JONATHAN CHAIT AUGUST 1, 2011
Nate Silver, upon reflection, decides that the debt ceiling agreement isn't really so bad for liberals:
given that Democrats were willing to accede to the constraints demanded by Republicans, they were able to exert a lot of control over the substance of the cuts. In particular, the first round of cuts will include $350 billion in defense savings, while the second round would include between $500 and $600 billion in defense cuts if no bipartisan agreement is reached. ...
If you’re a Democrat and you must accede to $1.5 trillion in cuts — and that’s literally the situation that Democrats will find themselves in if the deal passes through Congress — it’s going to be hard to do better than this $1.5 trillion in cuts. They are very heavily loaded with defense cuts, while containing few changes to entitlement programs or to programs which benefit the poor.
So Democrats will have very little incentive to vote for the panel’s recommendations unless they include tax increases.
I agree with this. Obama should have avoided the hostage scenario, but once he blundered into it, he managed to escape on relatively favorable terms. My argument was that Obama should forget about trying to get Republicans to agree to higher revenue, and simply sign the best all-cuts deal he could. He (eventually) did so.
Why did I advocate this? Because tax revenue is scheduled to increase anyway. The kind of revenue Obama was offering Republicans was actually a sop to Republicans. Obama was saying, in effect, I'm going to veto any extension of tax cuts on income over $250,000, which will raise $800 billion. But instead we can agree right now to raise that revenue by closing loopholes and avoiding any increase in rates. It was a shockingly generous offer.
But the reason Republicans couldn't accept that deal is that it would require them to concede that taxes would go up. Imagine you're John Boehner. Which is a better scenario for you -- the tax cuts for the rich expire in 2013 over your objections, or they expire as a result of a deal you cut with Obama? The former is obviously way better. It's the difference between conservative hating Obama for being a tax hiker and conservatives hating Boehner for being a tax hiker. It's true that a deal with Obama would be vastly better for conservative policy -- because it comes attached to entitlement cuts, and because the higher revenue would come with lower (or at least not higher) tax rates.
But the pathology of conservative anti-tax absolutism made it impossible for Boehner to cut the deal that's best for conservatives. One result is a deal that's better for liberals. Higher revenue is such a sacred taboo for Republicans that Obama couldn't get them to sign off on it even by giving them almost everything else. But the flip-side is that, by shelving that demand, he was able to win a lot of concessions.