First off, it’s not a “fiscal cliff.” What we’re slated to hit as of New Year’s Day, as the Wall Street Journal notes, is a tax cliff. Our fiscal cliff, which drops off into a far deeper canyon, is what looms because of our $16,000,000,000,000 debt and the runaway entitlement spending that fuels it — Medicare, Medicaid, (and now) Obamacare. In truth, the debt deal passed in the summer of 2011 — which the press now says we must scrap if we are to avoid the “fiscal cliff” — was designed to postpone our going over the (actual) fiscal cliff.
In poker, if you have a weak hand, you have two choices: fold or bluff. The problem for the Republican House is that this is like a crooked game of 7-card stud — most of the cards were dealt face-up, and a couple of the others are marked. In short, everybody can see that the GOP has a weak hand. Bluffing would be like trying a fake field goal when down 6 points with 3 seconds left in the game. Nobody would buy it. Obama, meanwhile, has a strong hand — as everyone can also see — and he’s not bluffing.
The reason why Obama has a strong hand is not because he just won a whopping 50.6 percent of the popular vote and 26 of the 50 states. No, he has a strong hand because what will happen on New Year’s Day if no deal is reached is that taxes will be hiked about $4 for every $1 in spending cuts. More specifically, every taxpaying American will see his or her taxes rise, while defense spending will be rather dramatically cut. Do you think Obama could live with that?
The only thing better for Obama would be to have the tax hikes and defense cuts kick in and be able to blame the GOP for their happening: “As I’ve said all along, we need a balanced approach. But Republicans continue to put the concerns of the rich ahead of the concerns of middle-class Americans who are struggling. So, while I regret that a deal wasn’t possible at this time, I still hope that we can get both parties to see that everybody’s gotta compromise a little bit and can’t always get everything they want.” For Obama, this juicy combination of tax hikes, defense cuts, and blaming it all on an ostensibly recalcitrant GOP, would be like hitting the jackpot.
Obama implicitly suggests he wants to lower the 4-to-1 ratio of tax hikes to spending cuts, since he says he wants to prevent the scheduled the tax hike on the middle class. The GOP isn’t going to be able to push him much further than he claims he wants to go, especially since he’d probably actually prefer to keep the ratio at 4-to-1.
So, my advice to House Republicans is to fold — or at least don’t raise the ante. Don’t push your luck, and don’t pick this moment of weakness as the time to seek a “grand bargain.” Make Obama own this. You don’t have to vote for raising taxes on the wealthy (they’ll be raised anyway); just vote to stop the tax hike on the middle class. If Obama’s tax hikes on the wealthy hurt the economy like you say they will, it’ll be crystal clear who’s to blame. Fold and wait for better cards on the next deal. (They can’t be much worse.) Nothing decided this time around will do much of anything to avoid our going over the real fiscal cliff anyway. Wait and risk your chips when the real drivers of our debt are actually at stake. That’s the smart, conservative play.