Those who share our fondness for the cinema of long ago might recall a certain scene in “Rebel Without a Cause.” James Dean’s crazy mixed-up kid character was challenged by a snooty rich guy to a “chicken run,” a test of teenage bravado in which the contestants hurtle their parents’ automobiles toward a cliff at top speed and whichever driver hits the brakes or bails out first is deemed the lose, and the result was predictably tragic.
That harrowing contest is brought to mind whenever we read about the “fiscal cliff” that has lately dominated the economic news. The tax rates enacted during the George W. Bush administration are set to expire early next year, and barring action by the congress and the president the country will revert to higher rates for nearly every taxpayer while a slew of automatic budget cuts simultaneously go into effect. Although most economists agree that the results would be catastrophic an agreement is by no means a certainty, as the Republicans who control the House of Representatives are adamant that the tax cuts be retained for everyone while the Democratic president and his allies who control the Senate are just as determined that the top 2 percent of be hit with the old higher rates. Both sides have indicated they are willing to drive over the fiscal cliff rather than relent to the opposition.
The Republicans have the better argument. Sticking the top 2 percent with the higher rate will only add $22.35 billion to the federal coffers next year, according to the Joint Committee on Taxation, and that’s a hopeful projection based on the assumption that the hike won’t have any effect on economic activity, so it won’t make a dent in the projected $1.1 trillion deficit, much less than $16 trillion of accumulated debt. Sucking that same amount of money out of the moribund private sector, especially through the investing class, will likely make a bigger dent in economic growth, and even if there were no economic consequences at all we would still prefer to start making cuts from an ever-expanding government that treads ever further upon the liberties of the people.
Alas, the better argument often has little to do with the way things are done in Washington. It certainly has little effect on the Democrats, who regard it as a matter of sacred principle that the government should take money away from rich people regardless of the economic consequences. Liberals we know are so embittered about the current tax rates for the rich, and the hated Bush administration that brought them about, that we have no doubt about their willingness to inflict a massive recession on the country rather than endure them further. There is no reason to believe that Obama and the Democrats in the Senate are any less reckless, and they have every reason to believe that they will not be held accountable if the country does go over the cliff.
Many conservative commentators have been urging that the House Republicans refuse to relent on the matter, but we prefer that at some point just before the fiscal cliff they be willing to hit the brakes. As much as we hate to see anybody’s taxes increased, even a wealthy class that for some reason or another voted mostly for Obama, tactical retreat is probably the best option. No matter how harmful the tax hikes on the rich might be, the effects of a tax increase for the rich and everybody else would certainly be far worse, and the Democrats’ intransigence does not permit the best solution. Worse still, the Republicans would be widely blamed for the resulting recession and less effective in staving off the inevitable further attempts for more taxation and spending.
Some pundits cite polls showing that a majority of Americans do not wish to impose taxes on any of their fellow citizens, even the rich ones, but those polls don’t reflect the choice most Americans would make between a severe recession and “asking the rich to give a little more.” That it is the Democrats who are forcing that choice will be overwhelmed by all the same media noise that has so successfully obscured their role in all of the nation’s economic woes, and any Republicans who doubt this would be advised to check the recent election results. What’s left of the establishment media will still be able to portray the Republicans as the snooty rich guy who wound up going over the cliff in “Rebel Without a Cause,” and Obama can be typecast as the crazy mixed-up kid who bailed out of the car just in time and became the epitome of cool.
Even if the inevitable debt crisis brings the American economy to its knees within the next four years, the Democrats and their media allies will argue that it was all the Republicans for hobbling the country with low tax rates and preventing Obama from spending even more. The Republican party will need to be standing strong enough to refute such nonsense, and they won’t be able to make that stand from the bottom of a cliff.
— Bud Norman