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Tuesday, January 01, 2013

Fiscal cliff notes 1/1

by digby

I honestly am  not going to lose sleep over whether every dollar over 300k or 400k a year is taxed at the Clinton tax rates and I agree with this assessment of the very dumb behavior of Democrats over the past few months that led to it:
Could the administration have gotten more revenue by holding out for a better deal? Quite possibly. But could the administration have gotten a lot more revenue? That’s less clear. Administration allies point out that congressional Democrats frequently floated ideas, like extending all tax cuts for incomes below $1 million, that would have generated far less revenue.
Oh right, I forgot. They were "smoking them out." Whatever. I have never felt that the tax hikes were the hill to die on, so it seems like a fairly reasonable outcome on that, all things considered. It will close the deficit by about 600 billion, which is good. But it won't be enough to break deficit fever. It's still going to be raging, unfortunately, even though it's the last thing we should be worried about. Going over the cliff might have done it, but I cannot say I'm surprised the Democrats didn't have the nerve. They were practically apoplectic this last week, with leadership all over TV wringing their hands and rending their garments over the allegedly dire consequences. Good bluffers they aren't.

But while I agree with much of David's assessment below, I think he overestimates the Republicans' all-consuming power to do anything they choose and underestimates how much the president's framing of the the deficit solution in his campaign, his public offers of spending cuts and his stated desire to "fix" entitlements has made the coming fights over spending much more likely to end badly.  I always say that I'm glad to live to fight another day, and today we are alive, but the bloody battles over the so-called "entitlements" loom and what's gone before has left the Democrats' weaker than they needed to be.

I won't reiterate my belief that the president truly and genuinely seeks a Grand Bargain.  You know what I think about that (and if you don't, you can google my name and Grand Bargain and read all about it.) Making a fetish of raising taxes on the rich as part of a "balanced approach"  to deficit reduction in the recent campaign baked it into everything going forward. And the president has now twice shown that he's willing to raise the Medicare age and cut Social Security benefits. So, that's where we begin round two, basically for no good reason.

Greg Sargent talks about the "balanced approach":
Presuming the Senate deal passes the House, what happened yesterday is that Democrats scored a victory on part two of that question — albeit only a partial one — while successfully deferring the epic, looming battle over the first part of it. Meanwhile, Republicans retained their leverage heading into round two, and thanks to the way things unfolded, they will likely walk into it more confident of winning major future concessions...

Obama has pledged to win more in new revenues from the rich via tax reform, has vowed not to agree to any deficit reduction that relies only on spending cuts, and continues to insist on a “balanced” approach. Only Obama, however, can ultimately define what he means by “balanced.” Liberals must continue to insist that this mean that the sacrifice necessary to reducing the deficit will not borne by the poor or seniors who can’t afford it.

All of which is to say that the major fight at the heart of this whole mess — over the proper scope and role of the safety net of the 21st century, and who will pay for it — remains unresolved. Only the outcome of that battle can settle the question of whether today’s compromise was a good one for liberals. Obama’s legacy on the future of the welfare state — which will help define his presidency and settle fundamental questions about our approach to governing that will define American life for years to come — remains yet to be determined.
That's not comforting. I suspect that were he to define his preferred legacy on the question of the welfare state it would be that he enacted Obamacare and "fixed" the alleged funding crisis with a Grand Bargain on taxes and entitlements. That's what he's been saying for four years anyway. And what that has always meant was raising some taxes and cutting programs (also known as "everyone having skin in the game.") He got the tax hikes because they were inevitable. He has yet to fulfill the second promise.  But it's not for lack of trying. Ironically, it's been those all-powerful Republican lunatics refusing to take him up on the offer that saved us so far.

But that's not going to last. All we have left are cuts, whether in the "new" sequester or the impending debt ceiling hostage situation. I'm afraid there just isn't time to change the campaign finance system, eliminate the filibuster, stop gerrymandering or any of the other implacable systemic problems we have that give the minority party the power in the House of Representatives to run the country against the will of the majority, the Senate and the President. So if the Republicans David describes below are as overwhelmingly nihilistic as he says ---  and the Democrats are as helpless in the face of it --- then we might as well just resign ourselves to giving up the safety net and having the Democrats take credit for it.

On the other hand, if you don't believe the presidency is completely powerless and that the Republicans are not members of the Walking Dead with superhuman strength, it is still possible to thwart this. Unless Paul Ryan has magically eliminated the presidential veto and the US Senate, the president still has a teeny tiny bit of power he could use if he wanted. (And that's not even counting the 14th Amendment option.) And I realize it's silly to think that a Democratic president could actually help save the safety net by using his useless bully pulpit to become a strong advocate of the lifeline that the only growing GOP demographic depends on, I continue to imagine what it would be like if the President of the United States stood up and said "Republicans will cut SS benefits, raise the Medicare age and hurt the sick and the poor over my dead body." Somehow, I think that could have an effect, even in their safe little gerrymandered districts. Sadly, that ship sailed a long time ago when he put those things on the table and the scary, all-powerful Republicans realized they have a very good chance to get a Democratic president to do the one thing they really want to do but for which they are too scared to take credit: cut the legs out from under their own constituents.

I don't disagree with David's assessment about the need for systemic change.  But in the meantime, it would really be helpful if we had a president who would at least test the limits of his power instead of seeking common ground in this toxic wasteland. I'm not sure that we've yet seen it proven that the relentless GOP zombies cannot be thwarted. I suspect that if the president took it directly to their voters and wasn't afraid to lay cuts to SS and Medicare at the Republicans' feet, he could defeat them. It wouldn't be the first time a Democrat won a legislative battle on that basis. In fact, for all the decades between Roosevelt and Obama Democrats did that reflexively.

I will also remind people that Reagan left office a popular guy who was falling in esteem over the following decade. So much so that Grover Norquist and the conservative movement boys put together the Reagan Legacy project to insure that he was remembered as the avatar of conservative success and popularity. And I think there's little doubt they were very successful. I bring this up to remind everyone that the president's legacy will depend in large part on how hard the progressive faction of the Democratic Party works to make it one worth having. The Republicans certainly will not help. And mushy centrists don't care about such things. It's the liberals he needs to think about if he's planning for his legacy in this second term. They are not going to be impressed by scare stories of a rump Republican faction in the House to explain a Grand Bargain   that degraded the social safety net for the sake of budget projections 20 years hence.

Update: Jonathan Cohn has a good analysis of the deal in which he reports the WH line that they will demand more tax increases in the debt ceiling as part of a "balanced approach:"
Obama has said repeatedly he won't negotiate on the debt ceiling. And, in what was perhaps the most important public statement made Monday, Obama during a press conference made clear he thinks future efforts at deficit reduction must have "balance." Obama's idea of "balance" is deficit reduction that includes both spending cuts and new revenue, in roughly equal proportions—and Republicans acted angrily. On twitter, McConnell's chief of staff wrote "POTUS just moved the goalpost again. Significantly. This is new."

Actually, Obama has talked about balance before. But never mind that. If Obama follows through on these promises, then the fiscal cliff deal would look a whole lot better. It would mean deficit reduction through a more reasonable balance of new revenue and spending cuts—and an end to Republican economic extortion.

But to achieve those goals, Obama cannot cede new ground. He really can't negotiate on the debt ceiling. And he really must get deficit reduction that balances revenue with cuts. If the last 72 hours have made you doubt his ability to do these things, you have plenty of company.

I'm fairly sure that the Republicans are going to say they've already made their contribution to the "balanced approach" with tax hikes for the wealthy. That's why they called it "moving the goalposts." This round was all hikes --- they expect that the next round is going to be all cuts. It's nice that the president is looking for more revenue, but I think it's fairly clear that he got all he's going to get.

It's now going to be about spending. And the Republicans know what cuts the president has already put on the table. Let's just say it would be a lot better for the people if they didn't. On the other hand, I have to wonder just how many times he has to offer them up before people believe that he really wants to do it? That many elite Democrats do too?


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