Ramesh Ponnuru | Republicans’ Leverage Against Obama’s Tax Hikes

Did you think the election was going to end uncertainty over the future course of U.S. economic policy? Dream on. There are at least three ways the standoff over the “fiscal cliff” — the automatic spending cuts and tax increases set to start in January — could play out.

The first scenario is a Republican surrender. The tax cuts enacted under President George W. Bush expire at the end of the year. Republicans want to extend all of them, while Democrats say only the ones that directly benefit the middle class should continue. Some liberals are hopeful that Republicans will realize they have lost this fight and no longer have leverage: After the start of the year, Democrats will propose re-enacting the middle-class tax cuts and Republicans will agree. Maybe they’ll even agree to it before the year’s end.

They will agree, on this theory, in order to avoid the second scenario: Republicans insist on extending tax cuts for everyone, the parties deadlock, and taxes stay high for everyone. Many liberals think that Republicans would get the blame for that result — and that Republicans know it and will therefore try to avoid it.

Republicans may, however, find this scenario more bearable than Democrats think. They may decide that even if middle-class taxes go up, they will be able to say that they tried to prevent it, and it was only Democrats’ insistence on higher taxes for the rich that got in the way. Republicans may figure that voters will be inclined to blame the Democrats because the party that controls the White House usually gets credit and blame for everything, and because the Democrats are the party associated with higher taxes.


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