Who's afraid of the fiscal cliff?
Were the average Republican asked for a succinct statement of his views on taxation, he might respond: “The tax burden — federal, state, local, together — is too heavy. We need to cut tax rates to free up our private and productive sector and pull this economy out of the ditch.”
This core conviction holds the party together. Yet today the leadership is about to abandon this conviction to sign on to higher tax rates or revenues, while the economy is nearing stall speed.
Why are Republicans negotiating this capitulation? Because they have been warned that if they do not sign on to a tax hike, they will take us all over a fiscal cliff. If we go over, Republicans are being told, you will be responsible for tax hikes on all Americans, for a surge in tax rates on dividends, interest, capital gains, estates, and for an automatic sequester catastrophic to the national defense. This is the pistol President Obama is pointing at the GOP.
Republicans are being told that they either vote for something they believe to be wrong and ruinous — or get something worse.
What are the perils for Republicans who sign on to an Obama deal? They will sever themselves permanently from much of the base of the party. While their votes may ensure that tax rates or revenues rise, they will have no assurance that the promised spending cuts will ever be made. Even Ronald Reagan fell for this bait and switch.
Then, if the tax hikes slow the economy, Republican collaborators will share the blame. They will have damaged the recovery. What would be their argument for re-election?
If you believe higher tax rates or tax revenues would be like poisoning an already weak economy, why would you collaborate in administering that poison?
Speaker John Boehner should tell the president politely that America's problem is not that we are taxed too little but that we spend too much — and the GOP will not sign on either to tax rate or tax revenue increases. For Republicans believe that would further injure the economy.
Then Boehner should urge his Republican caucus to do two things. Pass an extension of the Social Security payroll tax cut and block its automatic rise from 4.2 percent of wages to 6.2 percent, then vote to extend the Bush tax cuts for another year, with a pledge to do tax reform — lowering tax rates in return for culling, cutting or capping deductions for the well-to-do in the new year.
Then let Harry Reid work his will. If the Senate votes to let Social Security taxes rise, let Harry and his party explain this to the middle class that gets hammered in January. If the Senate votes to let the Bush tax cuts lapse for those over $200,000, decide in the caucus whether to negotiate.
As for the automatic sequester that would impose $100 billion in cuts next year, half in defense, do nothing. The budget has to be cut, and while these cuts are heavy on defense, the depth and mixture can be adjusted in the new year.
If Republicans walk away from tax negotiations with the White House, market investors, anticipating a sharp rise in tax rates on dividends, interest and capital gains next year, will start dumping stocks, bonds and investments to take advantage of the last year of lower taxes.
The market may tank. Let the party of high taxes explain it.
Pat Buchanan is the author of “Suicide of a Superpower: Will America Survive to 2025?”