Monday, November 12, 2012

Compromising, At Best

First, the "fiscal cliff" is not a cliff at all, literal or otherwise.

Try driving your car to the edge of a cliff.   Get out.  Then put the car into drive, release the emergency brake (if it is on), and watch your car plunge to its destruction.   Matt Yglesias argues "a salient fact about non-metaphorical cliffs is that falling over them is generally irreversible.  If the cliff is high enough that falling off of it would kill you, then if you falloff you're going to die and that's the end of it.  The 'fiscal cliff' by contrast isn't like that at all." Krugman explains that, despite the hand-wringing from the media and Washington Wise Men (and women)

It's worth pointing out that the fiscal cliff isn't really a cliff.  It's not like the debt-ceiling confrontation, where terrible things might well have happened right away if the deadline had been missed.  This time, nothing very bad will happen to the economy if agreement isn't reached until a few weeks or even a few months into 201.  So there's time to bargain.

In a similar vein, Dan Gross notes

Most significantly, the cliff will change the negotiating dynamic. After January 1, 2013, for the first time in several years, Republicans will desperately need and want something from the President. As CEOs, investors, and lobbyists wail, Republicans will only be able to deliver if they can coax President Obama into a deal. They can jump up and down and demand that Washington cut taxes on the very wealthy at a time of high budget deficits. And if Blackstone Group CEO Steve Schwartzman—who once compared the Obama administration to the Nazis, wants his low tax rate back—he can call the White House. Good luck with that.

Gross and Krugman recognize that a newly re-elected President Obama can negotiate from a strong bargaining position, the latter noting he is "in a far stronger position than in previous negotiations."   He can let the Bush-era tax cuts expire and then present Congress with the option of bringing back the lower rates for individuals earning below $200,000 and couples earning under $250,000.    House Democrats tried that in the summer but House Republicans, figuring the GOP might retake the White House and the Senate, predictably rejected it because the higher, 39% rate, would return for the wealthy.

That was then, this is now, and President Obama holds the cards- if he wishes to play them.    Early indications are mixed, at best.   On Friday, President Obama declared "But as I’ve said before, we can’t just cut our way to prosperity. If we’re serious about reducing the deficit, we have to combine spending cuts with revenue. And that means asking the wealthiest Americans to pay a little more in taxes."

Unfortunately, a moment later he followed that with"I want to be clear, I’m not wedded to every detail of my plan. I’m open to compromise. I’m open to new ideas. I’m committed to solving our fiscal challenges."

The community organizer, who won, and retained, the presidency by amassing the best campaign organization in American political history, is at it again, acting as if the opposition holds the power while he strives to secure half the pie, or even one-quarter.   We know he's "not wedded to every detail" of his plan and is "open to compromise," as he has been for four years.  Though Speaker John Boehner has indicated he is willing to raise revenues by limiting tax deductions, Digby realizes

So we have the general outlines of what revenues Boehner and the Republicans are willing to accept. Good to know. Does anyone have any idea what cuts the president and the Democrats are willing to accept in return? It seems as though it might be time to have a little chat about that because it appears that they've all agreed to accept some temporary chump change as a Big Victory and the Republicans may very well have wised up enough to recognize that now's the time to take the deal. 

So, what do you think the Republicans will demand for the tremendous sacrifice of closing a couple of loopholes? What will be the price for this huge sacrifice? 

I don't know, but I do know that the president once before agreed to 2 dollars in cuts for every dollar in revenue. He's said just recently that as Commander in Chief he can't go along with big defense cuts, so don't look for much money there. So, where are the cuts going to be?

We may have learned yesterday, when on Meet The Press yesterday Bob Woodward revealed that he had obtained

a confidential document, last offer the president -- the White House made last year to Speaker Boehner to try to reach this $4 trillion grand bargain.  And it's long and it's tedious and it's got budget jargon in it.  But what it shows is a willingness to cut all kinds of things, like TRICARE, which is the sacred health insurance program for the military, for military retirees; to cut Social Security; to cut Medicare. And there are some lines in there about, "We want to get tax rates down, not only for individuals but for businesses."  So Obama and the White House were willing to go quite far.

If Obama and Boehner had reached this agreement months ago, it would now be President-elect Romney with a Repub-controlled House and Senate.   And if this now forms the outline of a deal, the social safety net would be disemboweled, with even benefits for veterans cut, confirming the worst (inaccurate) stereotypes held of Democrats.  There will be no President (H) Clinton, (S) Brown, Biden, O'Malley, or (the fairly loathsome) Andrew Cuomo.  But at least, Barack Obama will go down in history as the transformative President always has yearned to be.

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