THE STUMP MARCH 21, 2012
On Sunday, The Washington Post published a long, blow-by-blow of last summer’s negotiations between Barack Obama and John Boehner over a $4 trillion deficit deal. The take-away from the piece is that Obama had a chance at a deal involving $800 billion in tax increases and trillions in spending cuts (including cuts to sacred programs like Medicare and Social Security), but that he got cold feet and backed away. By the time his feet warmed up again, the opportunity for a deal had passed.
Most of what I think about the piece, and what we learn from it about the Boehner-Obama negotiation, Jon Chait has already said, and probably better than I could. But I’d just add a couple quick points based on reporting I did for my recent book covering the same territory.
First, like Chait, I find the premise of the Post piece off-base. The context you need for understanding the negotiation is that House Republicans were simply never going to accept anything that had the slightest whiff of a tax increase. Period. That means, whatever the temperature of Obama’s feet at any given moment, there was no deal to make. The whole narrative about cold feet is, in fact, only of interest insofar as at gave Boehner cover to walk away while pretending he would have done a deal. It doesn’t change the non-viability of the deal itself.
To see this, you need to back up a few weeks from the action in the Post piece to May and June of 2011. That’s when Vice President Joe Biden and Obama’s top economic aides—Tim Geithner, Jack Lew, and Gene Sperling—were negotiating with Eric Cantor and Jon Kyl, the second-ranking Republicans in the House and Senate respectively, to lay the groundwork for the Obama-Boehner talks. And what you see in the Biden episode is GOP resistance to even broaching the subject of tax hikes, much less actually agreeing to them. As I write in the book:
The third group at the negotiating table was a four-man detachment of congressional Democrats, who would have to sell their colleagues in the House and Senate on whatever deal emerged. These were men acutely aware of the backlash any Democratic representative or senator would court by even contemplating Medicare cuts. As the conversation drifted in this direction, they became adamant that it was time to discuss tax increases. “Medicare beneficiaries have a median income of $23,000 a year,” one of the Democrats told Cantor and Kyl. “Why should we be engaged in a conversation asking them to pay more unless you’re talking about closing corporate tax loopholes and special breaks for corporate jets?”
At this, Cantor and Kyl became visibly flustered, according to several observers. They groused that it would be far more productive to stay focused on the spending cuts all sides could support, at least in theory, rather than get bogged down talking tax increases, which the Republicans opposed. Their strategy, the Democrats eventually concluded, was to resist tax increases and simply pocket whatever spending cuts everyone in the room would accept.
“Let me get this right,” Kyl finally said to Lew and Sperling as the discussion became tense. “You’re saying there are Medicare savings you think would be good policy. But you won’t do them unless we agree to raise taxes?” Lew and Sperling looked back at him stone-faced and simply said: “Yes.” A few days later, on June 23, Cantor and Kyl withdrew from the negotiations.
Given that Cantor and Kyl had left the Biden talks because Democrats’ insisted on tax increases as part of any deal, it’s hard to see how Obama failed to seize a deal involving tax increases, since they were never going to be forthcoming. Or, put differently, to the extent Obama made a mistake in his negotiation with Boehner, it wasn’t, as the Post suggests, that he lost his nerve in the face of an acceptable offer. It was that he assumed there was something to negotiate over, when in fact the entire exercise had already been shown to be futile.
The Post really only offers one real data point to rebut this, but it’s highly suspect. The paper says there was a chance that Republicans would have accepted $800 billion in revenue if the revenue arose from an obscure form of budgetary magic—Chait calls it “imaginary” revenue. Here’s the relevant portion of the piece:
Much of the $800 billion would have to come from overhauling the tax code—not from higher tax rates. The Republicans believed lower rates and a simpler code would generate new revenue by discouraging cheating and spurring economic growth. If the White House would agree to count that money, the Republican leaders said, then they might have a deal. …
[W]hen Boehner brought up economic growth, arguing that his caucus would not accept tax increases under any other terms, the Republicans saw Geithner as receptive, Jackson said. “It was literally one of the last things discussed when they came in on that Sunday. And Geithner said, ‘Yes, we accept that,’ ” Jackson recalled. “We viewed it as a breakthrough.”
But, as the piece points out, Geithner and several other administration officials deny that the imaginary $800 billion would have been remotely acceptable. And there’s good reason to believe them. I spoke with several people involved in the negotiation for my book, and each one of them understood that even doing a deal with $800 billion in real revenue would be incredibly controversial among Democrats—many hands were wrung over this when the parameters of the negotiation became clear. There was simply no way they would have expected to sell $800 billion in imaginary revenue to their own party. It was a complete impossibility, and they understood it as such. The only reason for not shooting it down was the hope that they could eventually turn the dross into gold. (As I say, it was delusional hope, but it was the hope nonetheless).
The Post goes on to report that, once the negotiations fell apart for the last time, Obama attempted to restart them by accepting this approach. “[T]he president tried to put the original framework back in play,” the authors write, explaining that he asked an aide to get Boehner on the phone and tell him “I’ll take your last offer.” But Boehner balked, saying, “[W]e don’t have time to reopen these negotiations.”
Chait reads this to mean that Obama was making a final, abject capitulation—settling for an imaginary $800 billion in revenue in exchange for trillions in spending cuts, when even a real $800 billion would have been insultingly meager. But I don’t think that’s what actually happened, or even what the Post is necessarily saying happened. If you parse these lines closely, Obama seemed to be accepting a framework in which Republicans would agree to an $800 billion figure, which the White House hoped would be real and the GOP hoped would be imaginary. That would have been the subject of the negotiation Boehner said there wasn’t time to reopen. And, on that point at least, Boehner was right. Given the Republican hostility to any bona fide revenue, the two sides could have negotiated ad infinitum without reaching a deal. That’s really all you need to know about what went down.
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