I agree with Mark that Republicans are terrible negotiators. I also believe that Republicans shouldn’t give in on letting taxes go up for the highest-income Americans alone (whether via deductions or higher rates) during these negotiations. There is nothing to gain from such a move: If they give in, taxes will go up on top earners, they won’t get any credit for comprising, and they will rightly be blamed by true small-government advocates for caving to political posturing from the left. Further, tax increases on high-income earners today won’t prevent taxes from going up on everyone in the future, since raising taxes on the rich is a symbolic measure that won’t raise much revenue — while having negative long-term consequences all the same. It won’t reduce the size of government today or tomorrow. In fact, it will make it easier for the government to keep on growing.
Strangely, back in December 2010, Republicans seemed to understand that there was nothing to gain by giving in to the president’s demand for high taxes on the rich alone. Back then, their position was “no tax increases or tax increases on everyone.” Moreover, they seem to have forgotten that this fight today should be about restraining spending and moving away from our unsustainable fiscal path , rather than about taxes. To be sure, lower taxes for all is better than higher taxes for some or higher taxes for everyone. But smaller government — an ideal that Republicans claim they believe in — isn’t only about keeping taxes low. The principles of smaller government have to be fought by fighting for less spending first and foremost, in particular by fighting for the reform of entitlement programs such as Social Security and Medicare.
Taking the side of small government during these negotiations probably means that we will go over the cliff. But at least we would go over the cliff knowing that Republicans fought for the long-term fiscal health of this country. It’s also better than the scenario in which we go over the cliff knowing that the Republican leadership caved on raising taxes for higher-income taxpayers while fighting against spending cuts (in the form of sequestration). This is all the more disturbing because the sequester’s cuts are mostly cuts to the growth of spending and they won’t make a dent in our fiscal problem.
Obviously, I am not holding my breath that Republicans will do the right thing since, with a few exceptions, they stopped being the party of smaller government a long time ago. I have said it before, but I’ll say it again: We are in this mess today because for years Republicans in Congress, along with the pundits and the policy people who support them, have agreed to significant compromises of their principles in the name of practicality or politics. (Think about Medicare Part D, or the Bush tax cuts in conjunction with massive spending increases.) But look what we got in exchange for practicality and politics, the government we have today: It is big and it will get bigger; it is overreaching; it is inefficient; it is wasteful; it corrupts the private sector and gets corrupted in return.