GOP May Renege on Norquist’s No-Taxes Pledge
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The Fiscal Times
August 18, 2011

Could the Republican no-tax pledge have topped out?

At first glance, the answer is clearly no. As the debt ceiling debate made clear, many pledgers would rather trigger a catastrophic default than break Grover Norquist’s Americans for Tax Reform pledge. Even conservative intellectuals who ought to know better seem to regard it as somehow sacred. TFT’s own estimable Liz Peek endorsed the idea in a sarcastic critique of the President:  “He seems unable to grasp that 236 Republicans in the House of Representatives and 41 Senators have signed the Taxpayer Protection Pledge…[the signees] are, shockingly, committed to the principles on which they campaigned. This is such a foreign concept in Washington that it seems President Obama can’t wrap his mind around it.”  

Even so, cracks—faint, but real—are starting to show in fortress Norquist’s foundation: Independent voters are awakening to the pledge’s perverse effect on the deficit. And Norquist  has lately had to twist himself into jesuitical pretzels to explain what the pledge does, or doesn’t, permit. A policy tool that purports to shrink the deficit but does the opposite and that paints its user as the lackey of an unelected ideologue is a tool that isn’t built to last—even in Washington.  

What is the pledge doing wrong? Let’s start with its effect on America’s credit standing. The full Standard and Poor’s report on the downgrade carefully avoids picking political sides, although it twice mentions Republican resistance to new taxes as a factor in the decision. In statements, however, S&P has been considerably less circumspect. S&P senior director Joydeep Mukherji told Politico that some “people in the political arena” undermine America’s creditworthiness by claiming that default is no big deal. “That a country even has such voices, albeit a minority, is something notable,” Mukherji said. “This kind of rhetoric is not common amongst AAA sovereigns.” Of course, the only people in the political arena taking that position are Norquist pledgers, including Presidential hopeful Michele Bachmann.

A $100 billion interest rate increase
is even more destructive than it looks
compared to a tax hike.

What’s so bad about a downgrade? If you believe the estimate by Terry Belton, JP Morgan’s global head of fixed income strategy, the downgrade to AA+ from AAA will eventually cost $100 billion a year in additional interest costs. By comparison, a tax on incomes above $1 million, one of the Democratic proposals during the debate, might have taken $31 billion out of rich people’s cash flow. So which is worse for the economy?

Moreover, in terms of fiscal politics, a $100 billion increase in interest costs is even more destructive than it looks. As Conor Friedersdorf argued recently in The Atlantic

What Norquist doesn't understand or won't admit is that deficit spending is worse than a tax increase, because you've got to pay for it eventually anyway, with interest. Meanwhile, you've created in the public mind the illusion that the level of government services they're consuming is cheaper and less burdensome than is in fact the case. If you hold the line on taxes but not the deficit, you're making big government more palatable.

The pledge also puts Republicans in the bizarre position of supporting wasteful government subsidies that they are theoretically opposed to, if the subsidies come in the form of targeted tax breaks rather than cash outlays. Case in point: the billions in annual tax credits for ethanol blenders. Republican Senator Tom Coburn, pushing to repeal the subsidy, told the Washington Post’s Lori Montgomery,  “I’m not for tax increases, but I don’t think [ending ethanol credits] is a tax increase. [The credits are] stupidity at its height.” Norquist, however, characterized Coburn’s proposal as a stalking horse for future tax hikes and angrily urged pledgers to oppose it.

Eventually, 34 Republican Senators rejected Norquist, and supported a separate measure to end the subsidy. (The ethanol credits still exist because the measure was attached to a bill that is not expected to make it out of Congress.)  “I think you all think  [Norquist] has more hold than I think he has,” Coburn told reporters after the vote.

Republican Jeff Fortenberry isn’t even
bothering to split hairs with ATR. 
He just resigned from the club.

Coburn isn’t the only politician to end-run ATR. Pennsylvania’s governor Tom Corbett, a Republican and a pledger, earlier this summer threatened to veto any new tax on natural gas drillers in the state. Now, his spokesperson, Kevin Harley, tells The Fiscal Times that the governor is open to an impact “fee” on drillers, imposed where the drilling takes place. “I don’t believe that’s a violation of the ATR pledge,” said Harley. “It wouldn’t be the governor imposing the fee, it would be local governments.” Norquist has ruled that impact fees are, in fact, a violation of the pledge but Corbett is standing his ground.

In Nebraska, Republican representative Jeff Fortenberry isn’t even bothering to split hairs with ATR.  He just resigned from the club. Although he signed the pledge when he first ran for office in 2004, he told voters at a crowded Nebraska town hall this month, he has changed his mind. “I informed [ATR that] I don’t consider the pledge binding. I don’t care to be associated with it. It’s too constraining.”

It may also be too much in conflict with another common oath on Capitol Hill—the one every member of Congress takes upon swearing in. Among other things, every member pledges to “well and faithfully discharge the duties of the office on which I am about to enter.”  Republican legislators like Coburn and Fortenberry are finding it’s not always possible to be simultaneously  true to that oath and to Noquist’s. Incidentally, the oath of office ends with the phrase, “So help me God.” In the great scheme of things, between God and Norquist, who should Republicans be more afraid of angering?

Eric Schurenberg
is editor-in-chief of BNET and CBS MoneyWatch.com. Previously, he was managing editor of Money and deputy editor of Business 2.0. Schurenberg was also managing editor of goldman.com, a site for Goldman Sachs Group's personal wealth management business.