Karl Rove on the so-called "fiscal cliff"

In a video interview available from Dow Jones/Wall Street Journal, “Karl Rove Doubts a Fiscal Cliff Deal Will Get Done” (Nov. 20, 2012),  Karl Rove’s pre-Thanksgiving news to the world is exactly what one would expect from one of the most successful GOP strategists.  He urges Repubicans to do everything possible to find “reasonable compromises without sacrificing principles”, which means entitlement reform coupled with offsetting revenues without increasing tax rates.

I. This is nothing new.  

Rove doesn’t want the GOP to accept any rate increases and he does want the GOP to play the obstructionist role to the hilt unless they get their longed-for undermining of the New Deal Social Security, Medicare, and Medicaid programs. 

The flawed argument is the same as Romney’s arrogant economic message in the presidential campaign–that increased revenues will come from economic growth gained from running the country’s economy to support Big Business.  And the GOP insists that it will only happen if they can get the purported bad-guy Democrats to accede to the Republican policy demands of continued preferential taxation of the wealthy and corporate America, increased spending for the military, continued regulatory inattention to the financialization of the economy, combined with spending cuts to safety net programs.  

Rove’s position essentially insists on the government folloowing the GOP’s long-debunked market fundamentalism that assumes that the “dynamics” of spending cuts to the GOP-hated so-called “entitlements” (and not to the GOP-loved military budget) will immediately cause the economy to bloom and result in all the revenues needed (by the “appropriately” shrunken federal government), while the elite continue to rip-off the economy with “rent” profits.  And even if the “compromise” was to allow some increase in tax payments through cutting back deductions that primarily benefit the elite, one can imagine that those cutbacks will be relatively minor and short-lived. 

II. The strategy is nonetheless revealing.

What is most interesting here is not Rove’s continued reliance on the same old failed Reaganomics arguments from the past re adhering to GOP “principles”.  It is his post-election strategy for how to achieve it.   He is “dubious” that a deal can get done in the few days left in this congressional session.  His solution–Congress should agree to carry on the ”status quo ante” for a few months and then arrive at a solution. 

Rove knows what progressives know (and what I’ve insisted on in this blog): the Democrats have the rare upper-hand at this point in the legislative cycle. 

The Republicans agreed to the passage of a law (the so-called “sequester”) that cuts otherwise slated increases to the military and also cuts a variety of domestic non-military expenditures.  The Republicans also joined with Democrats to pass a two-year extension of the Bush tax cuts two years ago, when they thought that they would control the White House and  the Senate after the 2012 elections and be able, finally, to deliver on their original intent to make the “temporary” Bush tax cuts permanent, thus guaranteeing a crop of preferential tax provisions for the very wealthy and multinational corporations while carrying out their long-term objective of privatizing and reducing safety net programs like Social Security, Medicare and Medicaid. 

Republicans have less ammunition to carry out their obstructionist and New Deal-defeating agenda–the laws that cut the military budget, protect the safety net programs, and increase tax rates are already enacted. 

Unless the GOP can convince the public and the Dems in Congress that there really is a fiscal “cliff” that spells suicide for the US economy, they are caught short in their legislative strategy.  They relied on a wipe-out victory in the 2012 elections.  Permanent reductions in taxes for the rich, deregulation, privatization/decimation of the New Deal safety net programs, and ever-increasing support for the military are much less easily put into law without one-party control. 

The Democrats should not be willing to negotiate against interest just to kick the ball down the road to a period when they will have fewer strategic advantages on their side!  Democrats–with Obama in the lead–should insist on enactment of a bill making permanent tax cuts for the lower-middle and lower-income classes–ie, a group that almost no one thinks should have to pay more in a time of continuing slow growth out of the Bush recession years. 

If the Republicans refuse to pass such a law, the Dems should not kow-tow to the GOP’s so-called “compromise” position of re-extending the full Bush tax cuts and caving to earned benefit program cuts.  Instead, the Dems should let the Bush tax cuts expire as slated and do nothing about the sequester and by all means do nothing to reduce benefits to Social Security, Medicare or Medicaid.  In January, President Obama and the progressives in the House and Senate should mount an aggressive campaign to pass a well-considered slate of tax cuts for the lower and lower-middle income distribution and a few well-targeted stimulus measures in support of public infrastructure and lower-income unemployment relief. 

Only after those measures are in place should there be any discussion of an “overhaul” of the tax code–and that overhaul should be handled in the context of raising sufficient revenues to pay for things we as a people know we should provide–decent retirement and health care for elderly Americans, decent educational support for young Americans, decent opportunities for a sustainable life for poor Americans, and the revitalization of the middle class who have been the losers of the last decades of class warfare.  The super-rich elite don’t deserve much attention at all in this debate–they have been the winners and their winning has not in any way built a sustainable, job-creating economy. 

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