John Boehner is a Genius September 27, 2013 Danny Vinik
Turn the clock back a year. It’s the middle of the 2012 election and I tell you that President Obama will win a second term commandingly, Republicans will hold the House and Democrats will keep the Senate. On December 31, the Bush tax cuts expire and sequestration takes effect. Soon after that, we’ll hit the debt ceiling. President Obama also campaigned on raising taxes for those with incomes over $250,000, refuses to negotiate on the debt ceiling and everyone hates sequestration.
Oh, and the Republican party will swing even further to the right in the aftermath of the election with Senate Minority Leader Mitch McConnell facing a primary challenge and Senators Ted Cruz (R-TX) and Rand Paul (R-KY) becoming leaders of the party. Over the next 12 months, what do you think the course of economic and tax policy will be?
Here would’ve been my guess: Taxes raised for all those with incomes over $250,000
Capital gains and dividends taxed at a much higher rate, if not as ordinary income
Estate tax rises back to 40%
Payroll tax cut extension
Sequestration is rolled back with limited if any replacement cuts
Debt ceiling raised without a fight
Here’s where we may be at in just a couple of days: Taxes raised for individuals with incomes over $400,000 and families over $450,000
Capital gains and dividends taxed at 20% (rising from 15%)
Estate tax rises back to 40%
No payroll tax cut extension
Sequestration is on the brink of becoming permanent
Debt ceiling is shaping up to be a major fight
That’s a lot of victories for Republicans and it’s in large part due to John Boehner. He has repeatedly out negotiated President Obama because he and his caucus seem more willing to break through the fiscal cliff, shutdown the government and default on our debt.
In fact, Boehner is not willing to do any of those things more than Democrats are. He brokered a last second fiscal cliff deal that was a pretty big victory for Republicans under the circumstances (only raised taxes on individual income over $400,000).
Over the current continuing resolution battle, Boehner is now hoping his caucus will give up their desperate demand to defund Obamacare and pass a clean CR. It’s looking like we could be heading for a government shutdown – the least damaging of all the potential fiscal crises, but damaging nonetheless.
In the end though, this will likely be a huge victory for Republicans, even if they don’t treat it as such! Sequestration will stay in effect and while many Republicans don’t like the defense cuts, they are more than happy with the other cuts to discretionary spending.
By changing the conversation to focus on defunding Obamacare, Boehner and his colleagues have made sequestration permanent. The upcoming debt ceiling battle is a place where Republicans have leverage.
They know the President doesn’t want to breach it – even if he said he won’t negotiate – and Americans want there to be a negotiation. How this shapes up is anyone’s guess, but Boehner has put his caucus in an excellent shape.
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