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Tuesday, January 15, 2013

Republicans Bit The Bullet On Taxes, Now It Is About Spending

By Susan Duclos

Quick background: Before the fiscal cliff deal, different polls found that over 70 percent of Americans favored "cutting government spending across the board," while 60 percent favored tax hikes. (Politico's Battleground poll had the spending cut percentage at 75 percent)

Spending cuts didn't make it into the fiscal cliff deal, but tax hikes did, for those making $400,000 in annual income ($450,000 for a family) and for 77 percent of American workers when the payroll tax holiday was allowed to expire.

Republicans accepted the bad deal, but on the bright side, they bit the bullet, took their hits from conservative supporters and now the conversation can be focused on the area where more of a majority believes it should be... spending cuts.

Charlie Cook over at National Journal explains:

But the next fight will come during that triple-witching period when Congress faces another sequestration battle, negotiations over raising the debt ceiling, and the possibility of a government shutdown if an agreement on funding for the balance of the fiscal year isn’t dealt with in time. It’s much more likely that Democrats will face more of a winter of discontent than Republicans. With tax rates now increased for all of those Democrats were willing to raise them on, the battleground will shift mostly to spending cuts and entitlement reform. Republican leaders’ claims that they won’t go along with anymore tax increases sound like wishful thinking; there will be more revenue found whether they like it or not. For the most part, though, it will be Democrats’ turn to have fiscal root-canal work done—without the benefit of anesthesia.

While the focus, until now, has been on the struggle between Republican leaders and their even more conservative base and caucus members, it will be up to President Obama and Democratic congressional leaders to deal with their party’s more exotic members. No one expected a fiscal-cliff deal effectively free of spending cuts—score one for Democrats—but that now has to change. The Democrats, who won the presidential race, expanded their Senate majority, and picked up seats in the House, will have a hard time dealing with the fact that they now have to endure pain.

The fact is that both parties are experiencing selective perception. There’s a great chart, developed last year by the White House Office of Management and Budget, that’s floating around town and sitting in a lot of PowerPoint decks. Covering the period from 1960 to 2011, it features two solid lines, one red and one blue, mapped against two horizontal dotted lines. The solid red line tracks spending as a percentage of gross domestic product for each year, and its corresponding dotted red line marks the overall average: 20 percent. The solid blue line, meanwhile, follows taxes as a percentage of GDP, and the dotted blue line marks the average: 18 percent.

Cook concludes:

The year-end fight was a clumsy way of dealing with the blue line, but the next fight is going to be much more about that red line, and that is not a fight that Democrats will want to see. So for all of the focus and talk about the cleavages within the GOP and how unrealistic Republicans’ approach to taxes has been, we will now see a mirror-image debate over spending that will show Democrats to be equally culpable for the fiscal crisis that we find ourselves in.

Barack Obama may continue to say "we don't have a spending problem," but Americans understand Washington does have a spending problem and while Republicans took a hit on the fiscal cliff deal, the very public nature of the battle over taxes vs spending cuts, allows Americans to know without a doubt, which party is attempting to address that spending problem and which party is not only refusing to do so but refusing to acknowledge it is a problem.

When it comes to Washington's spending addiction, Republicans are not battling Obama and Democrats alone, they have the majority of the public behind them.

That may give them the backbone they couldn't find during the fiscal cliff deal.