In the first year of NavigatingPolitics.com we have seen dramatic change in the middle east, the death of a terror leader, and the end of an almost nine year war. Domestically however, we have seen numerous moments that have warranted a countdown clock as Republicans and Democrats repeatedly fought to the bitter end. The issues always at hand: taxes, spending, or both.
The first was the government shutdown threat in April when Republicans demanded at least $60 billion in immediate cuts and Democrats pushed to protect funding for priority programs(Pell grants, planned parenthood, Head Start…). In the end, after much drama, an agreement to cut $38.5 billion was reached with less than an hour and a half before the government was set to shut down.
April’s government shutdown fight set the scene for the Summer-long debate over increasing the nation’s debt ceiling. As we reported this summer, the debt limit was something that has been routinely raised because failure to raise it would lead to a catastrophic credit default. President Obama insisted on large-scale deficit reduction (about 4 trillion) that represented a “balanced approach,” with both spending cuts and tax increases on the wealthy. Republicans, however, wanted deficit reduction to come from spending cuts exclusively. Just two days before the first ever US credit default, a deal was reached that included a debt ceiling increase funded by immediate spending cuts and a congressional “super-committee” that would find $1.2 Trillion in additional cuts. Months later, the committee failed to find those cuts.
And most recently, Americans were brought a week and a half away from a 1,000 tax increase. Last year, middle-class payroll taxes were cut temporally from 6.2% to 4.2%. In September, President Obama proposed a 1 year extension and expansion of that tax cut in his American Jobs Act. The President’s plan included a small tax increase on the wealthy as a way to both cut the deficit and pay for the tax cut. Republicans, who say this middle-class tax cut is not as stimulative as the tax cuts for the wealthy, refused to allow any tax increase on the wealthiest Americans. In the end, the tax cut was extended for two months after a stalemate over how to pay for the tax cut and the inclusion of these policy riders.
This year of down-to-the-wire politics was a direct result of the 2010 Midterm elections that increased the Republican’s power over the legislative agenda. It can also be seen as a guide as to what we can expect in 2012, an election year. The first battle that will be waged will be over how to pay for the full year extension of the payroll tax cut (even though Bush Tax Cut Extension was not paid for). This must be done by February. The next battle will be cutting 1.2 Trillion dollars from the deficit in order to avoid deep automatic budget cuts that are set to occur in 2013. Both will be simple continuations of the debates that occurred this year.
2011 was an extremely divisive and unproductive year in domestic politics. As the election season commences on January 3rd, the priorities of congressional leaders and the President will shift from trying to get work done, to working to get reelected. With the political dysfunction seen this year, do you expect much to get done in an election year? We’ll find out in 2012! Happy New Year!