PLANK DECEMBER 10, 2012
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The standard line on Barack Obama’s fiscal-cliff dilemma is that tactical considerations (i.e., how to get the best deal) recommend jumping over the edge, while strategic considerations (i.e., how to have the most successful presidency) recommend striking a deal. When it comes to tactics, after all, there’s no point in compromising with the GOP in order to raise tax rates below their Clinton-era levels, at least not when simply waiting until January 1 will restore them entirely, no concessions required. On the other hand, doing so could trigger a recession that derails Obama’s agenda. As Major Garrett of the National Journal put it a few weeks ago: “President Obama … has no hope of a second-term legacy of immigration reform, tax reform, or climate-change legislation (if he even wants it) if he drives the nation off the cliff. No one will follow Obama back out of the recessionary wilderness.”
There is plenty to be said for this argument—president’s don’t normally find it easier to govern during a recession, of course. But as the fiscal cliff negotiations play out, it’s increasingly proving to be wrong. At this point, both tactical and strategic considerations point toward the necessity of taking the plunge.
Simply put: The biggest threat to Barack Obama’s second-term agenda isn’t the economy. It’s the mania that has yet to loosen its grip on congressional Republicans, even after they lost seats in both houses and watched Obama roll to a comfortable re-election. To see this, look no further than the party’s internal discussions over its own fiscal-cliff positioning. The current debate within the GOP is between those who see that Obama has all the leverage in this particular episode and urge a quick deal on tax rates so the party can regroup for a bigger victory on entitlements, and those who still refuse to budge in any way on tax rates. Which is to say, it’s a debate between the moderately delusional and the utterly, irreconcilably delusional.
The moderately delusional argue that a deal could include raising the top income tax from 35 percent to 37 percent in exchange for certain concessions from Obama, like an agreement in principle on big spending cuts. (Never mind that there’s no reason Obama would accept lower rates than he could achieve simply by waiting till January—already a major concession--while granting the GOP additional concessions.) Then the GOP can make a more serious push on slashing entitlements by holding up a vote on the debt ceiling next year. The truly delusional—which includes members of the party’s congressional wing—respond that even this sweetheart deal for Republicans would entail “capitulat[ing] to Obama,” as Sean Hannity thundered the other night to Ann Coulter, who somehow represents what passes for reason within the GOP these days. (“We lost the election, Sean!” Coulter pleaded.)
As a result of all this, two things will almost certainly be true of any deal that gets done before January 1: First, it’s going to be worse from the perspective of the GOP than even the moderately delusional Republicans let on now: Obama may agree to a deal that extends middle class tax cuts and allows rates on the top rate to rise somewhere below the Clinton-era level of 39.6, but he’ll almost certainly extract other goodies in return—like an extended payroll tax cut or unemployment benefits. Second, in light of that, the truly delusional GOPers, who already think their moderately delusional colleagues are urging a shameful retreat, will promptly go bananas. “One party proposes 800 billion in tax increases,” Senator Rand Paul recently wrote on his Facebook page, referring to the Democrats. “In an effort to counter them and continue to be the ‘low tax, small government’ party, the other party’s leadership proposes ... wait for it ... 800 billion in tax increases.” The Wall Street Journal editorial page, too, is already in full agitation mode.
The only way the party leadership will be able to appease these holdouts is by promising all-out war on the rest of the president’s priorities, beginning with demands for massive spending cuts when the debt-ceiling has to be raised next year. The Republicans “will give way … but seething,” Josh Marshall has written. “The right of the party will not accept anything less than another debt-ceiling hostage drama.” If Obama somehow manages to survive that fight, then they will simply seize on the next opportunity to defeat him (like the March 2013 budget vote that will be necessary to keep the government running), or the next one after that.
In fact, we’ve seen this dynamic before. Back in early 2011, the GOP stared down Obama over the legislation that funds the government from year to year. Obama had proposed a $40 billion increase over the previous year’s spending level; the GOP wanted a $60 billion decrease. John Boehner and Obama eventually agreed to cut the budget by some $38 billion relative to 2010 (or roughly $80 billion below the president’s proposal). But the House GOP considered that three-quarter victory a sellout and vowed to get even, in the form of trillions in cuts when the debt-ceiling came up for a vote a few months later. (It didn’t help that the White House used a variety of tricks to finesse much of the $75 billion in agreed-upon cuts.) The upshot was the massive, economy-crushing crisis that preceded the last-minute debt-ceiling vote that August.
The problem last year, as now, is that most Republicans didn’t believe the voters were against them. In their minds, they simply got outmaneuvered by the Obama administration. In a fair fight, they would surely win, and so they demanded an even higher-stakes rematch.
That’s why going over the fiscal cliff is so critical this time. Here’s what happens if we head into 2013 without a deal: Taxes will rise on every American. Thanks to the PR offensive the administration has waged—month after month of accusing the GOP of holding middle-class tax cuts hostage to cuts for the wealthy—and to the president’s structural advantages during a showdown with Congress, the public will immediately and overwhelmingly blame the GOP. “If we go over the cliff,” Bill Kristol wrote Monday, “what Republicans will have done is to make Democrats the party of tax cuts and Obama a president fighting for economic growth.” (Polls currently show that Americans will blame Republicans by a 53 to 27 margin; it will surely get worse every hour of 2013 that the standoff lingers). Which is why, within a few days or weeks of January 1, the GOP will almost certainly throw in the towel—“Republicans will fold with lightning speed,” is how Kristol put it. Democrats will propose a bill allowing rates for the top 2 percent to return to their Clinton-era levels and restore the Bush tax cuts for everyone else.
And what of the economy? It will come through just fine. As others have pointed out, the “cliff” is a lousy metaphor. The effect of the tax increases and spending cuts scheduled to begin next year is more like a mildly uncomfortable slope, with the toll on the economy accumulating only gradually. A few weeks down this slope—which is likely to be the outer limit of how long the GOP can hold out—will do no damage to speak of. And while financial markets may get jittery, I’d caution against overstating even that. It turns out some savvy investors are treating the cliff as an attractive buying opportunity and hoarding cash accordingly.
But the real key here is the political upshot of going over the cliff: Republicans will see in defeat that it’s not Obama who has somehow pulled one over on their leadership or simply played his hand better. Instead, they will see that they have been completely repudiated by the public in a way that even the election didn’t impress on them. It will, in other words, be as close as you get in politics to a total victory for one side. It will highlight the perils of following one’s base too slavishly, a lesson that will come in handy not just on future fiscal policy fights (there will in all likelihood still be a debt ceiling to raise next year), but, one can imagine, also on an issue like immigration. Which is to say, it’s only by forcing the GOP off the cliff that Obama will find the space he needs to govern.
25 comments
You make it sound like it's all Obama's decision to go over the cliff even as you say that the public will rightfully blame Republicans. What you should be saying is that the President shouldn't cave to ridiculous demands from Republicans. That's what the poll is predicated upon, a good faith effort to make a deal on the part of the president. If Obama offers no compromise at all, I doubt the public would blame Republicans, and it wouldn't be a sound political decision at all. Also, if Obama were to do this, I would demand the hundreds of dollars back that I donated to his campaign, considering that I'll need every penny I could get after I've lost my job due to the mandatory cuts that would happen as result of this ridiculous strategic and tactical miscalculation that you're recommending. What the hell are you thinking?
- arock28
December 10, 2012 at 11:40pm
Everything you say is true but you reach the wrong conclusion by ignoring the state of mind of radical Republicans (as it is always hard for the sane to imagine how crazy people think). To my mind the relevant issue is the ATR pledge and the toxic history (see Bush I) of Republicans who vote for tax increases. The key to Obama's 2nd term is the midterm election of 2014. If Democrats can continue their gains and take the House, a lot gets done. For that to happen a lot of Rs need to lose. Rs who vote for tax increases tend to lose their next election. Therefore, the advantage to Obama in striking a somewhat less rich deal before Jan 1 is that it will require some pledge-breakers and we're more likely to see a Democratic Congress in 2014. Basically, the idea is to put the true-believer Tea Party types in a position to vote either their conscience (get the best deal for their constituents in 2012) or their career (wait till 2013 when you can make a deal without breaking the pledge). THIS is why Obama's legacy may depend on avoiding the "cliff".
- boyski
December 11, 2012 at 12:17am
Hallelujah, somebody understands that Republicans are nuts. Also they and their overlords are playing for keeps. They do not care about the economy or the lives of individual Americans unless they are in the Mitt Romney club from what I can tell. This means that trying to compromise with them is futile. If the President gives in to the Right on one issue they'll demand something else, something equally or more damaging. The debt ceiling crisis they indulged in last year harmed the US credit rating and hurt the global economy. Now they are pretending they won the election. So it isn't just the President's second term that's at sake here it's the idea of democracy.
- Sophia
December 11, 2012 at 3:06am
Yielding to extortion will beget more extortion. Call the authorities (the voters) or kill (in this case, figuratively) the extortionists by destroying them with the voters. The two solutions converge. Obama will just have to beat the tar out of Republicans rhetorically.
- peterpalys
December 11, 2012 at 5:00am
Bill Kristol, sage: “If we go over the cliff, what Republicans will have done is to make Democrats the party of tax cuts and Obama a president fighting for economic growth.” If Obama strikes a deal with the Republicans, he preserves the Bush tax cuts; if we go over the cliff, Obama proposes the Obama tax cuts. Does it make a difference? Yes, it does. Of course, some made the same argument in 2010: propose the Obama tax cuts and let the Bush tax cuts expire. Obama, however, chose a different path, with devastating political consequences to his party if not to himself. This time self-preservation (i.e., re-election) isn't an issue, so one would expect Obama to be mindful of history. And not only 2010, but also the 1980s, when the Democrats earned their reputation for tax increases when they approved the largest lower to middle income tax increase in history (while simultaneously acquiescing in income tax cuts for the wealthy), turning many working Americans into tax protesters and Republicans. Will history repeat? Not if Obama follows Scheiber's advice, and Kristol's warning.
- rayward
December 11, 2012 at 6:40am
"Instead, they will see that they have been completely repudiated by the public in a way that even the election didn’t impress on them." I'm not sure I agree with this assessment. I agree entirely with your prescription, but I'm not as confident as you are that the Repubs will abandon their hostage-taking ways or that they will recognize that they're on the wrong side of public opinion and vote accordingly. Today's crop of GOP hacks is remarkably impervious to data.
- AaronW
December 11, 2012 at 7:23am
So, if he follows this tactical course, how does Obama get back the billions lost that previously paid for public health workers, special ed teachers, funding for disaster recovery, among other needs? Getting back a few billion could be done in pieces, but we're talking huge cuts here that the Flat Earth Party could use as bargaining power to appease their elite backers and to ruin Obama's second term agenda.
- wamba1
December 11, 2012 at 7:24am
Absolutely brilliant. "no point in compromising with the GOP in order to raise tax rates below their Clinton-era levels, at least not when simply waiting until January 1 will restore them entirely" -- Exactly. The Republicans are out of cards, yet they're still playing liers poker, trying to get concessions out of the President based simply on bluster. And you also point out, the GOP is simply not going to compromise, while they maintain the delusion that they didn't lose the last election. It's rare to find all these insights summarized so nicely in a single place. Well done.
- AllanL5
December 11, 2012 at 8:15am
Does anyone know whether the temporary fiscal cliff or a debt ceiling fight are worse for the economy? Republicans are claiming that uncertainty is causing economic problems and then doing everything they can to create more uncertainty. In 2000, because of the deficits Republicans were creating, under the Byrd Rule Republicans didn't have enough votes in the Senate to permanently enact the Bush Tax Cuts, which is why we have more debt, uncertainty and the current fiscal cliff. What have the Republicans done that entitles them to insist on having their way?
- Nusholtz
December 11, 2012 at 8:19am
The article advocates one third of what I've been saying for months (or years if you count not advocating/taking/touting the original too-weak stimulus deal in 2008). First third is no debt deal in better than a debt deal. The second third is use the 14th Amendment and eliminate the debt ceiling as a hostage for anything. The last third is eliminate the filibuster (in 2008 it was the first third/first order of political business). There will be hell to pay from Repubs-- but it is the same hell that will occur if none -- or only one -- or only two-- of the above are done. I doubt BHO has the political fortitude to see it through. I'd love to be proven wrong. Had BHO taken that tack four years ago, the results of the 2010 election would have favored the Dems and he would have had FDR 1936/LBJ 1964-type-majoritires in 2012.
- drofnats1
December 11, 2012 at 8:46am
Eliminate the debt ceiling and the filibuster? Okay, but come 2017, a future president Gingrich or Santorum and Senator Majority Leader Mitch McConnell may have the last laugh. What appears to work best right now is not always what works best long term.
- Spengler47
December 11, 2012 at 10:09am
"Eliminate the debt ceiling and the filibuster? Okay, but come 2017, a future president Gingrich or Santorum and Senator Majority Leader Mitch McConnell may have the last laugh. What appears to work best right now is not always what works best long term." Actually, in the true long term, eliminating the filibuster is even more important, because a progressive agenda in general requires change, and the filibuster is about preserving the status quo.
- Fishpeddler
December 11, 2012 at 10:40am
"The upshot was the massive, economy-crushing crisis that preceded the last-minute debt-ceiling vote that August." Massive? Economy-crushing? Did I miss something? Rayward: Obama agreed to the extension only because he really wanted the unemployment benefits and the middle-class tax cuts. There was no way he could have got these without agreeing to extend the Bush tax cuts, and to suggest otherwise is revisionist history. As for the debt-ceiling, I think his fundamental error was thinking that the Republican Party was not going to play politics with the Full Faith and Credit of the United States, merely to hobble his Presidency. For my part, while I never underestimate Republican perfidy and craziness, I too did not, could not, imagine that they would be so cynical. Obama managed to get the best deal he could out of the situation - the automatic sequestration post-poned to after the election was brilliant - but, again, it was not really that easy to predict Republicans would be so completely far out. The one good thing from dealing with certifiable lunatics is that you learn for next time. Obama is not seeking all-out supremacy, as the WSJ alleges. He knows that you can "deal" with lunatics only if and when you put them in a straight-jacket and apply the occasional electric shock to their temples. And, because these are pro-torture Republicans, genitals. He also knows that any "concession" on his part on Medicare or Medicaid or SS or whatever will be spun, à la Ryan and Romney, in the most cynical way possible. Hence the negotiating posture. The Republicans are walking into this battle of Gattlings with a pen-knife and a reputation for crazy; I have every confidence that a deal will be had, much along the lines suggested by Kristol, for the reasons argued by Kristol. For once, the boy knows what is going on.
- icarus-r
December 11, 2012 at 11:39am
icarus-r I'm sure you're aware the word "lunatic" is verboten now when dealing with matters Federal:) Can we come up with a substitute? To the thesaurus!
- Sophia
December 11, 2012 at 11:54am
A major issue facing the country is the growing disparity between the wealthy and the rest of us. To the extent that conceding nothing at this time, allowing tax rates to rise, and going over the cliff helps to awaken us to that gap and to beginning the process of closing it, I say let's go. We also must address the deficit so as to foreclose the Republicans from using it as as a hammer with which to pound on important government services. Liberals should concentrate on the revenue side.
- donaldclea
December 11, 2012 at 12:06pm
Sophia: the choice of the word was deliberate ;) ...
- icarus-r
December 11, 2012 at 12:39pm
'Eliminate the debt ceiling and the filibuster? Okay, but come 2017, a future president Gingrich or Santorum and Senator Majority Leader Mitch McConnell may have the last laugh." "May" is the key word here, Spengler. Hillary is running in 2016, and the latest poll shows that, as of now, 60% of REPUBLICAN women would vote for her. And Gingrich, Santorum, or McConnell, all distasteful Right wingnuts, have about as much chance of becoming president as Henry VIII, especially against Hillary.
- magboy47.
December 11, 2012 at 12:47pm
I was watching Jack Van Impe Sunday and the title of his sermon that day was How Compromise is Paving the Way to Apostasy. Nothing epitomizes the spirit of the GOP, which is infused with religion right down to its corpuscles, better than that. Van Impe is even on a crusade against Rick Warren, because the latter has said that Muslims and Christians can live together. I say go down the fiscal slope. The GOP has been setting our economic policies for the past 12 years, and look where it's gotten us--from boom times with a deficit surplus to a near Great Depression. The only way to get out of this mess is to start over with sane economic policies. And, yes, these include sensible cuts to social programs. Severe cuts would create anarchy in the streets, and I don't think that even those on the Right want that. It would interfere with their Shopping Experiences.
- magboy47.
December 11, 2012 at 1:05pm
I still fundamentally disagree, I think Democrats are now behaving as reactionary as Republicans, that it now is about payback instead of what is best long term. I have written it before...in exchange for closing of loopholes, the ending of the debt ceiling (via the McConnell plan) and extension of the payroll tax cuts and ui, getting rid of the sequester budget cuts, as well as the 150 billion dollar infrastructure jobs bill the Bush tax cuts would be extended one year. Republicans are absolutely fanatical about keeping the Bush tax rates so I think they will sell their own mothers to do so. Why the insane rush to raise the rates, they will go up after a year and Republicans will have absolutely zero leverage, and by that time the economy should handle the tax rates going up for everyone. Meanwhile if we go over the cliff we will get the Obama tax cuts, but be saddled with huge cuts in domestic spending, ending the payroll tax cut and ui extension and Republicans would still be able to hold the debt ceiling hostage.
- blackton
December 11, 2012 at 2:50pm
blackton. End all the tax cuts-- including payroll. Payroll taxes fund SS. Neither Dems nor Repubs will avoid spending much of the resultant large income bonanza-- and the money will be put to much better use that tax breaks to the upper classes (and, yes, even to the middle class).
- drofnats1
December 11, 2012 at 3:37pm
"the ending of the debt ceiling (via the McConnell plan)" McConnell filibustered his own plan. So I am not entirely sure why you think this is an element to agree on.
- icarus-r
December 11, 2012 at 3:39pm
I hope you're right that a few weeks "is likely to be the outer limit of how long the GOP can hold out." If that happens, it's going to be a thing of beauty to see. But I'm not so sure it's that easy and it's sad to think of the people who will be hurt if this turns into a long stalemate.
- david@jenkins.net
December 11, 2012 at 3:59pm
ick, he might if the Bush tax cuts are extended for another year. What can they say if Obama made this gesture? He would be giving Republicans the issue they most desperately want and if Republicans say no to that what can they tell the American people? We are going to raise taxes on everyone because Obama wants to pass a bill that McConnell himself authored?
- blackton
December 11, 2012 at 4:55pm
He MIGHT? This is the same McConnell who held America hostage in 2011 three times. The same McConnell who's whined that Obama's not offering anything he can accept -- when all he'll accept is more tax-cuts. So he's perpetuated this Mexican stand-off by doing nothing except complain until now. Tell you what, here's something that McConnell has to accept -- come January 1st, the Bush tax-cuts will expire, and doing nothing about it won't stop it. There's no "Might" about that one. Now, he "Might" still try to hold the country hostage over the debt-ceiling -- in which case, the Government will have all the revenue from the Clinton tax-rates, lower spending on the Military, and should he actually try to close the Government, a Newt Gingrich style revolt in the country against the Republican Party. 2014 isn't that far away, you know.
- AllanL5
December 11, 2012 at 8:21pm
Allan, if McConnell says no then he says no, but how are Republicans going to sell that to the voters? Obama offered us exactly we want (a continuation of the tax code) and we still said no because...I can't answer that, will they say they will not endorse McConnell's own proposal on the debt ceiling? That a piddling 150 billion in stimulus will suddenly be too much? That they want to cut 600 billion from defense? And if they did say no, Obama can go to the American people and say there is nothing he could do, we have to go over the cliff and he can go on vacation early. But Obama won't because he is too afraid of Democrats own reaction, they will call it a "cave" though that stimulus and sequester delay will be lifeblood for millions of poor. All this is is another year of deficit spending to bolster the economy. After the year is up, rates will go up automatically and Republicans will have zero leverage.
- blackton
December 11, 2012 at 10:16pm