The so-called fiscal cliff was caused by the fact that the Bush tax cuts were due to expire this year if not renewed. President Obama did not want the whole package renewed, but did want taxes to remain the same for most Americans, rising only for those on somewhat higher incomes. He was in a strong negotiating position. If congress and the president had not reached a compromise taxes would have risen automatically and, while the president was against tax-rises, he was not as strongly against them as the GOP. It was like a game of chicken, but with Obama driving a truck and Speaker Boehner riding a bike. Obama didn’t actually want the collision, but he was not as scared of it as the Speaker.
Now roles are reversed. The automatic consequence of not agreeing a compromise is the so-called sequester: budget cuts. The cuts fall evenly between domestic spending and the Pentagon. Republicans do not like this. Most do not want to see defense spending cut. The cuts in domestic programs are substantial and the president gets to decide where they hit. This is far from an ideal situation for the GOP. But they are not as scared of cuts as the Democrats. Democrats live for spending taxpayers’ money. It is in their blood and bones. This time, Boehner is in the truck and the president is trying to play chicken from a bike.
At the New Year, the Senate could propose a bill saying “let’s protect 90% of people from tax rises”. The House wanted to protect everyone. But how could they vote against protecting 90%?
Now the House can propose a bill which averts many of the spending cuts. What can the Senate Leader Harry Reid and President Obama do in response? If they don’t agree to the proposal all the spending cuts will take effect.
During the last stand-off over the government’s borrowing limit the White House tried to pretend that Republicans wanted the US to default on its debt. That was untrue. Any argument that this would be result of not increasing the borrowing limit is merely an expression by the president that he would, when required to make cuts, choose to default on debt. However, that’s not up to him. The Constitution says that “The validity of the public debt of the United States, authorized by law . . . shall not be questioned”. The president has some discretion about whether he cuts more severely from, say, Agriculture or Labor, but the one thing he cannot do is repudiate the public debt.
Nor does President Obama’s line that he will not negotiate with Congress over whether they will pay the bills they have already incurred stand up. The Budget sets the maximum amount that may be spent by any department, but no department is obliged to spend up to its limit. If someone gives you $20 and says “spend no more than $15 at the butcher’s and no more than $15 at the bakers” you still understand that you have $20, not $30, to spend.
The sequester is not something Republicans should fear. They should call the president’s bluff.
Quentin Langley is a Senior Lecturer in Marketing at the University of Bedfordshire Business School as well as a freelance columnist published in the UK and all parts of the US. He blogs on social media and crisis communications at brandjacknews.com