GOP Shouldn't Be Eager to Play Debt Limit Chicken

Many Republicans are consoling themselves over the fiscal cliff fiasco by tricking themselves into believing they can make up lost ground in the upcoming debt ceiling negotiations. After all, they argue, the GOP has the hostages leverage. If the White House doesn't give into their demands, they can crash the economy.

The problem with this thinking is that the debt ceiling fight -- as was the fiscal cliff fight -- was not a hostage negotiation so much as it was a game of chicken. That is, if Republicans could crash the economy if they didn't get what they wanted, so could the President for the same reason. The question then, was who would climb out of the twisted wreckage and who would wind up on life support. Polling showed that Republicans would be the ones taking the damage, so it was Republicans who made the biggest concessions. Any hostages held -- and there were hostages -- didn't mean crap.

An old hand at political brinksmanship (and over-the-brinksmanship, for that matter) is warning the GOP that the debt ceiling fight is not going to be the big chance at a political comeback Republicans seem to think it will be.

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Fiscal Cliff Deal Demonstrates the Fantasy of Trickle-Down Economics

Last night's passage of the fiscal cliff agreement in the House of Representatives highlights a few important points: that Washington is broken, that a leaderless House GOP is in chaos, that Eric Cantor and John Boehner are working against each other and at cross-purposes, etc. You're going to hear a lot about that in the coming days, so I'm not going to waste your time writing a post you'll be able to read pretty much anywhere else.

Instead, I'm going to use the fiscal cliff deal to demonstrate how Republican explanations of economics are complete BS. As part of the deal (or, more accurately, because the deal completely ignores it), the payroll tax cut holiday will expire, hitting middle- and lower-income workers the hardest. Meanwhile, households over $450,000 and individuals making $400,000 or more will also see their taxes go up. Here's a fun game: guess whose tax hike will slow the economy more, the wealthy's or the rest of us?

Associated Press:

The higher taxes on the wealthy will probably slow the economy a little bit. But a bigger drag would come from a tax increase Democrats and Republicans aren’t even bothering to fight over: the end of a two-year Social Security tax cut. The so-called payroll tax is scheduled to bounce back up to 6.2 percent this year from 4.2 percent in 2011 and 2012, amounting to a $1,000 tax increase for someone earning $50,000 a year.

“It’s a huge hit,” says Joel Naroff, president of Naroff Economic Advisors. “It hits people whether they’re making $10,000 or they’re making $2 million. It doesn’t matter who you are... The lower your income, the more of your income you’re (spending). So if your taxes go up, it’s going to come out of your spending.” And that is bad news for an economy that is 70 percent consumer spending.

Mark Zandi, chief economist at Moody’s Analytics, calculates that the higher payroll tax will reduce economic growth by 0.6 percentage points in 2013. The other possible tax increases — including higher taxes on household incomes above $450,000 a year — will slice just 0.15 percentage points off annual growth, Zandi said.

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Americans Oppose Every GOP Idea for the Fiscal Cliff

I've joked that if you "unskewed" the presidential election results to get rid of the American people's liberal bias, you'd see that Mitt Romney totally won the election. While it's fun to tweak conservatives over the poll trutherism that caused them to be caught with their pants down on election night, the fact is that this form of denialism has always been there. It's usually expressed as "you can get a poll to say whatever you want," but this time they just put more effort into it with the addition of fantasy numbers -- an effort that, ironically, was spent getting polls to say what conservatives wanted to hear. You hope this particular strain of reality opposition has suffered a fatal blow with Mitt Romney's loss, but you never know. Conservatives have a talent for ignoring lessons.

But not learning this particular lesson would be a tragedy for the GOP, so I think it's sinking in. Given the findings of a new poll, the time would be right for a GOP awakening, anyway.

Raising taxes on income over $250,000 remains a broadly popular approach to dealing with the country’s budgetary woes, according to a new Washington Post-ABC News poll.

Sixty percent of all Americans back higher taxes on higher incomes in the new Post-ABC data. Earlier this month, an identical 60 percent of voters in the presidential election said income taxes should be raised on income over $250,000, according to the national exit poll.

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