Tuesday, January 01, 2013

Card Not Played

Who could it possibly be who made the following statements?

But I have said that for incomes over $250,000 a year, that we should go back to the rates that we had when Bill Clinton was president, when we created 23 million new jobs, went from deficit to surplus, and created a whole lot of millionaires to boot.


But what I've also said is, if we're serious about reducing the deficit, if this is genuinely a moral obligation to the next generation, then in addition to some tough spending cuts, we've also got to make sure that the wealthy do a little bit more.

So what I've said is, your first $250,000.00 worth of income, no change. And that means 98 percent of American families, 97 percent of small businesses, they will not see a tax increase. I'm ready to sign that bill right now. The only reason it's not happening is because Governor Romney's allies in Congress have held the 98 percent hostage because they want tax breaks for the top 2 percent.


But what I've also says is for above $250,000, we can go back to the tax rates we had when Bill Clinton was president. We created 23 million new jobs. That's part of what took us from deficits to surplus. It will be good for our economy and it will be good for job creation.

The other option is to pass a law right now that would prevent any tax hike whatsoever on the first $250,000 of everybody’s income. And by the way, that means every American, including the wealthiest Americans, get a tax cut. It means that 98 percent of all Americans and 97 percent of all small businesses won’t see their taxes go up a single dime.


Of course, it was the President of the United States, Barack Obama.   The first hint that he was the speaker in these instances, respectively from the first presidential debate, second presidential debate, and a post-reelection press conference, is that it didn't happen.  And President Obama is singularly adept at setting the red line, then crashing through it.  As Noam Scheiber put it last night after terms of the budget deal were coming to light, "Coming into the negotiation, Obama had two big problems: First, no matter how tough he talked, Republicans always assumed he’d blink in the end, for the simple reason that he pretty much always had. (This is one of the major themes of my book about his first term.)"

But Scheiber recognizes that raising from $250,000 to $400,000 the level at which taxes will be allowed is relatively small potatoes.   As his colleague at The New Republic, Timothy Noah, lays out to congressional Democrats, "Your President sold you out."

Yesterday morning, The New York Times' Annie Lowery explained

... the United States officially hits its debt ceiling today, starting a countdown clock that ends in a cash management crisis in a matter of weeks.

The debt ceiling is a statutory limit on the amount the country can borrow – currently, it sits at about $16.4 trillion – which Congress periodically needs to raise if the country is spending more than it is taking in in revenue. Right now, of course, it is doing just that: The country is running deficits of about $1 trillion a year.

Of late, Republicans have refused to raise the ceiling unless Democrats agree to commensurate spending cuts. In 2011, that led to the heated and ultimately fruitless debt negotiations between the White House and the House speaker, John A. Boehner, as well as the passage of the spending cuts in the “fiscal cliff” that Congress is now peering over.

This time around, Republicans want to extract cuts, likely from entitlement programs like Social Security, in exchange for their help in lifting the ceiling. But Democrats have said that Congress should go back to raising the debt limit as a matter of course, as generally happened up until last year....

Specifically, the White House has said that it will not negotiate with Congressional Republicans over the debt ceiling. “We are not going to play that game,” President Obama said at a meeting with the Business Roundtable this month. “If Congress in any way suggests that they’re going to tie negotiations to debt ceiling votes and take us to the brink of default once again as part of a budget negotiation – which, by the way, we had never done in our history until we did it last year – I will not play that game, because we’ve got to break that habit before it starts.”

Democratic aides have described a strategy that is more literal than one might think: to simply refuse to discuss the ceiling as any kind of bargaining chip. But Republicans continue to see the debt limit as a potent piece of leverage over the White House. That has set up another major debt confrontation for early in 2013.

Right now, the Treasury is undertaking “extraordinary measures” to give the government enough breathing room to pay all of its bills. But such measures buy Washington only so much time. In February or March, the Treasury secretary would need to decide which payments to delay or default on.

February or March, Lowery notes.  Not coincidentally (Ezra Klein helpfully summarizes), the deal delays the sequester for two months and the debt ceiling is not addressed.   President Obama might have allowed the country to go clearly over the curb, then had Senate Majority Leader Reid presented his chamber with a clean bill, one lowering tax rates on incomes below $250,000- or perhaps one which included a deal on raising the debt limit.

Scheiber recognizes

Fortunately, the fiscal cliff offered Obama a chance to solve both these problems. He could afford to be unyielding because the economic consequences of going over the cliff for a few days or weeks would be relatively minimal and almost entirely reversible. And doing so would immediately demonstrate to the GOP that public opinion was emphatically not on its side—polls showed that the public reaction to going over the cliff would be both intense and heavily trained on Republicans. Throw in Obama’s post-election bump in approval ratings, and there was never a better time to hold out.

Barack Obama could have done that, but didn't.  Instead, he sent his lieutenant, Joe Biden, into negotiations with Senate Minority Leader McConnell who, like most of his colleagues on both sides of the aisle, do not have the distaste for Obama they have for Biden (and had asked to deal directly with the V.P.).   Out popped a deal (approved, with an overwhelming majority of both parties, last night by the Senate) not so distasteful that most Democrats would vote against it, but one which delays reckoning with the debt limit for two months.  At that time, with the President's bargaining position weakened (income tax rates already having been cut for the vast majority of Americans), Republicans will say:  nice little entitlements (Social Security and Medicare) you have there- it would be a shame if something happened to them.

But fear not!  The President on December 5 summoned his inner testosterone and, as Lowery notes, told the Business Roundtable

So I want to send a very clear message to people here: We are not going to play that game next year.

If Congress in any way suggests that they're going to tie negotiations to debt ceiling votes and take us to the brink of default once again as part of a budget negotiation--which by the way we have never done in our history until we did it last year--I will not play that game. We've got to break that habit before it starts.

Unfortunately, a habit already has begun, the habit of the President to cave under a little pressure from the GOP (unless, of course, it is only where he always wanted to go).

Noah observes "Ezra Klein reports that the Democrats think they can make a deal now, force another tax increase later, and still get Republicans to back down on the debt ceiling. This is delusional. Any Republican who at this point believes Democrats will drive a hard bargain must be judged a fool."

Republicans may be a lot of things, some of them unprintable.  But, as the vote last night indicates, few of them are fools.

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