Tax Analysts Blog

The Critical Question

Posted on Sep 24, 2012

In this morning's Washington Post columnist E.J. Dionne ponders what will happen after the election. He asks the critical questions: "Will Republicans give up on obstruction and the reckless use of the filibuster? Will they be open to compromise on the budget?"

According to one theory--favored by (wishful-thinking?) Democrats and (realistic?) Republicans (see prior post)--Obama will have a mandate after the next election and Republicans will steer clear of brinkmanship on the fiscal cliff and the debt limit and agree to a grand bargain that includes some tax increases.

The alternative view is that Republicans will blame Romney for losing the election because he was not conservative enough (as they blamed George H.W. Bush for their loss of the White House in 1992). Accordingly, there is no need to change tactics or compromise on bedrock conservative principles.

So if Obama wins--and of course that is still a big IF--we should all pay close attention to the internal debate in the Republican Party. If there is sufficient willingness to compromise, we may be able to get back to some political and economic normalcy. If not, there will be more uncertainty from a protracted political struggle that will--among other things--result in another ratings downgrade on U.S. government debt.

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