Republican Party leaders need time to absorb the lessons of this month’s election. They need time to mull over whether their second presidential defeat in a row was the fault of their candidates, their tactics or something deeper in their party’s nature and beliefs.
But there is no time for contemplation here at the edge of Washington’s fiscal cliff. Republicans such as House Speaker John A. Boehner have not months, or even weeks, but just days to decide whether they will overturn decades of party orthodoxy and support tax increases in order to head off something worse — across-the-board spending cuts and tax increases that could throw the economy into recession.
By the end of last week, it appeared that both Boehner and Senate Minority Leader Mitch McConnell of Kentucky — the top GOP leaders after Mitt Romney’s defeat — were willing to negotiate higher revenue as part of a deal with Democrats and President Barack Obama.
"We’re prepared to put revenue on the table," McConnell said after meeting with Obama at the White House on Nov. 16, "provided we fix the real problem," by which he meant entitlement spending.
McConnell’s concession, which followed Boehner’s earlier in the week, shows the deep impact that Obama’s re-election has had on Republicans and the growing realization that the party perhaps has become too doctrinaire for its own good.
"Defeat concentrates the mind," says Henry Olsen, a vice president of the pro-business American Enterprise Institute, "and two defeats concentrate the mind twice as much."
The election results also raise the question whether prominent Republicans like Boehner and McConnell, once they choke down the bitter draught of higher taxes, might be willing to reconsider other Republican taboos such as regulation of the finance and housing industries and allowing illegal immigrants a route to citizenship.
After decades of being, in effect, purged from the party by those enforcing orthodoxy on taxes, abortion and other issues, GOP moderates might again have a say.
In considering this point, Olsen reaches back for a phrase from Richard Nixon to describe what he thinks will happen within the party. "I think there’s a silent majority in conservatism that is going to stop being silent," Olsen says, and the party will focus on good ideas and packaging.
"There’s not going to be unanimity," he cautions. "There will be debates; there will be fights. It will be loud. It will be civil. It will be not civil."
Even during the campaign, there were hints that leading Republicans have had misgivings about GOP recalcitrance on taxes. In his keynote speech to the Republican convention, New Jersey Governor Chris Christie raised eyebrows by saying that Republicans and the country at large needed to face up to "the hard truths" presented by the budget deficit. He stopped well short of defying party doctrine on taxes but still sounded more like a traditional fiscal conservative than a supply side disciple.
In the weeks before the election, Romney had begun to present a more nuanced, even positive view of government in the final weeks of the presidential campaign, particularly in his first debate with Obama. And that was when he saw his poll numbers begin to rise.
What isn’t clear is whether giving ground on the tax question is a negotiating point, a brief tactical retreat or a recognition of larger changes to Republican policy on taxes and other issues.
It’s difficult for any outsider to gauge where the Republican Party stands, after all, especially when, as Alex Brill, a former GOP tax policy aide, puts it, it is "hard for the party to know where the party is."
A New, or Old, Vision
Any idea of rethinking the Republican position on fiscal issues would, of course, go against 20 years of the party’s absolute opposition to tax increases. That absolutism has fed the party’s adamant stance on a broad range of issues, with strict adherence to the core principle of fiscal conservatism paramount. But if Republicans are no longer to be the party of absolutes, some say, that means they can open up to other new ideas.
Suddenly, for instance, many Republicans have decided that a more flexible immigration policy is necessary to appeal to the growing Hispanic population that voted so overwhelmingly for Obama. Likewise, questions on health care, the environment, defense spending and other policies may look different through a less-restrictive filter.
Republicans aren’t giving up on their drive for a much smaller federal government — for many in the party that is at the heart of the current debate over taxes and spending — and, in fact, some commentators maintain that the party can help itself most with all sectors of the public by clearly defining a Republican vision of economics and finance, even if that means accepting higher taxes.
"What the party really needs, much more than a better identity-politics pitch, is an economic message that would appeal across demographic lines" to voters "who don’t relate to the current GOP fixation on upper-bracket tax cuts," New York Times columnist Ross Douthat wrote four days after the election.
Other influential conservatives aligned with the Republican establishment, such as The Weekly Standard’s Bill Kristol, essentially agree with Douthat.
"It won’t kill the country if Republicans raise taxes a little bit on millionaires," Kristol said on Fox News the weekend after the election. "Really, the Republican Party is going to fall on its sword to defend a bunch of millionaires, half of whom voted Democratic, and half of whom live in Hollywood and are hostile to Republicans?"
Traditional conservatives are wary of that kind of talk, because they worry it will distract Republicans from the implications of the election. After all, they say, Republican presidential candidates have failed to win the popular vote in five of the past six elections. Republicans have become less popular with minorities who make up an increasingly large percentage of the population, and, according to experts, there is little evidence that isolated adjustments on some issues, such as a more open stance on immigration, would be enough to reverse that trend.
"It’s not just about immigration policy," says Michael Dimock, an associate director at the Pew Research Center. "Latino voters do care more about that issue than non-Latino voters, but there are a wider range of values that bring Latinos closer to the Democratic Party than the Republican Party."
But conservative commentators, those who influence long-term GOP positions, believe there are high hurdles in fiscal policies on the way to a new message.
Since the 1980s, Republicans have supported tax cuts for economic reasons but also for what’s been derided as the "two Santa Claus theory" that tax cuts can help Republicans just as new spending programs can help Democrats. Supporting a tax increase would mean abandoning this strategy. And raising taxes on the rich — those millionaires in California and New York at which Kristol directs his ire — could make it harder for Republicans to raise money for campaigns.
There are models in the party’s history to follow. There are, for instance, the Republican presidents of an earlier era, such as Dwight D. Eisenhower and Gerald R. Ford — and even Ronald Reagan and George Bush — who promoted a brand of fiscal conservatism that was less concerned with slashing taxes and government programs than with sustainable budget deficits.
For many Republicans, Bush’s 1992 defeat by Bill Clinton was the result of one thing: He reneged on his "No New Taxes" pledge. Bush’s decision to allow an increase during budget negotiations in 1990, and his subsequent defeat essentially sealed the principle of absolutism — at least on taxes — that the party has strictly maintained ever since.
But, says Rudolph Penner, a senior fellow at the Urban Institute who was an economic adviser to Ford, another theory "which I think might have more merit, is the problem was not raising taxes per se, but breaking his very dramatic ‘read my lips, no new taxes’ promise, and that’s what did him in."
Now, at a time of heightened concerns about deficits and debt, it’s possible "that being prudent fiscally is not necessarily a losing game" said Penner, and that allowing a tax increase might be considered prudent.
Other ideas for reform-minded conservatives range in scope and ambition.
For Olsen, one of the important steps that Republicans could take would be to adopt a generally more positive attitude toward government, embracing specific programs that work rather than disparaging the very enterprise of governing. There was strong evidence for this in the wake of Superstorm Sandy, where the rapid and highly visible response of the White House and the Federal Emergency Management Agency was widely applauded and highlighted the attachment Americans have to government programs that work.
Other scholars, such as Luigi Zingales of the University of Chicago’s Booth School of Business, would like Republicans to redirect their suspicion of big government to big business, which, in his view, has become dependent on government. That would mean more stringent regulation of large banks, as well as a revenue-raising, structural overhaul of the tax code to eliminate deductions and credits that benefit certain industries.
Taking this "pro-market but not necessarily pro-business" approach might make it harder to raise campaign contributions, Zingales acknowledges. But, he insists, "money is not everything in politics. If you lose on the idea ground, it is very difficult to win on other grounds."
Reading the Fine Print
The American Enterprise Institute published a budget proposal last year that offers a glimpse of what type of positions Republicans might take if they tilt a bit more toward the center.
The blueprint would let tax revenues increase to 19.9 percent of GDP by 2035, above the post-war average of roughly 18.5 percent that would be maintained if all expiring tax cuts were extended but below the level that would be achieved if all tax rates expire next year and remain unchanged. The plan includes a carbon tax to curb greenhouse gas emissions and an overhaul of Medicare that resembles the proposal offered by Rep. Paul D. Ryan of Wisconsin, still a conservative favorite even after his loss as the GOP vice presidential nominee.
Think tanks such as AEI have long been innovation centers for new party ideas, and conservatives are watching them for the debates, and the intellectual grounding, that could reconstruct the Republican foundation.
On a day when the think tank was holding a conference on global warming and carbon tax proposals, Olsen expressed optimism that AEI will foster a debate that would influence Republican lawmakers. "I do think that if people at AEI are producing good ideas in attractive packages, that people will listen and that you will start to hear those things by the people who are persuaded by them," he said.
But not everybody is convinced the Republican Party is about to reverse course, least of all those who have helped set it on its current path.
Grover Norquist, the author of the famous pledge to not raise taxes that almost all congressional Republicans have signed, vigorously denied in an interview that the modern anti-tax movement is anywhere close to losing steam. The call for a new look at taxes comes from inconsequential newspaper columnists, he said, "who don’t know anything about politics."
As for the think tanks, Norquist said AEI President Arthur Brooks "is dead set in opposition to that sort of nonsense," adding that Brooks is "very solid on taxes and spending and limited government, but he runs a university that’s got all these guys out there who mouth off on their own and he was terribly embarrassed by this ‘let’s have a carbon tax’ gang."
In Norquist’s view, Romney lost to Obama mostly because of the immigration issue and because he didn’t communicate his ideas well enough. Republicans, Norquist says, have only just started to become honest about their plans to shrink government and, despite warnings otherwise, were able to keep control of the House while running on those proposals.
Deadline for a Decision
Norquist has reason to be confident. Congressional Republicans, particularly in the House, have resisted tax increases for so long and with such passion that it seems unlikely they will undergo a major shift in a matter of weeks.
In Congress, Republicans have zealously tried to cut the size and scope of government and also have adopted some new positions that are encouraging to people like Zingales.
For the first time in recent memory, a significant number of Republicans opposed the continuation of targeted, temporary tax cuts known as extenders because they viewed the provisions as wasteful earmarks. Although some Republicans supported efforts by multinational corporations to get a temporary tax holiday on their foreign earnings, other Republicans resisted.
Led by figures such as Boehner and Ways and Means Committee Chairman Dave Camp of Michigan, a group of House Republicans said their goal was to streamline the tax system by scaling tax breaks and dealing with nonpartisan problems such as the prevalence of temporary provisions in the law.
For the past two years, most GOP lawmakers have been committed to using all the revenue gained by ending tax benefits to lower tax rates, rather than to reduce the deficit.
However, that may be changing as the pressure grows to protect the middle-class from being overburdened by taxes, a mantra the president used in the campaign.
The path toward a new party position, though, may put the mathematics of taxes up against ideological purity. Heading into deficit reduction negotiations, Republicans insist they are against allowing rates for top earners to rise beyond 35 percent, and some say that should remain a fundamental GOP principle.
By holding firm on rates, Republicans are showing they can "stare down all the constituent interests that have worked their way into the tax code," says Brill, who is now a research fellow at AEI. "It’s a lot easier politically in this town to leave those preferences in place and use the other levers to get more revenue."
Brill says, however, that putting a cap on itemized deductions for high-income earners would not be nearly as meaningful as a plan to carefully restructure or eliminate individual preferences.
Given political pressures and the tight deadline of the lame-duck session, Republicans might be tempted to push for an across-the-board haircut on tax benefits, but that would be "a poor substitute for tax reform," he says.
Such basic questions about policy are what party leaders in Congress are grappling with as they try to redraw their stance on economic measures even while larger GOP principles remain under vigorous debate.
"If you aren’t able to describe how you’ve gone to making the code substantively more fair, more pro-growth, then you are losing your identity, then it’s a tax hike without technically changing the rates," Brill says.
Yet, there "is not adequate time or resources to have the policy reform debate," he said.
FOR FURTHER READING:Obama’s victory, CQ Weekly, p. 2204; "fiscal cliff," p. 2164; Boehner’s challenges, p. 1830; facing the sequester, p. 1608; tax increase opposition, p. 1490.