PLANK DECEMBER 20, 2012
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The word started going out on Sunday night: President Obama and House Speaker John Boehner were this close to a deal. By Monday, journalists plugged into Democratic sources were writing sentences like this one, from yours truly: “An agreement on the ‘fiscal cliff’ may be near.” Well, here we are, 72 hours later, and an agreement doesn’t look very near. In fact, the prospects of an agreement before January 1, when tax increases and automatic spending cuts are set to take effect, seem awfully remote.
It’s a reminder that Washington can be unpredictable and that inside information isn’t always as valuable as it seems. But it’s also a reminder that the Republican Party hasn’t yet changed as much as some of us had been thinking. Large elements of the party aren’t ready to budge from extreme positions on spending, taxes, and the role of government—positions that the voters in the last election very clearly rejected.
The reason for hope, you may recall, had been a very real concession that key Republican leaders, including Boehner, had finally made in the last few weeks: Tax rates on the wealthiest Americans had to go up. These Republicans weren’t relinquishing their moral and practical objections to higher taxes; they were simply acknowledging a policy reality. The Bush tax cuts of 2001 and 2003, which had lowered income tax rates, were set to expire. Obama, having campaigned on a promise to restore the old rates for the wealthiest Americans, wasn’t going to sign a bill extending them. That concession had allowed serious negotiations to take place and, up through Monday, the two sides were in close contact, exchanging ideas and slowly, but surely, finding common ground. Obama's latest counter-offer became public, through leaks, on Monday.
But since then the fiscal cliff drama has played out like Groundhog Day, only instead of Bill Murray waking up to the harmonies of Sonny and Cher it’s President Obama waking up to the harangues of House Republicans. The last time this happened was in the summer in 2011, when the issue was whether, and under what circumstances, to increase the government’s borrowing ability so it could pay its bills. Liberals (like me) watched those negotiations anxiously, and nervously, as Obama offered substantial spending cuts and embraced, provisionally, a proposal to postpone the eligibility age for new retirees from Medicare from 65 to 67.
Obama contemplated the Medicare shift again this year. And while Obama ultimately rejected that suggestion, arguing that it would merely shift costs to seniors rather than reduce the cost of medicine, he has indicated that he would go along with a different proposal, demanded by Boehner, to recalculate inflation in a way that would reduce Social Security benefits. On the question of how much new revenue a deal would raise, Obama has reduced his demands—first it was $1.6 trillion, then it was $1.4, and then $1.2. Or, to put it in individual terms, his latest offer would raise taxes only on incomes above $400,000, not $250,000, as he’d vowed during the campaign.
Still, locking in more than a trillion dollars of revenue, all of it from higher taxes on the wealthy, would represent a significant accomplishment. So would extending unemployment insurance, investing in public works, renewing expansions of tax credits that help working families pay their bills and college students pay their tuitions. Obama’s counter-proposals included all of these, which helps explain why, notwithstanding the gnashing of liberal groups inside Congress and more than a few liberal lawmakers within it, party leaders like House Minority Nancy Pelosi stood by the president—and stood ready to provide the votes Boehner would need, inevitably, to get a bill through the House. On Capitol Hill, Democratic leaders assess Obama's leverage more or less as the White House does: Obama has the upper hand, but Republicans control the House and can filibuster in the Senate. In any deal, they'll have to walk away with some concessions from Obama.
But with those concessions in hand, or at least within grasp, Boehner did exactly what he did in 2011: He pulled back from negotiations. This time it was to introduce his Plan B, which would extend tax cuts on incomes up to $1 million. The wealthy would still get huge tax breaks; meanwhile, the government would get a lot less revenue than it would under Obama’s proposal, eventually forcing deeper cuts to programs like Medicare and Medicaid. And did I mention that Plan B doesn’t renew expansions of unemployment insurance or the tax credits for families and college students? Or did you guess that on your own?
Boehner’s motives, other than to keep his job as Speaker, are unclear. But if it was a negotiating ploy, as many suspect, it didn’t work, because Boehner quickly found himself, once again, making a proposal that his caucus was not willing to support. Conservative groups blasted the proposal—because, after all, it would still amount to a tax hike on the rich. Boehner is ready to recognize policy reality; the right wing, it seems, is not. And while Boehner responded by promising to add spending cuts, it's still not clear he has the votes to pass even this modified version of Plan B. Meanwhile, Senate Democrats have said they won’t vote for it and Obama has promised a veto if they do, making it all an exercise is staged futility.
To better grasp the skewed perspective Republicans still hold, consider an issue that’s emerged as the major point of contention—the notion of “balance.” By White House accounting, Obama’s most recent proposal has what amounts to to a one-to-one ratio of tax increases to spending cuts. Boehner says the White House accounting is wrong, that Obama's plan actually has far more tax increases than spending cuts. But Boehner is correct only if you discount interest savings that past Republican proposals, as well as the Bowles-Simpson chairman’s report, included. And Boehner is correct only if you ignore the last two years of fiscal policy making, during which Obama agreed to reduce the deficit exclusively by cutting spending. Put all the agreements together and, even if you throw in Obama’s latest proposal, the result would be a deficit reduction effort that reduced spending a lot more than it raised taxes—even though, in the presidential election, voters made it quite clear they didn’t want big cuts to entitlements and they did want higher taxes on the rich.
What happens now? Obama has sent a strong signal that he’s done with major concessions. The administration apparently imagined that its most recent offer was close to its final one—that the debate had come down to the numbers and that, in relative terms, the two sides were not that far apart. Obviously that was not the case. And whether Obama made the compromise offer because he is a lousy negotiator or because, given the economic and political alternatives, he felt compelled to pursue seriously a major deal—the two explanations are not mutually exclusive—it’s hard to imagine him budging much from his current position. Republicans, also prone to misjudging the contours of negotiations, may be skeptical. That would be a mistake—if only because, if Obama tries, the liberals who have supported him will go into open revolt. As they should.
This drama seems likely to end in one of two ways. The Republicans come back to the table and agree to something that looks, more or less, like what Obama just offered. Or they end up negotiating a much smaller package, one that avoids the fiscal cliff but in a way that neither helps the economy, gives extra help for the vulnerable, nor makes substantial progress on the deficit—pushing those debates, along with an argument over the next increase in the debt ceiling, into next year.
The latter seems more likely than the former, although I'm no more certain of that than I am of whether it all comes together before January 1. The last few days taught me, again, that confidently predicting the outcome of negotiations is a bad idea, as much for the negotiators as for those of us watching them.
12 comments
Of course its Groundhog Day. Are you really surprised? People and parties rarely change dramatically overnight. Winning the election does not change BHO as an inadequate negotiator with a questionable understanding (charitably put) of Progressive policies. And losing the election does not disabuse Repubs of the insanity of their positions, especially when BHO partially validates them and their tactics. Care to bet this is only the first of a series of Groundhog Days for the next four years?
- drofnats1
December 20, 2012 at 11:36am
I perceive that Obama does not have a lot of power over the Republican House. The most he can get, is ONE deal, once. After that, they go back to irresponsible blocking and taking hostages. Right now, and for the next two weeks, Obama holds all the cards. Then the so-called "fiscal cliff" happens. After that, it Would Be Good if the Republicans cooperated enough to reduce the spending cuts. But more likely their behavior will be to hold America hostage again, to get restoration of the expired Bush tax-cuts. The only good news in this scenario is that having restored the Clinton-era tax-rates, the financial position of the Government will be fine, and the economy will continue to recover, almost no matter what the Republicans can do. So that's the one deal, Obama can get, once. After that, the Republicans will resume trying to take advantage of him and the American economy. So Obama should definitely hold out for the best deal he can get. And anything worse than the $250K line is simply unacceptable.
- AllanL5
December 20, 2012 at 11:36am
Good analysis as usual. Boehner seems to have stepped in it. If the vote on Plan B fails, he's fatally weakened both himself and the Republican caucus. If the vote succeeds, he'll have expended his political capital on a fruitless ploy. But there's another outcome between a grand deal and a small deal. There might be no deal. Indeed, without a grand bargain, Obama would be better going over the cliff. He'll then be in a better position to go for his original goal of raising taxes on incomes of $250k and up (he will be able to argue that the offer to raise the income level to $400k was contingent on concessions from Republicans, and of course the GOP is happy voting for tax cuts once the old rates expire) and then use the threat of defense cuts and the promise of entitlement reform to get additional stimulus and debt ceiling relief. It would be two separate packages, probably, and take longer, but it would be a better deal in the end.
- polcereal
December 20, 2012 at 11:42am
Too many tnr readers are on BHO's past and current negotiating team, Sophia and roi being conspicuous exceptions.
- drofnats1
December 20, 2012 at 11:47am
Over the cliff and far far away! The Republicans are playing a compound game of bait and switch, they're doing it deliberately, they want no compromise on anything, it's their way or the highway. Well let them take the highway (or low way, if you will). They are not legislators they are hijackers. So on with the hijack and see who gets rescued and who doesn't.
- Tgossard
December 20, 2012 at 1:12pm
Here's the good thing about "going over the cliff." At that point, laws could be introduced to make selective, specific beneficial changes, right? For example, once the tax rates go back up on everybody, laws to reduce taxes on lower income Americans, if you insist on calling $250,000/year "middle income" it could be below that, could be introduced. By the same token if the slashing and burning is too extreme it could be adjusted on a case by case basis. The bad news about all this posturing is that it's actually angered many Democrats. The GOP wasn't going to change anyhow and now the AFL-CIO is running adds against cuts to Social Security, seniors, especially women, are upset because we stand to be victimized by the president we'd counted on not to harm us, and nothing is being done to reduce wealth/income inequity that in and of itself is stifling economic growth but also making our society dysfunctional. Finally, what is being done to address the high cost of health care? That's underlying many of our problems along with absurd "defense" industry expenses. For example why are we building carriers? Why aren't we using the same money and if possible the same workers to fix the infrastructure? Why are we spending a fortune on iffy airplanes like the F-22 and the F-35?
- Sophia
December 20, 2012 at 1:47pm
Something else is bad about this: the sense that we can't trust President Obama to honor words he repeatedly declared, over and over again and with great passion. So WTF. I'm seeing articles here and there that because chained CPI is too "wonky" the cuts to SS are practically a done deal. That's outrageous. It underestimates the intelligence of American voters but also it's not a big savings to the government, however it is harmful, really harmful, to older people whose expenses rise as we age.
- Sophia
December 20, 2012 at 1:51pm
What was missing in 2010 was the sense of a rough joint strategy by the White House, the Senate majority, and the House minority. That aspect is being better handled this time around, as there aren't as many Blue Dog (and scared) Dems in the House to give the impression than the GOP has much more unity (which it does). I am actually more confident this time, and I don't make the assumption at the moment that the president is fumbling negotiations. I do make an assumption that the WH wants not to be the trigger that leads to Boehner being toppled in short order by the teabaggers and getting Cantor or someone in charge for the debt ceiling crisis.
- ironyroad
December 20, 2012 at 4:41pm
I noted over on Tim's related post (Democrats being wimps again) that I wanted more context, though I agreed with Tim's general point. And Jon, you've provided more, thank you. I like the open revolt idea, but I'd actually just rather let the tax cuts expire and then start negotiations. If we can't trust Obama to negotiate properly when the Republicans can get a better deal, then let them negotiate once the cuts have expired. Then we can claim they really broke Norquist's pledge.
- jet
December 20, 2012 at 6:27pm
most people are still ignoring the very real pain when unemployment benefits expire and the EITC and education credits do as well. Couple that with 600 billion in domestic spending and higher taxes on both payroll (with the expiration of the payroll tax cut) and regular income taxes then a lot of poor and middle income people will be in real trouble. I was hoping to use the EITC tax refund to pay for my property taxes, if that goes away I won't be able to save for my kids college education or save for my own retirement. But hey libs here, if it can punish some rich Republicans then why not, right drofnats? Of course I support Obama's last position. How many people need lose their homes to get your pound of flesh from the Republican party?
- blackton
December 20, 2012 at 6:54pm
blackton, your points are well taken but our points are these - and they don't have to do with humiliating Republicans but rather a) ensuring sufficient revenues, from the right people, to run the country and b) not harming the poorest and weakest citizens. Somehow, bashing sick, poor and old people has become popular in America. This needs to stop, immediately. Incidentally, there are Republicans who take those same tax deductions you do. They don't want to lose them so rich Republicans can buy more houses either. But, the entire GOP is apparently being held hostage by interests representing corporations and rich people and/or anarchists. So, their own party has to restore sanity, unless less wealthy Republicans realize what's at stake how can this happen?
- Sophia
December 20, 2012 at 8:43pm
Now (late Thursday afternoon) it's clear that Boehner can not deliver the necessary number of votes from his own caucus to pass his "Plan B" (tax raises on only $1 mil & up of income). So we are going over the cliff. In early January this will allow the Dems to give the Repugnants a huge gift - the opportunity to vote for a massive tax reduction for 98% of American tax-payers. It's a win-win-win, as I see it! < 8 ^ ))
- Haole45
December 20, 2012 at 11:59pm