotten because it was passed back in March, before we entered crisis mode and it was too comprehensive to be easily understood by the media and the public free of liberal demagoguery. 

If the House were to pass a new law as outlined above that would resolve or at least delay the fiscal crisis, its positive action could not be ignored and would get the Republicans out of the defensive position they are now in.

One final point:  Republicans should refute the nonsense from Obama that "the math tends not to work" in terms of their preference for substituting revenue increases from limitations on itemized deductions for his growth-stifling proposal to raise tax rates on the successful.  The math either works at a reasonable limitation level (e.g., $40,000, $50,000, $60,000) or it doesn't and it is no more difficult for the government to simulate the impact of various deduction limitations using the tax return databases and models employed by the Joint Committee on Taxation and others than it is to simulate the impact of raising marginal tax rates.  In fact, since personal deductions are less sensitive to changes in economic activity than adjusted gross income, projections of the impact of limiting deductions will be more accurate than changing tax rates in the face of the dynamics of economic activity that would result in the real world.

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