In point of fact, the Republicans have already bowed to the election results and agreed to raise taxes on the top 2 percent of earners. But the president is pushing for much more. Far from proposing spending cuts, Obama touts new stimulus spending and "investment" in infrastructure. He wants to limit deductions and have sole discretion to raise the federal debt limit. He may be hoping to provoke angry Republicans into permitting sequestration, calculating that he could withstand a recession at the start of his second term and still emerge with his legacy intact, but that Republicans would be devastated in the 2014 midterms if they were made to take the blame for a downturn.
It's a triple irony that Obama is successfully painting Republicans into the "party of the rich" corner. First because they've already agreed to tax increases, and second, the much-maligned Bush "tax cuts for the rich" actually made the code more, not less, progressive. And third, because the Republicans are holding out for what? For spending reductions. What is the nature of those spending cuts? There are a number of possibilities, but one that Republicans have endorsed includes means-testing entitlements.
Means-testing translates into another tax on wealthier Americans. They will receive fewer benefits from programs like Social Security and Medicare than they've been led to expect. So Republicans are holding out -- and being scorned as the party of the rich -- for demanding fewer benefits for, yes, the rich.
The Republicans are attempting to divert the nation -- not from the "fiscal cliff" but from something much worse. If government debt is not controlled by spending cuts (tax increases on the rich make scarcely a dent), the U.S. is headed for drastic economic decline. Interest rates will rise to attract wary international investors. Rising interest rates will in turn increase our debt service burden, while a diminished private sector will provide less and less tax revenue. The combination of spiraling debt service and entitlement spending will quickly leave no funds for any other purpose.
That's when it becomes Mad Max. That's what the negotiations are about.
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