For a few weeks around New Year’s Day, Washington, D.C., turned topsy-turvy. Well, topsy-turvier than usual. Conservative groups blasted a huge tax increase, the Congressional Budget Office estimated the size of a large tax cut, and they were all talking about the same bill. The Club for Growth’s president said he would hold congressmen’s votes for the bill against them — including the vote of a former president of the Club who is now a senator. Congressional Republicans refused to vote for spending cuts they favor. Some of this oddity was the result of the peculiar circumstances that gave rise to the month’s political debate, circumstances that will not soon be repeated. Some of it resulted from features of the contemporary conservative movement that will continue to limit its political effectiveness even after that debate has run its course.
In 2001 and 2003, President Bush, most congressional Republicans, and a few Democrats cut almost all income-tax rates, cut taxes on capital gains, dividends, and estates, and expanded the child tax credit. To get the tax cuts through Congress, Bush had to choose between shrinking their size and making them expire at the end of 2010. He chose the latter course, subsequently trying to make the tax cuts permanent or at least push back the expiration date. After taking the House in 2010, Republicans succeeded in getting President Obama to agree to push the date to the end of 2012.
Obama’s position was that the tax cuts on everyone making less than $250,000 a year should be made permanent, while the tax cuts on incomes above this level should expire. He also wanted taxes on estates, capital gains, and dividends to go partway back to their pre-Bush levels. It was estimated that these tax increases would increase federal revenue by $800 billion over ten years.
The basic fact that structured the political wrangling over taxes from November through early January was that failure to reach a deal acceptable to majorities of the House and the Senate as well as the president would result in a $4.2 trillion tax increase (measured, again, over ten years). So this was never going to be a normal budget negotiation, where Democrats would urge tax increases, Republicans would urge spending cuts, and the final result would be a mixture of the two reflecting the two sides’ relative political strength, negotiating skill, and media savvy. In this case, even if the parties were evenly matched in all three respects, the scheduled tax increase would have put Republicans at a disadvantage. Whatever Republicans did or did not do, taxes were going to go up.
Yet a remarkable number of conservatives attacked congressional Republican leaders — particularly Speaker of the House John Boehner and Senate minority leader Mitch McConnell — for “caving on taxes,” without acknowledging that the consequence of not caving would have been even higher taxes. (News accounts, too, depicted Republicans as voting “for tax increases” when they were actually voting, in intent as well as effect, to restrain scheduled tax increases.) Or they faulted these Republicans for not getting spending concessions in return for the tax increases, ignoring the question of why Obama would make these concessions when the law already gave him tax increases larger than he had called for. Republicans would have had to give him something extra, such as a temporary extension of the debt limit, to get such concessions, and the same conservatives who complained about the alleged cave-in on taxes were so dead-set against doing so that they killed the idea.
Grover Norquist, the head of Americans for Tax Reform, had for years promoted a “taxpayer protection pledge” to get politicians to commit not to support tax increases. He wanted all of the Bush-era tax rates to be made permanent: that is, for the expiration dates to be lifted so that it would take an affirmative act of Congress signed by the president to cause those rates to rise. He did not, however, label congressmen who voted for proposals that fell short of his goal as violators of his pledge.
At one point during the debate, Boehner tried to get the House to vote for what he called “Plan B” (Plan A being productive talks with the president): a bill that would have limited increases in the income tax to people making more than $1 million a year. The theory was that this move would have increased Republicans’ leverage over the final deal. They would have shown their commitment to shielding the middle class from tax increases and their lack of fealty to millionaires, depriving the Democrats of their best talking points. The result, Republican leaders hoped, would be a deal that protected everyone making less than $600,000 or so from higher income taxes.