The Republican Party's Hidden Advantages

The GOP still holds the cards on spending, and isn't as divided as it looks.

The Republican retreat was a public humiliation. For two months Texas senator Ted Cruz promised his followers certain victory if they would simply follow direction and never waver. Demand the “defunding of Obamacare” -- nothing less, he commanded -- and the Democrat-controlled Senate and President Obama would hand over their crown jewel. Republican and conservative leaders who thought this strategy not completely thought through were denounced as RINOs (Republicans in Name Only), part of the “Surrender Caucus," "Neville Chamberlains" trying to appease evil, and “owning Obamacare.”

Democrats watching this retreat hoped it was Napoleon returning from Moscow with but 10,000 troops of the 422,000 that had first crossed the Niemen River heading east. This retreat, they claimed, would lead to total collapse of the Republican party. But as the dust settles where do the two contending coalitions in American politics stand? Ted Cruz’s promised fifteen minutes of fame have distracted many from what is important and lasting.

First, the two great successes of the post-2010 Republican congressional party stand. In August 2011, President Obama agreed to reduce his planned spending by $2.5 trillion over a decade in order to win a $2.5 trillion hike in the debt ceiling. Most importantly, this was not a 1982 or 1990 promise to trade later spending cuts for permanent tax hikes. There was no tax hike. And the spending caps were enforced by the sequester to last for ten long years. The Republican leaders Boehner and McConnell knew from the beginning of this year’s fight over the Continuing Resolution (CR) and the debt ceiling that the central goal of the modern Republican party was to hold the sequester. It changed everything.

Before the sequester “everyone knew” that someday there would be a grand bargain consisting of a massive tax increase (Simpson-Bowles wanted $5 trillion over a decade) and reform of entitlement spending to reduce the $64 trillion (present value) in unfunded liabilities. Thanks to the sequester the shape of the deal is different. If the GOP wins the House, Senate and presidency, they pass the Ryan plan, which reforms spending (no tax hikes) on welfare programs and entitlements to bring total federal spending down from the 40 percent of GDP projected in 2050 to 20 percent--roughly where we are today. Any possible deal that precedes united Republican government will combine reductions in entitlement spending in the trillions for temporary relaxation of the sequester limits in the billions. The Democrats desperately want more spending today. The GOP can grant such limited and capped spending increases in return for real, permanent law changes that reduce entitlement spending. Tax hikes always displace reforms and are now off everyone’s table.

The GOP has the whip hand in the spending debate. That has not changed.

The second great game changer was Obama’s decision to extend and make permanent 85 percent of the Bush tax cuts—the cuts of 2001, 2003, and the AMT patch. This was Obama’s great blunder that stripped him of his political power for his entire second term. Had Obama simply extended 90 percent of the tax cuts for one year or two years, he would have held over the heads of Republicans the ability to raise taxes simply by refusing to allow another extension. But he threw that power away like a child tossing aside a pearl of great but unrecognized value. This and Hannibal’s failure to march on Rome after his victory at Cannae are the two great mysteries of power foregone.

Third, the underlying unity of the Republican party was disguised by the frantic attempt by some to claim they were leading a crusade against Rockefeller Republicans, RINOs and big-government Republicans. This collapsed of its own idiocy. Every single Republican in the House and Senate voted against Obamacare, and has voted three and now four times to repeal the law. Almost every Republican in the house and Senate has signed the Taxpayer Protection Pledge, and the few who have not have publicly stated their opposition to raising taxes. (Save only Virginia’s Frank Wolf.)

No Republican in Congress has voted for an income-tax increase since 1990. No tax hikes have passed into law in any year since 1990 where the GOP held the House, Senate, or White House. The three tax hikes were in 1993, 2009 and 2010 -- the years of total Democrat control in Washington.

Yes, the past few months and the unnecessary government shutdown/slow down imposed an opportunity cost. We could have had two months discussing delaying Obamacare in whole or in part, helped along by the troubled rollout of the Obamacare website documented in the soliloquies of Jon Stewart. Instead, too many of the headlines were about Obama closing the World War II memorial.

But now the shoe is on the other foot. Each party has one chamber of Congress and thus wields a veto of any change in law. When Cruz demanded a change in the law of the land—repealing Obamacare—the Democrats simply said no. Now it is Obama and the Democrats who wish to change the law of the land: the sequester spending limits and the permanent extension of the tax cuts. Republicans can and (they assure this writer) will simply say no. In fact, they look forward to two months of Obama saying he wants an increase in the debt, more spending than present law allows, and higher taxes. The Republican response will be “please look directly at the TV camera and say that again more clearly for the microphone.”

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