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Go Home The Bright Side Of The Debt Ceiling Deal

JONATHAN CHAIT AUGUST 1, 2011

The Bright Side Of The Debt Ceiling Deal

BY JONATHAN CHAIT

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.

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21 comments

- You're beginning to catch on JC. A not bad deal for the left and Boehner and Mitch still owe the dead-enders? The candidates too, oh my! I think the WH couldn't imagine a better future than a hungrier TP while the Republican's up for election are their next meal.

- michaelg

August 1, 2011 at 4:30pm

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Call me crazy, but I still don't think any of this means anything until the sh*t hits the fan and the interest groups and constituencies begin to feel the heat. You'll see. They'll be on the streets begging for deficits with signs saying: "Will work for more debt."

- Nusholtz

August 1, 2011 at 4:48pm

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And maybe this was good for the relationship between Obama and the Republican leadership, as I get the impression that he has developed a good working relationship with Boehner, something both will need going forward. With Boehner, when he makes outlandish statements about Obama and the Democrats, you get the feeling that he's doing what's necessary for his caucus. With McConnell, you get the impression he's nothing more than a liar doing what's best for McConnell.

- rayward

August 1, 2011 at 4:53pm

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The outcome I see is any one or more of the following: 1. The economy gets much worse. 2. The economy stays about the same. 3. The economy surprisingly improves. I suppose all three could result, depending on how you define 'worse' 'the same' and 'improves.' Personally, though, I can report my own reaction. Regardless the direction the economy takes, I'm now persuaded to give as much as possible (and then some) to Obama's re-election campaign next year. Simply in practical, if not moral, terms I find the radical/tea party conservatives genuinely evil, practically and morally. They abandon their consciences as they attack the foundations of a civil society. I want them out, if not dead! I will do whatever I can to eleminate these pests.

- Tgossard

August 1, 2011 at 5:08pm

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Sorry for the redundancy!

- Tgossard

August 1, 2011 at 5:09pm

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"Because tax revenue is scheduled to increase anyway." Yeah, but given the track record of Obama and the Democrats, how sure are you that they won't blow that, or only get the $800 billion for the rich, rather than the whole $4T?

- RHSerlin

August 1, 2011 at 5:21pm

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"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." Maybe Obama knew this full well all along and it's the only reason he made this offer. Be very careful about underestimating this man's intelligence and selling/political strategy ability. This is a very smart guy with a lot of experience and ability in sales/politics.

- RHSerlin

August 1, 2011 at 5:26pm

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Of course he can still have weak points an screw up, especially if haggard and rushed.

- RHSerlin

August 1, 2011 at 5:27pm

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left unsaid is that neither party has any real answers of what to do about globalization and the continuing slipping of our tax base. We are all arguing about how to carve up a shrinking pie. Personally, I don't mind much as I have lived very modestly all my life but these teabaggers are in for quite a shock when their imaginary nirvana never comes about and they find themselves poorer and poorer as time goes by. Hell, even the wealthy in America are going to find themselves on the short end of the stick as Asians and others work harder, for far less, and acquire educations that are a rival of our own. China has about as many students studying to be engineers as we have engineers. Don't get me wrong, I am not pessimistic, the Mexamericazation of America will now begin to proceed apace. Lowered expectations will lead to lowered demand which will lead to a sustainable planet.

- blackton

August 1, 2011 at 5:44pm

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"Obama should have avoided the hostage scenario, but once he blundered into it, he managed to escape on relatively favorable terms." That's it exactly. Much ado about not much really. It's a score draw and it's only half time. I think the Republicans have the real problems going into next year. Obama will get the base "Fired Up!" on cue. Although, I understand a rousing speech by this young man, who has already caused waves with his "getting out of Afghanistan now" policy, has created some momentum for a serious primary challenge: http://www.youtube.com/watch?v=uQjAR7mOvgc

- IggyPop

August 1, 2011 at 5:53pm

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blackton, I agree with everything you said. Including that the Tea Partiers are going to be shocked when "their imaginary nirvana never comes about." But I'm not necessarily sanguine about how they will react to that. This time, their sense of betrayal and frustration with the failure of the Republicans to provide the nirvana they have been expecting since the Reagan revolution just led to taking the economy hostage. What will their increasing nihilism lead to next?

- esmense

August 1, 2011 at 7:53pm

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You guys just keep on telling yourselves it ain't that bad. Maybe you can make yourselves believe it and feel a little better about our country's sorry state of affairs. Me, I take my reality neat. I find it amusing how three weeks ago some of you here were arguing that Obama didn't really want the deal he was promoting, that in a masterful political stroke he was making an offer he knew the wingers couldn't accept in order to reap all the political rewards while suffering none of the downside of the deal actually being done. Now that a similar deal--big cuts, no revenue--is about to be done with Obama's full participation the very same people are telling us how happy we should be. As several posters on companion threads have mentioned, it isn't the economy, stupid, it's the politics. Obama got rolled; he ratified government-by-blackmail; and it is only a matter of time until the Republicans roll out their next hostage scenario. What price have the Republicans payed for their extortion? None whatsoever. We'll have a few months of peace, but I guarantee we'll see a repeat performance on some basis prior to November 2012. My bet is that along about spring 2012, the GOP will find a way to threaten another government shut-down +/- refusal to extend unemployment benefits. Their demand? Make the Bush tax cuts permanent, though they'll probably settle for a five-year extension, and Obama will give it to them and will spin it as a victory.

- AaronW

August 1, 2011 at 8:29pm

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My husband has decided to deal with this by turning off reality, ie Comcast.

- Sophia

August 1, 2011 at 8:46pm

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Your "reality" and the actually-existing reality do not much overlap. A Democratic establishment figure emailed Jonathan Cohn and asked what he (Cohn) would have done instead. If the keyboard-pounding geniuses here were in charge of this country, it would be time to emigrate to Norway.

- liberalref

August 1, 2011 at 8:51pm

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I see you passed me on the inside and got between me and my target, Sophia. My wife has been glued to Comcast through this crisis. Me, I can't take TV even under normal circumstances.

- liberalref

August 1, 2011 at 8:53pm

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On a positive note, is this the first truly bipartisan bill to pass Congress since Obama was elected President? (Pending Senate approval, of course.) It seems like some of the Republican's intransigence since January 2009 has been to not let Obama win on "no red states, no blue states, we are the United States". Is it time to consider the "Bring Democrats and Republicans together to pass an agenda" campaign promise closer to being met? http://www.politifact.com/truth-o-meter/promises/obameter/promise/522/bring-democrats-and-republicans-together-pass-agen/

- aboufade

August 1, 2011 at 9:23pm

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"Your 'reality' and the actually-existing reality do not much overlap." Would you care to outline where my detailed description of present circumstances, complete with predictions that will be verifiable--or falsifiable--within a matter of months, deviates from reality? Oh, wait, no you can't, because you're liberalref and liberalref cannot offer an outline of, well, anything. Liberalref just sits back and offers his brain-dead thumbs-up or thumbs-down on other posters' comments and asserts that whatever the president says and does must be correct because he's the president and, you know, we're not.

- AaronW

August 1, 2011 at 10:22pm

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The political team in the White House, including the president, is not combative enough to handle the Tea party and their mainstream Republican enablers. I don't see how this White House would ever win any future battles. They are clearly overmatched.

- scrubby

August 1, 2011 at 11:10pm

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"A Democratic establishment figure emailed Jonathan Cohn and asked what he (Cohn) would have done instead." Another Democratic establishment figure, Bill Clinton, told the nation what he would have done instead--raise the goddamn debt ceiling. It ain't rocket science.

- AaronW

August 1, 2011 at 11:14pm

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Here's a very rosy view of the deal from a pro-Obama progressive standpoint: http://www.thepeoplesview.net/2011/08/paul-krugman-is-political-rookie-or-how.html I don't think it's all *that* rosy, but it's somewhat soothing to read. Of course, the real problem is, as AaronW points out, the precedent, not the specifics of the compromise.

- frippo

August 2, 2011 at 2:16am

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"Another Democratic establishment figure, Bill Clinton, told the nation what he would have done instead--raise the goddamn debt ceiling. It ain't rocket science." With Bill Clinton that probably depends on what the meaning of the word "raise" is. Don't believe the sweet talk, but Clinton couldn't and wouldn't have bypassed congress to unilaterally raise the debt ceiling. How do I know this? Well, when Clinton was faced with a debt ceiling standoff in 1995, he vetoed the bill, resulting in a government shutdown. Clinton never once told the nation he intended to bypass congress, nor did he attempt to. Instead, he worked out a compromise with the Republican Congress to raise the debt ceiling. Had he bypassed Congress then, he would have set a precedent and forever removed any chance of Congress using the debt ceiling to extort policy concessions from the Executive Branch. I guess Clinton is good at sweet talking and sharing your pain, but he never really had a political long game. If you doubt it, go ahead and name at least one enduring Clintonian progressive legacy. Clinton signed the "Gramm–Leach–Bliley Act" into law (essentially repealing "Glass-Steagall"), which contributed to our current financial crisis. In contrast, Obama passed financial regulation. Clinton passed DADT; Obama oversaw its repeal. Clinton had several opportunities to capture or kill bin-Laden and didn't; Obama killed bin-Laden. Clinton failed at universal healthcare, Obama passed ACA. Yeah, you're right AaronW, it sure ain't rocket science.

- wkwami

August 2, 2011 at 4:26am

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