What the Election Means for the Fiscal Showdown
President Obama won a decisive victory on Tuesday. He’s the first Democrat since FDR to be elected twice with over 50 percent of the vote.
As soon as the election was over, discussion immediately turned to the upcoming fiscal showdown. Over the course of the next few weeks, Congress has to resolve numerous fiscal issues:
- The fate of the Bush tax cuts, particularly those for the wealthiest Americans.
- $1.1 trillion in automatic cuts to both defense and domestic discretionary spending.
- The debt ceiling, which may be hit as soon as the end of next month.
If nothing is done by the end of the year, the automatic cuts kick in and taxes revert to Clinton-era rates for everyone, not just the wealthy.
Republicans are already indicating that they think the election either didn’t mean anything or somehow actually validated their viewpoint. House Speaker John Boehner (R) said yesterday that tax hikes for the wealthy were off the table. He then floated what he called a “compromise,” but in reality is basically the same tax plan that Mitt Romney just ran on — and lost. For his part, House Majority Leader Eric Cantor (R) has already taken the debt ceiling hostage to deep cuts to entitlements and other spending. Cantor also insisted that Obamacare be on the table during negotiations.
Here’s why the election provides President Obama with a mandate to push his vision — a balanced approach that invests in the middle class, makes smart spending cuts, and, most importantly, makes the wealthy pay their fair share. Conversely, the election was also a definitive repudiation of the GOP’s failed top-down approach.
Candidates Ran on Tax Fairness — And Won
The President made raising taxes on the wealthiest Americans a centerpiece of his campaign, and never wavered from that position. On election night, one of Politico’s top headlines read: “Exit polls 2012: Most say hike taxes.” In fact, 6 in 10 voters nationwide say they think taxes should be increased. The question of returning the high end tax rates to those during the Clinton era played an even more central role in key Senate races in blue, purple and even deep red states:
- Wisconsin (D51, R46): Rep. Tammy Baldwin was the lead sponsor of the Buffett Rule in the House of Representatives and made it a central element of her campaign, including in her advertising. Her opponent, Tommy Thompson, opposed the Buffett Rule, calling it “discriminatory.” He also ran on a tax plan that would lower taxes for the wealthy while raising them on the middle class and the poor. American Crossroads, Crossroads GPS and the Chamber of Commerce all spent heavily to define Baldwin as a “tax and spend” liberal; in fact, in the final two months these three groups spent over $3.6 million to attack Baldwin on her tax plans. Yet, fifty-two percent of Wisconsin voters said that taxes should be increased for those making over $250,000, according to exit polls (with another 12 percent supporting tax increases for all incomes and 32 percent against tax increases for high earners).
- Connecticut (D55, R43): Linda McMahon released a tax plan that was identical to Gov. Romney’s proposal and similarly pitched her plan as a tax cut for the middle class even though analysts agreed it would provide massive tax breaks to the wealthy and corporations. Rep. Chris Murphy centered himself as the candidate “on the side of the middle” class, featuring McMahon’s tax policy that benefited the richest in multiple ads, declaring “it’s time to make the rules fair.” According to an analysis of Kantar Media CMAG data by CAP Action, the U.S. Chamber of Commerce spent at least $550,000 in the final week of the election championing McMahon’s tax plan and contrasting it with “politicians who raise taxes so they can keep spending more”.
- North Dakota (3,000 votes): Even in solidly red North Dakota, Heidi Heitkamp championed tax fairness and campaigned in support of the Buffett Rule. She also attacked her opponent, Rep. Rick Berg, for twice voting in favor of the Republican budget, specifically citing its tax cuts for the wealthy. Heitkamp also strenuously defended her support for Obamacare, even turning Berg’s support for repealing it into an attack. Crossroads GPS spent heavily against Heitkamp with more than half a million dollars in the final eight weeks used to define Heitkamp on the tax issue.
The American people voted for candidates up and down the ballot that supported getting rid of tax giveaways and special loopholes that favor the richest corporations and individuals.
A Debate Between Two Visions for the Economy
This election across the country was a proxy debate on two competing visions for economic growth: the trickle-down model that suggests that the only job creators are the richest, where it is enough to grow profits without sustaining jobs or wages, and the “middle out” vision of the economy that says the government has a role to play in making prosperity possible for more Americans. And what happened? The middle class as the engine of economic growth won.
- Exit polls show that a majority believes that the economy generally favors the wealthy (55 percent); what’s more a majority also said that Romney’s policies favor the rich (53 percent). But it wasn’t just about Romney’s support of policies that benefit the wealthiest; it was that people rejected the basis of his top-down economic theory.
- A poll of 1700 presidential voters the night of the election found that while voters credited President Obama with being better on the economy by only a point, when it came to “restoring the middle class”, voters favored Obama by twelve points.
- Joel Benenson, chief pollster for the Obama campaign, wrote for New York Times about an 800 person poll they conducted for their own firm, finding: “Spending cuts alone could not address voter concerns — 89 percent of those surveyed agreed that “for my children to have the economic opportunities I’ve had, we need to make real investments in education, creating world-class schools and making college more affordable.” Benenson continued, “And when asked what the key to growing our economy was, nearly two in three voters said it was building a strong middle class over creating a “healthy climate for business.”
Americans made clear this week that they are more interested in investing in growth through the middle class than austerity measures that place more of the burden on the middle class. There is broad support for cutting wasteful spending, including tax giveaways that favor the wealthiest, rather than cutting investments in programs that protect social mobility and growth, like education, infrastructure and public health.
As Elizabeth Warren stated in her speech after defeating Sen. Scott Brown, “This victory belongs to you…we’re going to fight for a level playing field and we’re going to put people back to work.“
The choices we make over the next few weeks will have huge consequences for the middle class and our economy for a generation to come: will Congress ask the wealthiest Americans to pay their fair share, or will they keep the game rigged for the wealthy at the expense of the middle class? One path asks the wealthy to pay a little more in order to reduce the deficit while making investments in the middle class that we need in order to grow the economy over the long-term. A different path asks the middle class and seniors to foot the bill by slashing Medicare and Social Security just to provide another round of tax cuts to the wealthiest – tax cuts that have proven to not create jobs and would effectively preclude investments in energy, education and infrastructure.
As Republicans and Democrats make their case to the American people during the fiscal showdown, they would be wise to look closely at what Americans said loudly and clearly in this election and the brinkmanship and pledges they rejected.
BOTTOM LINE: Republicans made their case to the American people and the American people rejected their approach.