Fiscal Cliff 2013: Republicans Dangerously Repeating History With No New Taxes Pledge

President George H.W. Bush, as a presidential candidate at the Republican National Convention in 1988, famously uttered the words, “Read my lips: no new taxes!” As president, however, he promptly did just the opposite.

Faced with a recession, rising deficits, a government shutdown and impending mandatory cuts unpalatable to both sides, President Bush did the only sensible thing and agreed to raise taxes as part of a budget deal with Congressional Democrats. He promptly lost the next election after a primary and general election in which his reversal of positions was repeatedly used as political fodder.

If the situation sounds familiar, that is because it is. In 2012, President Barack Obama is facing sluggish economic growth, record budget deficits, and an impending “fiscal cliff” brought about jointly by the expiration of the Bush (junior) tax cuts and cuts to government spending mandated in the sequester provision of the Budget Control Act passed last summer. The difference, of course, is that Obama is not up for reelection; in fact, he has just won his, decisively. Whereas Bush won on a platform of no new taxes, Obama won on one of raising taxes on the wealthiest Americans as part of a balanced approach to deficit reduction. The choice between Obama and his challenger, Mitt Romney, was perhaps the clearest on the issue of tax policy, in which Romney advocated cutting taxes even further. He lost. Obama won. The American public has spoken and given Obama a clear mandate to govern.

The greatest obstacle in his path, not surprisingly, is Republicans. They seem to have pinned the loss on election night to be the result of demographics and have done little since, except to moderate their stance on immigration. Despite an overwhelming electoral win for the president and Democratic gains in both houses of Congress, Republicans have held up their wildly gerrymandered control of the House as proof of a “dual mandate.” Their bargaining position has barely shifted, and they remain stubbornly wedded to the idea of preserving tax cuts for the wealthy despite little evidence that doing so results in actual economic growth. A recent Congressional Research Service report debunked the idea that lowering top tax rates helped grow the economy. Republicans responded by pushing for the report to be retracted.

This stubborn intransigence to tax hikes of any kind is exemplified by the “Taxpayer Protection Pledge” championed by conservative lobbyist Grover Norquist. The pledge, to never vote for a tax increase, has infiltrated Washington and allowed Norquist to wield tremendous power. In the upcoming Congress, there are 219 House members – a majority – and 39 senators who have committed to the pledge. In essence, the pledge is the same that Bush made in 1988, binding Republicans to the unyielding philosophy of no tax increases. Even a 10-to-1 ratio of spending cuts to revenue increases, said the Republican presidential candidates during a primary debate, is unacceptable.

In committing themselves to the pledge, Republicans have taken the wrong lesson from the Bush years, seeing his loss in the following election as proof that raising taxes would hurt their electoral success. The problem with Bush is not that he raised taxes – a majority of Americans supported tax increases of some kind, and his successor, Bill Clinton, raised taxes himself – but that he made such a strong pledge at the convention and then promptly went back on it. In raising taxes as part of a budget compromise, Bush did what was right for the country, but exposed himself to attacks on his character and trustworthiness. The lesson for Republicans should not be to never agree on a tax increase again. Instead, it should be to never commit to such an uncompromising and untenable position. By pledging to never, ever, raise taxes, Republicans have committed themselves to adhering to an unyielding philosophy over doing what is right for the country.

There are some signs of hope. The number of pledgees on Capitol Hill has declined in the previous election and certain prominent Republicans like Representative Peter King and Senator Lindsey Graham have backed away from the pledge’s strong language. House Speaker John Boehner has proposed some revenue increases as part of a compromise with the president, but the various machinations being devised to do so – eliminating loopholes and tax expenditures but keeping the nominal tax rate the same or letting all the tax cuts expire on December 31 and then passing a new bill to cut taxes again by the same amount for a select group, so as to be labeled a tax cut and not a tax hike – are examples of the distorting effects of the pledge. Simplifying the tax code and eliminating unnecessary loopholes and deductions is a good thing, of course, but if revenues need to increase – as there is agreement on both sides – then raising tax rates should be on the table.

As Congress debates the best approach to dealing with the fiscal cliff and escalating national debt, revenue increases must be part of the discussion. President Obama won reelection on the message that tax hikes on the wealthy are necessary as part of a balanced approach to deficit reduction. The essential services government provides simply cannot be maintained by continuously lowering taxes. Now it is up to Republicans to accept that reality, stop pledging allegiance to Grover Norquist, and do what is right for the country.

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Victor Zhao

Victor is a freshman at Cornell University, studying Applied Economics and Management. He has a strong interest in macroeconomics and public policy, particularly tax policy and monetary policy

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