Norquist pledge can send us over the cliff

If those who signed it believe compromise is heresy, we will end up with no budget deal.

By Jim Cramer Dec 3, 2012 9:59AM

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CorbisThe Republicans who signed the no-tax increase pledge -- the one put together by anti-tax strategist Grover Norquist -- have no room to maneuver when it comes to compromising to avoid the fiscal cliff.


Norquist is the real force behind the Republican Party's strategy when it comes to the talks to avoid the cliff. He has made it clear to anyone who signed the pledge, and that's pretty much every Republican, that they will be embarrassed and shamed out of their "impure" thoughts. They will be forced to get back in line, or risk being outed as closet Democrats who favor bigger government and higher taxes.


In other words, those who signed an allegiance to Norquist have no choice but to send us over the cliff. They are duty-bound to do so, frankly, regardless of whether they like it. They took the pledge; they have to swallow the cliff medicine.


Unless the pledge is broken by those who signed it, there won't be enough votes to put through a package to avoid the cliff.


Put aside for a moment the issue of whether you hate President Obama or like him. I know, I know -- that's virtually an impossibility these days. But accept the view that the president will not accept any deal that does not have tax increases.


Then accept that Norquist, who is by far the most powerful ideological force behind the Republican Party, will not allow those who signed the pledge to get out of it without a promise that they'll be fired by their constituents.

Assuming these two factors, there will be no choice. We will have to get the onerous austerity package -- the one that was created to give us Spain-like budget cuts and tax increases -- even though we are nowhere as profligate and anti-tax as the Spanish had been before their forced cliff jump.


Now, I am sure many of you say, "Wait, why doesn't the president have to give? Why doesn't he have to surrender to Grover Norquist, too, in order to get a deal done? Why doesn't he have to bend his will?"


Don't laugh, but when I pulled up with Norquist, an old acquaintance from college, he marveled at how obtuse the president was not to see that we need to prevent tax increases. He appears to believe that, if the president were to sign the no-tax-increase pledge and then go with the program cuts wanted by the Republicans, there will be no deficit and the U.S. will grow to the sky.


That's my summary of Norquist's view, whether Norquist thinks that's accurate or not. You can't help but draw that conclusion.


Here's the issue with our obstinate president. He campaigned and won on a pledge to raise taxes and cut spending. Norquist didn't campaign. He didn't win. The president is all hung up on his pledge -- the one that the voters agreed with.


The fact is, again, regardless of whether you like him, the president has said he will be willing to cut spending. He awaits the Republican anti-spending plan. If they propose one, I think he will agree with some of it, provided that the Republicans agree to some tax increases. It is called "compromise" where the president comes from.


Where Norquist comes from, it is called "heresy." No compromise is allowed. That, to me, is why the only hope for a deal is to have the pledge broken in favor of avoiding the fiscal cliff. Norquist doesn't care about the consequences of the cliff; he cares about exacting the consequences of violating the pledge.


I think we have to stop obfuscating. If you think the no tax-increase-pledge must be upheld, then you can't believe in compromise. If you can't believe in compromise -- which, in this case, would mean tax increases and spending cuts -- then enjoy the cliff jump, because it simply must occur.


I'll have more on what that world looks like later in the day. But let's just say that, if you like stocks going higher, you want the pledge broken. If you want them lower, then go with the pledge.


Cramer's face


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust.




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Dec 3, 2012 11:30AM
No new taxes until Obama proposes 1.3 trillion in cuts and a balanced budget.  He has increased spending from 2.95 trillion to 3.8 trillion.  We need to ELIMINATE all his special interest payback spending FIRST.

After that is done we can increase taxes, but the money MUST be used to reduce OBAMA's 5.8 trillion in debt FIRST.  

Dec 3, 2012 11:02AM
i'm starting to agree with someone's comment here that BOTH parties want the cliff to pass so they can claim they didn't vote FOR it and no one proposed anything to correct or modify it.  once the cuts are in place, some tax relief can be re-established. 
Dec 3, 2012 10:36AM
Jim, Jim, Jim, you are missing quite a few points.  Yes, Obama was re-elected with a decisive majority, but so were the House Repubs.  Obama campaigned on tax increases and spending cuts, but he has yet to propose any plan that actually cuts spending.  Everyone and their brother knows about the Norquist pledge, and yet Repubs were overwhelming re-elected to the House.  There are ways to generate more tax revenue while leaving the rates the same or even reducing them.  Norquist has come out in favor of these ideas.  However, it seems that Obama won't be happy without raising the rates.  As with everything else, it's his way or the highway.

A big part of the problem is Obama's lack of executive experience.  A huge part of being in an executive leadership role is negotiating.  Obama has demonstrated time and again that he is completely incompetent when it comes to negotiations.  He couldn't negotiate a budget for going on 4 years, to the point that his proposals didn't get a single vote.  He tried to negotiate with the Olympic committee and they picked Rio instead of Chicago.  He couldn't negotiate his healthcare bill and had to ram it through in order to get it passed.  He tried to negotiate with Iran (our enemy), and they are stronger now than ever before.  He tried to negotiate with the terrorists in Libya, and they murdered 4 of our people.  He tried to negotiate with Iraq, and they set a huge target free, even though he'd murdered 5 of our guys.  Also, Iraq is now encouraging the rest of the Middle East to use oil as a weapon against us.  He tried to negotiate with leaders in Egypt to fill the power vacuum, and the Muslim Brotherhood took power.  He tried to negotiate with our ally, Israel, and left them weaker than ever before.  He tried to negotiate with Pakistan and they harbored Bin Laden for years.  Obama tried to close Gitmo by negotiating the release of Gitmo detainees to our allies and the place is still open.   He couldn't negotiate with Congress on several issues, so he just appointed a bunch of czars.

Obama is in way over his head, and it keeps showing.   His opening offer of $1.6 trillion in new tax increases with no real spending cuts is like making an offer of $75k on a house that's listed for $400k - it's an amateur move that reeks of insincerity and incompetence. 

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