Fiscal Cliff Highlights Washington’s Failures to Voters

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Published July 17, 2012

| FoxNews.com

“My priority [on taxes] is making sure that manufacturing and companies that are making goods and services that they take advantage of the best workers in the world and the outstanding business environment here and not have a situation where they are creating jobs someplace else."

-- President Obama talking to Toledo, Ohio CBS affiliate WTOL, part of an attack on Republican Mitt Romney for foreign financial activities.

If you want to know how badly Washington is failing, consider that amid a weak and worsening economy and persistently high unemployment, elected officials intentionally created a circumstance that risks a $250 billion income-tax increase for next year and the layoffs of millions of defense workers.

We got here because lawmakers were unable to act on taxes or spending when they could, so these same folks opted to raise the stakes figuring that the consequences of inaction just weren’t high enough before. Once the health of the American economy and the fiscal future of the nation were hanging in the balance, surely they would have to come to some sort of arrangement.

Unable to address their own differences, President Obama and members of a divided Congress, decided to tie the American citizenry to the railroad tracks assuming neither side would really let the tragedy happen. It’s a game of chicken that only politicians could devise. They have nothing at stake but their political careers, while the people they purportedly serve are put in peril.

Today, Federal Reserve Chairman Ben Bernanke will again tell lawmakers that the disaster awaiting the nation on Dec. 31 – an across-the-board tax hike and deep, automatic spending cuts, including to the military and entitlements – is dragging down the already anemic economy. The chairman will beg senators to take action to head off the “fiscal cliff” and reassure jittery markets that Uncle Sam isn’t going to let the guillotine fall.

Also today, former Vice President Dick Cheney, a former secretary of Defense who was heavily involved with Pentagon appropriations during his five terms in the House, will chat with current Republican House leaders about the need to head off the automatic cuts scheduled to go into effect on Jan. 1.

These meetings will lead to a lot of frothy rhetoric from both sides about “job creators,” “middle-class families,” “our brave men and women in uniform,” “the most vulnerable members of our society,” and all of the other tired-out, hackneyed, focus-group phrases that pour forth from politicians like mayflies from a stagnant pond.

But everyone knows that nothing is going to happen until at least December.

Republicans want to campaign against the Obama Democrats as tax hiking, Defense cutters. Democrats want to campaign against the Republicans as fat-cat protectors who want to starve widows and orphans. For all of the froth and frenzy you will hear in coming weeks, this was disaster by design.

When Obama and congressional Republicans struck a compromise in July 2011 to increase the federal borrowing limit by $1.7 trillion to the current $16.4 trillion, they constructed a Rube Goldberg contraption with potential opportunities and pitfalls for both parties along the way.

But from a policy perspective, none of this matters. The election is what matters.

Even if the current president and Congress allowed the nation to fall off the cliff, the new Congress and whomever takes the Oath of Office on Jan. 20, 2013 would act quickly and retroactively to undo what had been done by the dead-man switches on taxes and spending.

It’s more likely that the lame-duck session after the election will simply extend the status quo for a few months and close up for Christmas.

Look at it this way: If there were no fiscal cliff, investors, employers and taxpayers would still know that long-term tax policy and federal spending hinge on how this election turns out. After back-to-back wave elections that created a sharply divided government and with presidential candidates as different as any in decades, everybody is getting the sense of just how huge the stakes are in November.

But that’s not to say that there aren’t consequences to the cliff.

A big one is that with all of the issues put on the table due to the fiscal failings of the past decade, capitalists know that whatever comes to pass late in the winter of 2013 has the potential to be very big and very transformative. Some may try to get rich betting on possible outcomes, but the big money will stay on the sidelines until there is at least a moment of clarity.

That capital strike will continue to retard the economy and make it harder for Obama to argue that his economic policies have been effective.

Both parties will pay a price as alarm grows over the cliff and the bickering over it intensifies. It may be pointless, but it will reinforce the notion to voters that Washington is a disaster. As the red team and the blue team try to one up each other in blame and brinksmanship, voters will get the general sense that they are being poorly served.

And here’s where the danger is most acute for Obama.

The president has made everything these days about maintaining his months of character attacks on Romney for the former Massachusetts governor’s wealth, tax avoidance, sinister-sounding overseas financial dealings and alleged prioritization of profits over people.

Ask Obama or his surrogates about the tax code, and you will hear about Romney’s overseas holdings. Ask Obama or his surrogates about the fiscal cliff, and you will hear about Romney’s low tax rate.

Democrats opted against budget or tax reform during their time of total control of Washington, instead focusing on creating a new health-insurance entitlement program. And other than creating blue-ribbon committees, Obama has talked little of the topic except to repeat his call for higher taxes on top earners… like Romney.

The president is trying now to keep the election about small things – the contents of Romney’s 2006 tax returns or which year Romney quit running Bain Capital. And when it comes to the runaway train barreling toward the American economy, he blames Republicans for past improvidence and current intransigence.

However he sees himself or describes his role in Washington, voters are most likely to punish the man at the top when it comes to assigning blame for failures of this magnitude.

And Now, A Word From Charles

"Spoken by a man who never created or ran so much as a candy store. And it's completely a straw man argument as if conservatives and Republicans are arguing to disband the fire department and the police department so we could all individually do it on our own. The idea that infrastructure is necessary and good is as old as the republic. It's older than that. The Romans had the Via Appia, and that wasn't exactly a new idea. And they had sewers as well. The question is what are you doing with the money when you build the infrastructure?"

-- Charles Krauthammer on “Special Report with Bret Baier.”

 

Chris Stirewalt is digital politics editor for Fox News, and his POWER PLAY column appears Monday-Friday on FoxNews.com. Catch Chris Live online daily at 11:30amET  at  http:live.foxnews.com.

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