5 Myths About the Fiscal Cliff

As the nation careens toward the end of the year "fiscal cliff," politicians and pundits are expressing many assumptions, some of which are incorrect. Here are five common myths about the fiscal cliff.

Myth #1: Democrats Want to Compromise, Republicans Do Not

A plurality of Americans believe that if a compromise is not reached, Republicans will be mostly to blame. This should come as no surprise when much of the reporting on the fiscal cliff implies that House Republicans are the main obstacle to reaching an agreement.

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This is odd, though, considering that since the election Republican leaders have spoken often about compromise while Democratic leaders have more often been speaking about what they are not willing to compromise.

Republicans mostly want to prevent tax increases and defense cuts while Democrats mostly want to prevent cuts to social welfare and entitlement programs. Speaker of the House John Boehner said after the election that he is willing to accept additional revenue as part of a compromise. Other House Republicans have made similar claims in interviews since then. Democratic leaders, on the other hand, have mostly talked about what they are unwilling to compromise on and have said little about where they are willing to compromise.

Recently, for instance, Democratic leaders have said they will not compromise on tax rate increases and Social Security reform should not be part of the negotiations.

Myth #2: Obama's Position is the Compromise Position

During his 2008 campaign, President Obama said he wanted the Bush tax cuts to expire for those making more than $250,000 per year and to make the tax cuts permanent for everyone else. This was also his position throughout his first term and during his campaign for re-election this year.

Democrats like to offer this position to Republicans as if this position is a "compromise" between themselves and Republicans. Offering to do what you want to do is not, however, a compromise. A true compromise would be somewhere between the president's and Republican's positions.

Myth #3: Grover Norquist is the Problem

With some of the reporting on the fiscal cliff, one might assume that everything would be resolved if not for Grover Norquist. Norquist, though, is not nearly as important as many imagine.

Norquist is the president of Americans for Tax Reform, an advocacy organization that aims to keep taxes low. Many Republicans have signed a pledge for ATR, sometimes known simply as "the pledge," that they will not support any tax increases.

Since many Republicans have signed this pledge, they are unable to come to compromise on deficit reduction; to wit, Norquist is preventing a compromise by not "releasing" the signers from their pledge, the argument goes.

There are a couple of flaws with this reasoning. First, those who have signed the pledge did not make the pledge to Norquist but to their constituents. In all likelihood, they did so as a way to help them get elected as well. Second, with the fiscal cliff, politicians who signed the no-tax pledge can legitimately compromise with Democrats without violating the pledge (see myth #4).

The editors of the Wall Street Journal pointed out the irony of a press corps that often complains about dishonest politicians yet criticizes Republicans for refusing to break a promise made to their constituents.

Additionally, Republicans are not the only elected officials who have made pledges to their constituents. President Obama has pledged not to increase income taxes on those making less than $250,000 per year. This pledge also leaves potential sources of revenue out of the negotiations. (Is a family making $200,000 a year struggling to put food on the table?)

Myth #4: Republicans Who Compromise Will Violate "the Pledge"

The above is not to suggest that what Norquist thinks does not matter. While his influence is overblown, it is not insignificant. ATR can back primary challengers against those that they believe violated the anti-tax pledge, for instance.

Much of what Norquist has said about the anti-tax pledge, though, is political posturing, as a 2011 interview with The Washington Post editorial board illustrates. In July of last year, Norquist said that failing to extend the Bush tax cuts would not be a violation of the pledge.

"Not continuing a tax cut is not technically a tax increase," Norquist correctly noted.

What does that mean? If no compromise is reached, all tax rates will go up. If a compromise is reached, some will pay more in taxes, but taxes would not be as high as they would be if the nation goes over the fiscal cliff. So, the choice for Republicans will be to let taxes go up a lot or to let taxes go up a little. Which of those two choices would be violating the pledge?

Republicans who took the no-tax pledge will correctly be able to argue, if they reach a compromise with Democrats, that they lowered the taxes from what they would have been had they gone over the fiscal cliff.

Myth #5: What Senators Think Matters

Senators Saxby Chambliss (R-Ga.), Lindsey Graham (R-S.C.) and Bob Corker (R-Tenn.) this week noted that they would support additional revenue as part of a compromise. Many news reports and editorials followed, thus giving the misleading impression that senators matter in the fiscal cliff negotiations.

Senators, especially Republican senators, are the least significant players in the fiscal cliff negotiations. With a Democratic president, Democratic Senate and Republican House of Representatives, any agreement will necessarily be negotiated between the White House and House Republicans. No agreement can pass unless it has the support of those two parties. The Senate, therefore, will be left to go along with whatever deal is negotiated between Obama and Speaker of the House John Boehner (R-Ohio).

Expect, though, Senate Majority Leader Harry Reid (D-Nev.) and House Minority Leader Nany Pelosi (D-Calif.) to complain at some point about being left out of the negotiations, as they did during the debt ceiling negotiations.

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