Author of Saving Democracy!, Wasted Genius and Common Genius

How the Republicans won the “Fiscal Cliff” Battle

The compromised settlement enacted over the New Year Holiday has been hailed as a win for Obama who, as the main stream media spins the story, ran circles around a confused and incompetent Republican leadership. Nothing could be further from the truth. The hypocrisy of this Administration, that claims above all to be protecting the Middle Class, was revealed when it went into the negotiations with no intent on extending the payroll tax breaks. Right off the bat, they were intent on hitting the middle class and working poor with a substantial tax increase that will show up in reduced paychecks this week. So much for protecting those in the middle!

Further, the very idea of extending the Bush tax cuts went against everything they stood for– for years they have criticized Dubya for that tax cut–and now they have extended them for a second time and made them permanent! The increase of 3% on incomes over $450K is a paltry difference–most people in that category won’t feel it, and will continue to get most of their income from capital gains, dividends, tax exempt interest, and sheltered sources immune to that 3% increase. Basically, the Democrats fought for the Republican/Bush tax cuts. Plus they renewed the $5 million estate tax exemption, and even added a reduced tax rate on dividends and capital gains for those fat cats with income over $ 450K!

I suspect the Republicans accomplished this huge win by using the good cop-bad cop gambit: The leadership “used” the tea party members as the bad cops, arguing they could not pass any legislation that did not slash spending and entitlements. But the Republicans then hinted that those sticky wickets might be deferred provided the Bush tax cuts were extended. The Democrats fell for this ploy by offering to extend everything Bush did except for a token 3% increase on ordinary income over $450K. The Republicans then hinted that that might pass muster with their base, provided the deferral of the entitlement spending cuts was only extended for two months. The administration then went ahead, got their minions to join enough Republicans to pass that compromise, and called it a victory. After all, they had soaked the rich and avoided spending cuts.

Lost in the media blitz was the fact that Obama had campaigned on a $250K income threshold, a reduction in the estate tax exemption, and had repeatedly stated that those points were “non-negotiable.” But he caved on both! When will the media recall the “Read my Lips” line, which would lampoon Obama’s stance throughout the “crisis.”

The brilliant aspect of all this was that the Republicans had cornered the Democrats from the beginning into seeking a virtually total extension of the Bush tax cuts and a temporary escape from the sequestration nightmare that will cut entitlement spending. George W. Bush must be very pleased today to see his oft-criticized tax reductions made permanent, and the Democrats crowing about it! And, hopefully, Speaker Boehner and his colleagues in the House are lying in wait for another win on March 3, when they might be able to head toward a balanced budget by cutting spending and slowing the spiraling national debt.