Boehner's defeat is no big deal

The House Speaker couldn't deliver the votes of his own caucus. But in a perverse way, that's good news for fixing the fiscal cliff.

By Jim J. Jubak Dec 21, 2012 12:45PM
Image: Washington, D.C. (Corbis)Surely you didn't expect global financial markets to react positively to Thursday night's debacle in the House of Representatives?

Overnight, after a revolt among conservative Republican members forced House Speaker John Boehner to pull his solution to the U.S. fiscal cliff, Hong Kong’s Hang Seng index dropped 0.68% and Tokyo’ Nikkei 225 index fell 0.99%. 

As morning rolled across the world, the Germany DAX index declined by 0.74% and the French CAC 40 index moved 0.46% lower. In the United States, the Dow Jones industrials ($INDU) was down 1.23% and the Standard & Poor's 500 Index ($INX) was down 1.33% in late-morning trading.

From a cynical U.S. perspective (and is there any other appropriate perspective on U.S. politics these days?), it’s hard to see what all the hoo-hah is about.

Boehner’s Plan B -- a proposal to raise the marginal tax rates for taxpayers making more than $1 million and to extend the Bush tax cuts for everyone else -- was never a real proposal with a chance to pass into law in the first place. It would have been dead on arrival in the Senate and President Barack Obama had promised to veto it.

It was a political stunt designed to embarrass Democrats -- and not a particularly well-designed one to begin with.

And to even get the bill to a chance of passage in the theoretically Republican-controlled House, Boehner had to load it up with all kinds of spending cuts -- to Food Stamps, for example -- designed to appeal to the most conservative Republicans. But those additions made the bill even more repugnant to Democrats in the House and even less likely to pass the Senate.

So what’s the big deal? If it had passed would we be closer to a deal on the fiscal cliff? I think there’s a strong argument to be made that we’d be further away. This morning we’d be watching Boehner push a bill that stood no chance of passage. Granted Republicans packed their bags last night and went home for Christmas and so there are no negotiations Friday, but if Plan B had passed nobody would be engaged in serious talks today anyway.

In having to pull Plan B before it came to a vote, Boehner has actually delivered a strong dose of reality -- always in short supply in Washington. Last night demonstrated Boehner’s inability to deliver the votes of his own caucus for a proposal that he crafted. And that testifies to the reality that the Speaker can’t deliver a majority of Republican votes in the House if he were to strike a deal with the Democratic President and Senate.

That’s only a big deal if you thought Boehner had any real control over the Republican caucus in the House to begin with. If you didn’t -- and frankly I don’t see how anyone watching the post-election Republican party can think its leaders have any control over the conservative rank and file members of the House -- then last night’s events aren’t especially surprising.

Before last night, the odds were that Congress was going to send the country off the fiscal cliff at the end of December. And that’s still the case.

Before last night, the only deal with a chance to pass the House and the Senate and get signed by the President would have had to be a bipartisan agreement able to attract a majority of Democratic votes and a sufficient minority of Republican votes. And that’s still the case.

In a perverse way, last night’s debacle -- because it was so profoundly humiliating for Boehner and because it so clearly demonstrates Boehner's inability to deliver his caucus on any deal with a chance of passing the Senate -- clears the way for action in January. It’s one less piece of political grandstanding in the way of a solution. And it’s one big demonstration of how a coalition to fix the fiscal cliff will have to be assembled.

The big test -- the one the markets should be focused on -- is not whether Washington could get its act together to pass a fiscal cliff solution before the end of December. That was always extremely unlikely. The big test is whether Washington can act relatively quickly in January so that the economy can avoid real damage from the higher tax rates and lower spending targets that go into effect on Jan. 1.

A little bit of a fall off the fiscal cliff isn’t going to send the economy into recession. But if our politicians are still staging political stunts at the end of January, then the economy is in real danger.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. The fund did not own the shares of any company mentioned in this post as of the end of September. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 
105Comments
Dec 21, 2012 5:03PM
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Boehner is a naked politician and his own party stole his clothes. 
Dec 21, 2012 5:02PM
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Stop Fiddling
If ever a situation pointed to the need for tax reform, the current budget bill debate is it.  While the two may seem unrelated, they are not.  The existing process promotes shifting the focus from spending cuts to revenue.  The real issue is not revenue stream, the issue is that politicians spend more than the system provides by continuing their “pork barrel” politics to win re-election. 
Nothing has changed in nearly a century; the Republicans want less taxation on the wealthy and use the economy to scare voters, while Democrats promote more taxation on the wealthy by scaring the poor and middle classes.  Therefore, is it surprising that the so-called “fiscal cliff,” which was enacted during a previous budget battle and likely designed to provide political cover for future battles, is now the “enemy” of everyone? 
Once again, the media tell us “Rome is burning.”  Meanwhile, the people we elected to lead this nation “fiddle.”  It is time to abandon the budget bill posturing, hand wringing and predictions of fiscal doom to enact a tax code that is fair, exempts no one, and does not require yearly change.  Perhaps, then, the people that put us in this mess can focus solely on curbing their uncontrolled appetites for spending other peoples’ money.

Jim
Dec 21, 2012 4:57PM
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Bargaining and compromise are now insanity

Demanding that the U.S. Congress and the White House continue the decades long corrupt Washington practice of compromising to “get a deal done” by bargaining away our liberties is the very embodiment of insanity.

This is the regimen that has evolved the federal government into the resource consuming
monster we endure today; consuming our lives with each successful fear-based appeal to the public to effectively maintain the suicidal status quo.

The fiscal cliff is the latest from the Washington panic circus and a complicit press. An economic model dependent on federal spending — taxing and printing money — is institutionally corrupt and weak. Each of us is responsible for our own lives.

The answers will come from we the people within the context of our local communities. Who better knows what is needed and where?

Let us not humor these hooligans any further.

If you want to make a lasting positive difference, get your congressional delegation to reduce taxes and cut federal spending even more. Demand they no longer vote for any increases in the debt limit.  This will automatically force the President into responsible allocation of available
revenues.

Dec 21, 2012 4:51PM
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Constitutionally, we are suppose to spend on DEFENSE.  NOT OFFENSE.  Yes the military budget can be cut. 

However, the entitlements should be eliminated completely.
Dec 21, 2012 4:45PM
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In the current movie on Abraham Lincoln,  President  Lincoln gets opposition party Congressmen  to support his  bill (the 13th Amendment abolishing slavery) through Congress.  Yes, Lincoln gave political favors, bought or rented votes,  to opposition Democratic, pro-slavery Congressmen, but he won.  IMO, Abe Lincoln was the best U.S. president ever.

 

I don't get Obama and the Democrats approach to getting a budget:  if all 195 or so Democratic Congressmen vote for the Obama budget plan, then Obama needs to get only about 30 Republican Congressmen to either vote Yes or to Abstain.  Why aren't Obama and Nancy Pelosi courting Republican Congressmen who will vote for a reasonable budget?  There are conservative Republicans who will vote for the budget.

 

Obama needs to influence, cajole, and yes "rent" Republican votes.  Lincoln did it; so did Reagan, Kennedy, LBJ, and other effective presidents.  Then the Democrats will own the budget and cannot keep blaming Republicans.

 

Grow up, Democrats and Republicans.  We are a democracy; make a deal for the good of the country and move on.

Dec 21, 2012 4:33PM
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Wow Jim....I didn't realize that you were such a moron.

 

There is never going to be an agreement that a big majority of dems want that will ever pass the house.

 

The only way there is going to be an agreement is to have the balanced approach to minimal tax rate hikes tied to 2-1 or 3-1 spending vs tax hikes that are real cuts and take affect the same time as the rate hikes not 10 years down the road as most politicans do to us which the result always leads to no cuts.

 

There should be no agreement without a clear and concise plan to reduce the debt, otherwise what do you really get for the rate increase other than more wasteful spending.

 

We are already over the cliff, the fact that you don't know that says how much in the know you really are.....your writing shows you are just more of the same tax and spend bunch that wants to get rich off our dollars and waste it all.

Dec 21, 2012 4:17PM
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The GOP should be taking a back seat on this since they are the minority party.  It's up to Obama to put his plan up for a vote in the Senate and see if it passes his own party.  Now that is how its done Mr. Boner!
Dec 21, 2012 4:09PM
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This is a no brainer for the GOP.  Let the chips fall back on Obama who was "re-elected" and the Senate.  My gosh everyone is talking about the Speaker and the GOP, but they only control 1/3 of the Gov't.  Obama and Reid control almost the enitre Gov't and why is it that they can't get  a solution and get the job done?  hmmmmmmm????  I mean come on the DEMS control 2/3rds of the Gov't.  Last time I checked that was enough to do what you wanted to do.
Dec 21, 2012 4:08PM
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Boehner gave me a good laugh yesterday.He said "I`m concerned about the middle

class"I believe in Santa Claus in 4 days too.LMAO.

Dec 21, 2012 4:07PM
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Like I've already said at least once, Boenher's Plan was not a Plan, it wasn't even a failure, it was a nothing and he knew it.....Buffoonery......
Dec 21, 2012 4:05PM
Dec 21, 2012 4:02PM
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I dunno Jubaki, I think the "Fiscal Cliff" is a big DEAL....I just think "a warning shot is being fired across the Bow" and "the fat lady hasn't sung."

For one....The American citizen loses more confidence in it's Government and Wall St....

Many investors will be scared out of investing for a longer period....

Traders and Wall Street will try and prove they are a "big deal "....

We very well could step back into another or worst recession....

The jobs picture will get muddied more or worst...

Inflation might/will probably start rearing it's ugly head....

More American money will probably wander off-shore...

We could have 2-4 more years of Partisan bickering....

Traders will probably make about 3-6% during the bickering within 30 days to 3 months....

And the solid investors will get hurt at least for the time being...

As it all unwinds it will eventually pass, but it will still hurt in the short term...

 

Yeah, Jim I think it is a big deal....AND that is without a DOWNGRADE or a DEFAULT.

and here I thought we would actually have a deal before "D" day...Silly me..

Boner is actually a joke and he proved that to the World yesterday...Sure did to me. 

Dec 21, 2012 3:49PM
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Congress via the pathetic GOP will destroy America. As will these runaway obscene health care costs. $2T per year is an absolute scam. Buy guess what/ It's the most lucrative sector in our economy. And money is God in America so don't expect any real cost cutting measures vs the health care world. No matter as pres. Obama stated that this will RUIN our way of life. We simply can NOT afford these outrageous fees/costs in health care. 
Dec 21, 2012 3:39PM
Dec 21, 2012 2:56PM
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WE the People are required to fix it.

[REIN IN BIG GOVERNMENT OVERREACH]

        

Poor foresight by all Americans regarding Washington legislation have created decades of inept policies. A simple, strategic, powerful fix to jump start the process:

 28th constitutional amendment: Yearly Balanced Budget Required

Balanced definition:

Debt to GDP ratio

>35% =   balanced               

<35% =   allow 10% extra yearly spending

 

This will not be easy to get congress to enact. The good news is we don’t need Washington to move this: The Constitution provides that an amendment may be proposed either by the Congress with a two-thirds majority vote in both the House of Representatives and the Senate or by a constitutional convention called for by two-thirds of the State legislatures.

 

It will take only one state to get the ball rolling!!!!!!! A STATE CONSTITUTIONAL CONVENTION!!!!!!!

Dec 21, 2012 2:42PM
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The GOP is collapsing!

 

Republican Retards, Teabagger Turds and Libertarian Lunatics arguing amongst themselves!

 

The Stock Market is crashing!

 

The Mayans we're right, Republican Armageddon has arrived and their pathetic lives are being destroyed,..... by themselves. LMAO

 

Boehner with an 11% approval rating!

 

LIFE JUST KEEPS GETTING BETTER! ;-)

 

Chris Van Hollen & Elizabeth Warren in 2016 & 2020!

 

MERRY CHRISTMAS AND GOD BLESS AMERICA!

Dec 21, 2012 2:30PM
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The million dollar and up tax hike was  a Warren Buffett idea that Obama embraced until that offer was made, but that's Obama. During the preelection period, those who were awake and paying attention, we heard many dems. claim we needed to go back to Clinton era tax rates. Well guess were we could be going. The dems. just wanted a way to blame it on someone else. They are smarter than the repubs. in a political sense,

Dec 21, 2012 2:16PM
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The Republicans haven't  learned a thing from the last election. Those on the far right fringes are only interested in pandering to thier rabid constiuents in order to be reelected. They have no concern for the welfare of the country as a whole and little knowledge as to the effect their misguided platform will have on the immediate future of the nation.
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Gee people the fiscal cliff deal either way Republican or Obama

 

is going to be way too little way too late

 

even if it is done we are going to have a debt of $25 trillion in seven years 2020 perhaps even in just 6 years

 

we need to cut or raise $2 trillion a year not $1 trillion over 10 years to start to make a dent in the debt.

 

We are past the point of no return and headed towards complete economic meltdown.

Dec 21, 2012 1:59PM
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Let the spending cuts and tax rates take effect on the overstuffed wealthy and then we'll see who's willing to get serious. It's OK to spend $4 trillion of SSA money on needless Christian wars protecting wealthy assets but don't make any of them pay the taxes to pay those monies back. OK, now the Democrats can pass a Senate bill that rolls back taxes for just the middle class, extends UE, fixes AMT, fixes MC payments and ups the age to match SS and various of good ideas. Then let's see if the House has the balls to pass it.
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