‘Cliff’ Deal: $1 In Spending Cuts For Every $41 In Tax Increases

It appears that Congress and Barack Obama have reached a deal. Nothing like waiting till the last minute either. It appears that this deal is all in favor of Obama and the Democrats as the Republican leadership once again caves on the issue. According to Fox News contributor Chad Pergram, the “deal” works out to $1 in spending cuts for every $41 in tax increases.

Pergram tweeted:

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This “deal” works out to a 41:1 ratio in tax increases versus spending cuts.

While many were decrying Grover Norquist about the Taxpayer Protection Pledge earlier in the talks, the reality is that these “leaders” didn’t pledge a thing to Norquist. They gave their word to the American people, not Norquist. So we find out that the GOP leadership, those that signed the Taxpayer Protection Pledge, just demonstrated to the American people what their word is worth, nothing.

In fact, Americans for Tax Reform are very clear about this, writing:

That’s not what the Pledge says. Signers pledge to the taxpayers of their Congressional district (or state in the case of senators) and to the American people that they won’t support a net income tax increase. The Pledge is made in writing to voters before a politician is elected so that these voters can hold the politician accountable on the tax issue. Pledge enforcement is done by voters, not by Grover Norquist or Americans for Tax Reform.

ATR also demonstrates exactly what happens when Republicans agree to idiotic deals like this in history. Presidents Ronald Reagan and George H.W. Bush increased taxes in return for spending cuts that never ultimately came, they did so at ratios of 1:3 and 1:2.

Here’s what ATR points out:

Bush’s 1990 Budget Deal

-What was Promised: Congressional Democrats convinced a number of Republicans to join them in a bipartisan deal promising $2 in spending cuts for every $1 in tax increases. President Bush signed the deal on November 5, 1990.
-What Actually Happened: Every penny of the tax increases ($137 billion from 1991-1995) went through. Not only did the Democrats break their promise to cut spending below the CBO baseline by $274 billion—they actually spent $23 billion above CBO’s pre-budget deal spending baseline. 34 House Republicans broke their own Taxpayer Protection Pledges and went along with this one-sided “deal.” As a result, Republicans lost 8 seats in the 1990 Congressional midterms, and President Bush only received 38% of the vote in the 1992 Presidential election.

Reagan’s 1982 Tax Equity and Fiscal Responsibility Act

-What was Promised: President Reagan signed the deal on September 3, 1982, agreeing to a budget deal with Congressional Democrats that promised $3 in spending cuts for every $1 in tax hikes.
-What Actually Happened: The spending restraint never materialized – instead, the resulting tax hike made up almost 1 percent of GDP ($37.5 billion) and amounted to the largest peacetime tax increase in American history.

So what do we learn from history and from Democrats here? We learn that when deals like these are struck the taxes always go up, but spending cuts never materialize. I wish Republicans would learn that lesson.

Reports are that Boehner will not get enough House Republicans to go along with this deal. In fact, Ron Meyer with American Majority Action, that sponsored the “Fire Boehner” campaign, said, ““These sources tell me Boehner has indicated he won’t bring up a plan without 50% GOP support. The McConnell-Biden compromise does not meet that threshold.”

The Senate passed the bill around 2 a.m., 89-8. Five Republican Senators voted against the bill: Sens. Marco Rubio of Florida, Mike Lee of Utah, Rand Paul of Kentucky, Chuck Grassley of Iowa and Richard Shelby of Alabama. Three Democrat Senators joined them.

UPDATE: Eric Cantor “smells blood in the water” concerning House Speaker John Boehner. “I do not support the bill,” he says.

UPDATE 2: 6 Things in this “Deal” You just won’t believe.

1. There’s a provision extending a tax policy related to Puerto Rican rum.
2. And a tax credit for 2- and 3-wheel electric vehicles.
3. Something having to do with Diesel Fuel.
4. An extension of some special rules for the film and television business.
5. A gift to the car-racing world.
6. Help to asparagus farmers.

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