The GOP 'Scorched Earth' Policy

The GOP 'Scorched Earth' Policy

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Call it a “scorched Earth” policy. Republicans in Congress are so intent on getting everything they want they are prepared to impose enormous costs on the country in pursuit of their goals. Sometimes those costs seem wildly out of line with the value of their objectives.

Perhaps the biggest cost of all is that with everyone focused on debt issues, the real needs of the economy aren’t being addressed at all. Significant cuts in spending at all levels of government are part of the problem. Consumers, watching the dysfunction in Washington, have held back on spending and increased their saving once again.

Anyone would be discouraged by foolish disputes such as the one currently blocking funds for many Federal Aviation Administration programs. A group of essential airport inspectors are working not only without pay but also charging the cost of their travel among airports to their personal credit cards. Congress began a five week recess without settling the dispute even though it is preventing the collection of the tax on passenger tickets costing the country $30 million a day in lost revenue. The impasse, triggered by Rep. John Mica, the Republican chairman of the House Transportation and Infrastructure Committee, could cost taxpayers $1 billion.

At a time of such sharp focus on federal budget deficits that’s simply irrational. Or could it be intended simply to intimidate: let us have our way or we will wreak havoc on things you care about.

It was clear from the extended negotiations over raising the debt limit that President Obama and congressional Democrats cared more about avoiding a catastrophic default than did Republicans. Some of the latter argued that the government has enough revenue coming in that interest on Treasury securities could be paid and other bills “prioritized.” There seemed to be little concern about how not being paid would affect the lives of those getting stiffed.

But meeting legal obligations to state and local governments, businesses and households takes a back seat to two other Republican considerations: reducing the scope of government, cutting spending and, above all else, rejecting all efforts to raise taxes.

Under the debt limit deal, there is to be a new 12-member committee—six Democrats and six Republicans—that is come up with additional ways to reduce future budget deficits. House Speaker John Boehner and Senate Minority Leader Mitch McConnell have both said they will appoint only Republicans who promise not to agree to any tax increases.

In other words, the negotiations become a farce. At every opportunity Obama should expect no cooperation, even on relatively minor issues—the FAA funding deadlock, for example.  Last spring there was almost a government shutdown because of disagreements over spending. Presumably the same thing could happen again this fall if, as appears likely, fiscal 2012 appropriations bills don’t get passed on time and the government is operating under a continuing resolution. The point is that many Republicans don’t care if the government shuts down.

Given the Republican strategy, Obama and the Democrats have only two alternatives, not necessarily mutually exclusive.

One, which probably should have been used this week, would be to let a disaster occur. A debt default would have had awful consequences, but over time so would caving in to Republican demands time after time after time. With luck, voters would understand who was responsible and react accordingly. Polls have shown a majority of Americans believe added revenue is needed. After all, ultimately securing the government’s fiscal future will require additional sources of revenue—unless we are prepared to let the country’s infrastructure crumble and the neediest among us go without assistance.

The second alternative, which has been proposed by Washington Post blogger Ezra Klein, among others, is to let all the Bush tax cuts expire on schedule at the end of 2012. That could be a tough sell for Obama as he seeks reelection next year. But he could also promise to consider cutting some of them again in the context of a plan that would put future deficits on a sustainable path.

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covered the Federal Reserve and the economy for 25 years at the Washington Post before joining Bloomberg News in 2004. In 2009 he began writing freelance pieces for, among others, Thomson Reuters, and is widely recognized for his ability to interpret the Fed.