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12.20.12

Fiscal Cliff Vote Fails Due to Republican Theology on Taxes

There should be no surprise that Republicans are incapable of compromising on a fiscal cliff deal. When it comes to taxes, for the GOP it’s a matter of theology—not business.

This is not a business transaction. Those of us in the press who follow both business and politics tend to think there are certain similarities between the two realms. But the fiscal cliff hostage situation, now in its brutal 44th day, is highlighting one of the key differences.

In business, when two sides want to make a deal, or have to make a deal, there’s a certain protocol that is followed. The two sides stake out their positions. They argue, threaten, charm, and cajole. Ultimately, if there is a zone of agreement—an array of outcomes that are acceptable to both sides—then the two parties will cut a deal and meet in the middle. This is what happens when a stock trades, or when people get hired, when companies are sold. I offer 10, you bid nine. We have a deal at $9.50. If there is no mutually acceptable price, the two sides simply walk away.

Politics is often transactional in just this way, especially on issues of spending. But when it comes to issues of taxes, and when Republicans are involved, it’s less business than theology. People don’t tend to compromise on theology. And we don’t expect them to. When a Catholic who believes in the Holy Trinity meets a Jew who believes in Adonai, they don’t shake hands, meet in the middle, and agree that there are two divine figures, a sort of Holy Duo. They agree to disagree, and then coexist.

People in our world too frequently fail to take professionals at their words. The modern Republican Party doesn’t believe in raising taxes. Full stop.

In fact, as a rule, its members believes that taxes are too high. When they get in power, Republicans try to cut taxes, regardless of the economic or fiscal situation. George W. Bush may have had a failed presidency in many ways, but you can’t deny his success at reducing taxes on income, capital gains, dividends, and estates. When they are out of power Republicans agitate to cut taxes and oppose tax increases. When they run for office, they promise to cut taxes and oppose tax increases.

And when confronted with the prospect of massive tax increases that will result from mere inaction, they have proven, thus far, unwilling to take evasive action if it means raising taxes on anybody.

It’s a widely held belief that Grover Norquist and the Club for Growth act as modern-day Komissars, enforcing a rigid anti-tax ideology. But for Republicans in general, and for the Republicans in the House in particular, the overwhelming majority of whom come from safe, conservative districts, their arms don’t need to be twisted.

There’s another difference between business and politics. Typically, when two CEOs sit down to negotiate a deal, the hard part is negotiating the terms. CEOs today enjoy tremendous freedom of movement. They are “supervised” by compliant boards of directors, and are surrounded by senior yes-men and yes-women. If the rank-and-file thinks a proposed transaction is stupid, or reckless, they don’t really have any means of redress or outlet for dissent. Deals are presented as fait accomplits, and everybody—from senior vice presidents down to assistants—must either live with the outcome or leave.

Now, President Obama effectively functions like a modern CEO. Nobody in the White House will put the kibosh on a deal he wants to make. But House Speaker John Boehner, while he is the titular leader of the Congressional Republicans, is nothing like a CEO. He always faces the challenge of selling a deal to his reluctant subordinates. He and his team spent much of Thursday begging for votes. To no avail. Boehner has no sense of imperium, and no apparent ability to threaten or intimidate rank-and-file members into falling in line.

People in our world too frequently fail to take professional at their word. The modern Republican Party doesn’t believe in raising taxes. Full stop.

A deal may yet still happen. It might be that it was necessary for the Republican leadership to fall on its face, to confront the utter unwillingness of a large number of Republicans to sign off on a tax-raising deal before it goes and tries to make a deal with House Democrats. That’s what happened with the passage of the TARP bill in the fall of 2008. Republicans revolted against Boehner and the Bush administration. In the end, Treasury Secretary Henry Paulson had to get down on his knees and beg House Minority Leader Nancy Pelosi for assistance. It ultimately passed with Democrats voting 172–63 for the bill, and with Republicans voting 108–91 against the bill.

Back in 2008, the House Republican leadership was moved to act against the wishes of a majority of its caucus because global stock markets were in free fall. Late Thursday night, after the Republicans went home without voting, futures were plummeting in Asia.

Check out the charts below:

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