In April 2001, Vice President Dick Cheney and Senate Majority Leader Trent Lott, R-Miss., left, discuss the 2002 budget being debated on the Senate floor, during a meeting in Lott's private office on Capitol Hill.

Dennis Cook, Associated Press

Gimmick set the stage for fiscal cliff

  • Article by: DAVID LIGHTMAN
  • McClatchy News Service
  • November 30, 2012 - 9:55 PM

Both political parties may have their fingerprints on problems in the federal budget, but just one created the current crisis known as the fiscal cliff.

Blame them or thank them, it was the Republicans who forced the budget moves that have pushed the nation toward a fiscal cliff.

Part of it was a political gimmick, working the rules of the Senate to push through sweeping tax cuts in a way Republicans later would lambaste when President Obama's Democrats used the same tactic to enact the new health care law. The legislative gimmick got the tax cuts through Congress, but it made them the first such tax cuts with an expiration date. Those temporary tax cuts are expiring.

And part of the Republican approach was by design, risking the first-ever default on U.S. debt to force a change in Washington and rein in runaway deficits. That 2011 showdown led to the automatic spending cuts that will start going into effect Jan. 2 -- and which no one really wants in their current form.

It started in 2001, when the government was running its fourth straight year of surplus and President George W. Bush moved to cut taxes as he'd promised in his campaign. He faced a serious hurdle: a Senate split 50-50, far short of the 60 votes needed to clear Senate rules and enact his sweeping tax reduction.

There was a way out, but it was a tactic that the staid Senate was reluctant to use, called reconciliation.

Created to make it easier to deal with budgets, it also became a tool for skirting the 60-vote threshold since only 51 votes were needed. There was a major catch: Any such bill could only make changes in federal revenue for a maximum of 10 years. With support from some Democrats, the Bush tax cuts passed the Senate with 58 votes. They were temporary.

The precedent was set, and when Bush came back with new cuts in 2003, the Republicans used the reconciliation rule again. This time, the bill passed with 51 votes, as Vice President Dick Cheney broke a 50-50 tie.

In May 2001, White House press secretary Ari Fleischer was confident the cuts would be extended forever. "To do anything other than that is to raise taxes on the American people," he said.

Republicans miscalculated.

The tax cuts contributed to a decade of record deficits and debt, aided by rising spending on a new Medicare benefit and wars in Afghanistan and Iraq. The national debt, $5.7 trillion when Bush took office in January 2001, had grown to $10.6 trillion by the time he left eight years later. It grew more under Obama.

Republicans had a bold idea to bring down that deficit. As the debt limit approached its legal ceiling of $14.3 trillion in 2011, party leaders saw the need to raise the limit as a way of forcing massive spending cuts.

"There hadn't exactly been much restraint in spending, and Bush had a lot to do with that," said Michael Franc, vice president of government studies at the conservative Heritage Foundation and a former top aide to House Majority Leader Dick Armey, R-Texas.

By 2011, with the government running trillion-dollar annual deficits, Republicans were emboldened. They won control of the House in 2010 with support of the Tea Party movement, which pledged to slash spending.

"We need to have a showdown at this point that we are not going to increase our debt ceiling anymore," Sen. Jim DeMint, R-S.C., told Human Events, a conservative magazine, as the 2011 congressional session began.

The conservative stand led to White House-congressional negotiations in the summer of 2011. They eventually agreed to raise the debt ceiling, but only with the promise that a congressional "supercommittee" would seek $1.2 trillion in reductions from projected deficits.

As a hammer to force that committee to produce the promised savings, the deal set automatic spending cuts as the alternative. The committee failed, and the automatic cuts now are set to start on Jan. 2.

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