A Political game of chicken

Patricio Navia

Buenos Aires Herald, November 27, 2012

 

As the deadline to avert the fiscal cliff nears, Republicans and Democrats in Congress have engaged in a game of chicken, threatening to let the spending cuts and tax increases take effect unless the other party agrees to their demands.  Because it will be possible to increase spending later in 2013 for popular social programs affected by the cuts, Democrats believe that Republicans will be in the losing end if they fail to reach a compromise on tax increases and spending cuts that lead to a balanced budget.

 

After he secured re-election, President Obama is in a much better position to negotiate with Republicans in Congress.  The President can turn his re-election victory into a political mandate to broker a compromise that includes both spending cuts and tax increases. Though the negotiations will require Republicans and Democrats in Congress to compromise, the general public expects the President to lead the negotiations and bring the parties to the bargaining table. After he successfully maneuvered to reduce tensions in the Middle East, President Obama is looking more in command than ever.  His approval rose climbed above 50% a few weeks before his re-election and has stayed in positive territory since. This week, his approval was 53% and this disapproval was down to 39%. The last time the President’s approval was 14% higher than his disapproval was in November of 2009.  His re-election victory and his good standing with the American public put Obama in a powerful bargaining position. 

 

Every time a President enjoys strong popular support, legislators from the opposition party find it politically costly to resist White House calls to broker a solution to an impasse.  Thus, even though Republicans retained control of the House and the same leaders that opposed a grand bargaining last year are in still in the leadership positions, Obama has a much better hand this time around to exert concessions from them.  Several Republicans have already signaled their willingness to walk away from the “no new taxes” pledges they signed as candidates. Even though they would prefer to avoid tax increases, they correctly anticipate that it is better to concede to some tax increases—in the form of eliminating deductions—than to let the Bush tax cuts expire at the end of December.

 

After betting that their firm stance on opposing taxed would pave their way to the White House, many Republicans now realize that what they believed was a principled stance turned out to be interpreted by many Americans as a sign of intransigent. Americans want their politicians to have principles, but they also want them to be able to compromise to find solutions.  Uncompromising politicians do not earn the trust of moderate Americans who believe that disagreeing over priorities and principles should not inevitably lead to gridlock. 

 

As Congress convenes this week after the long Thanksgiving recess, the mood in favor of negotiations is strengthening. Republicans have responded positively to President Obama’s call for a grand compromise.  In fact, most of the resistance against a compromise now comes from liberal Democrats. Since a compromise will require severe tax cuts in some social programs, a few democrats are having second thoughts about avoiding the fiscal cliff at any cost. If no compromise is reached, tax increases and spending cuts in defense will be larger than the spending cuts. Moreover, democrats believe that pressure from their constituents will make Republicans more likely to agree to increases in social spending in late 2013 or when the next electoral cycle begins in 2014. As they believe they have less to lose than Republicans if the U.S. fails to avoid the fiscal cliff, liberal democrats are urging the President to demand more concessions from Republicans before they sign on to a grand bargain.

 

Since the Bush tax cuts are due to expire on December 31st, inaction by Congress will hurt Republicans more than Democrats or the White House.  In addition, as many Republicans have signed a pledge against increasing taxes in any form, public opinion is more likely to punish Republicans if no compromise is reached. Republican leaders have hinted that they are willing to support tax increases if they are presented to the public as elimination of tax breaks and deductions.  President Obama, fully aware that his legacy in his second term will be unavoidably associated with averting the fiscal cliff, will be willing to make concessions of his own.

 

Still, because Obama just won re-election and because the cards are stacked in favor of Democrats, the negotiations to avoid the fiscal cliff will require Republicans to make more concessions.  Though it will feel like a bitter pill for many conservative Republicans, the benefits of an agreement that presents both democrats and republicans as fiscally responsible will be more beneficial to Republicans in the long run. After all, Democrats have just won a second term for Obama and Republicans are in need of regrouping and reframing their message as they prepare to take the White House away from Democrats in 2016.