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Policy: Budgets & Deficits

How the fiscal cliff fight will end (unhappily for Republicans)

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Fiscal Cliff
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The word among some Senate Republicans is that a fiscal cliff deal is likely to be struck by Sunday, or Monday at the latest.  (And Monday, being December 31st, is in fact the latest a deal could be struck to avoid January 1 tax increases.)  Those Senate Republicans hope the final deal will make permanent current tax levels — Bush tax cut levels — for everyone who makes below $500,000.

The $500,000 figure is not set in stone.  It could be $400,000, as President Obama is reportedly willing to agree to, or it could be higher, as some Senate Democrats have suggested in the past.  But it will be more than the $250,000 that is the president’s current position.  In addition, big spending cuts, the sequestration cuts scheduled to go into effect in the new year, would not be affected and would go forward as planned.

If such a deal is made, it would mean that many Republicans would be backing off their longstanding position against raising taxes on anyone, including top earners.  Some Republicans are dead set against changing their stand.  Some Republicans would be open to the change, but would only want to give up their position in return for serious spending concessions from the administration.  And some Republicans would be open to giving in on top-earner tax rates in order to get a deal done now, and worry about spending later.

It appears that it is the last group, working with Democrats and the White House, that will prevail.  Under the most likely scenario, Republicans will get nothing — nothing — in return for giving in on tax rates for the highest-income Americans.  No spending cuts, at least no serious spending cuts beyond what are already included in sequestration, would be part of the deal done on Sunday or Monday, if that is indeed what happens.

Instead, Republicans will tout their accomplishment in making nearly all of the Bush tax cuts permanent.  Those cuts were always temporary, first in a ten-year form that expired in 2011, and then with a two-year extension.  Now, in a fiscal cliff deal, they would be permanent for those who make less than $500,000 a year.  Or at least as permanent as any tax rate can be; rates can always be changed by Congress, at any time.

As for spending cuts, particularly in entitlements, some Senate Republicans say they will press for those in January or February, during the coming battle over raising the nation’s debt ceiling.  They believe that fight will give them leverage to extract real concessions from the White House and Democrats on spending.  It’s not entirely clear why they believe that so strongly; Republicans will certainly take a beating in the press if they appear ready to push the nation toward default to win unpopular cuts.  Nevertheless, some in the GOP are readying themselves for that fight.

As for the immediate fiscal cliff agreement, the wild card is what will happen in the House of Representatives.  Facing opposition from some conservative members, Speaker John Boehner has already had to back off pushing for a vote on a measure (“Plan B”) to extend current tax rates on all Americans who make less than $1 million.  Given that, how could he pass a bill that would do the same thing, only for those who make less than $500,000?

There are two things to remember.  The first is that Boehner had a big majority of Republican support for Plan B.  An estimated 80 percent to 85 percent of the House GOP caucus was ready to vote for that bill.  The second thing is that a Senate deal, presumably blessed by the White House, would have the support of Democrats as well as a significant number of Republicans, meaning House Democrats would undoubtedly vote for it.  Put those Democrats together with even some of the Republicans who were prepared to vote for Plan B, and a bill would pass the House.

So a deal will most likely be done.  But the bottom line is that the fiscal cliff fight will not end happily for Republicans.  They will have given in on what was an article of faith — that taxes should not be raised on anybody, poor or rich — in return for essentially nothing.  All they will have is a plan to fight again, soon.

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Byron York

Chief Political Correspondent
The Washington Examiner