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November 09, 2012 4:13 PM “Fiscal Landscape-Shift” Maneuvering Begins

By Ed Kilgore

There’s a lot of confusion and cross-talk over the meaning of the initial post-election maneuvering of the president and the House speaker over negotiations to deal with the so-called “fiscal cliff”—the impending expiration of the Bush tax cuts and the imposition of across-the-board spending cuts as agreed to at the end of the 2011 debt-limit negotiations. John Boehner has reiterated his party’s absolute opposition to any tax rate increases on the very wealthy—which will happen automatically if the Bush cuts are allowed to expire—but has opened the door to higher revenues via the usual “loophole closing” mechanisms that GOPers often talk about in conjunction with further tax rate cuts—in exchange, of course, for both “entitlement reform” and a cancellation of the scheduled defense spending cuts. The president’s reiterated his demand for a “balanced” approach to deficit reduction that demands revenues, and more specifically “a bit more from the very wealthy.” Meanwhile, like some clunky deus ex machina, deficit hawks, including some Democrats and maybe a few Republicans, are ginning up a new, well-funded campaign to push for adoption of the Bowles-Simpson framework for a big deficit reduction deal that would involve new revenues and “entitlement reform.”

As Jonathan Chait has been pointing out for some time, this isn’t just a return to the dynamics of the debt-limit talks. Aside from the fact that Obama has just won re-election after talking frequently about demanding more taxes from the wealthy (a position that remains exceptionally popular), Republicans aren’t the ones with a big hostage right now. If nothing happens, tax rates go up automatically. It’s Republicans who badly need something from Obama—an agreement to boost defense spending—and Republicans who are in danger of looking unreasonable by threatening the economic recovery in order to preserve lower taxes for their donor class. As Chait’s pointing out now, so long as Obama can make a credible threat to do nothing if Republicans don’t make major concessions—and then maybe come back with a free-standing bill to lower taxes on middle-income families, daring Republicans to block it—the GOP is in danger of losing on everything it cares about.

There are, in my opinion, three things Obama must do to strengthen his hand even more: (1) stop talking about the “fiscal cliff” as though life will end if the Bush tax cuts expire or Pentagon cuts take effect, however partially or briefly; (2) tell Democrats in no uncertain terms to keep their distance from the Simpson-Bowles effort (if a revenues-for-entitlement-reform deal eventually proves essential, control over its dimensions should under no circumstances be forfeited to “independent” deficit hawks); and (3) force Boehner and other Republicans into the big leap from “more revenues” to “higher rates,” or at least the permanent cancellation of some features of the Bush tax cuts benefitting the wealthy. Congressional Republicans cannot be allowed to enjoy the luxury of fearing Grover Norquist more than Barack Obama, restive financial markets, or defense contractors altogether, at this point. And if Boehner and company refuse to take that step, Obama should make his own non-negotiable demands—such as taking actual benefit cuts for Medicaid, Medicare and Social Security recipients off the table (with or without some wiggle-room for additional means-testing in the latter two programs, again keeping the focus on protecting low-to-moderate income Americans).

Whether or not Obama pursues this exact strategy, he has absolutely no reason to bend to GOP demands at this point. He’s got the upper hand until he chooses to lower it.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • TCinLA on November 09, 2012 4:22 PM:

    Please Mr. President: DO NOTHING TILL JANUARY. Let the Republicans find themselves face down in a dark alley on New Years' Eve. A Damn Good Whacking like that will teach them who's boss, and negotiating with them for actual reform will be much easier after that.

  • c u n d gulag on November 09, 2012 4:26 PM:

    Oooh - there's nothing Conservative hate more, than when a black man has the "whip-hand!"

    President Obama, please, PLEASE, keep Erskine "Motherfeckin' Idjit" Bowles out of ANY, and EVERY, aspect of the countries economic future. No good will ever come of it.

    And, tell Senator Simpson to eat the feckin' dogfood he wants all of the other seniors to eat - it'll be a step up from his own feces, which is probably all of the solid food that moron eats anymore.

  • Ronald on November 09, 2012 4:29 PM:

    Guaranteed that the supposed 'fiscal cliff' is nothing like what would have happened if Romney was elected.
    Let the cuts happen. Put the damn knife to the Republicans in Congress already and _make_ 'em compromise.
    Above all- DO NOT COMPROMISE ANY LONGER.
    Geez we lost so damn much when Obama started playing footsie with the Republicans the last couple of years. I hope and pray that doesn't happen again.

  • cmdicely on November 09, 2012 4:32 PM:

    Republicans aren't the ones with a big hostage right now.

    This is true: unless, of course, you count the entire US economy, and particularly the millions of jobs that would be lost if the sequester was implemented, a "big hostage".

    You can argue that a particular set of demands are worse than doing nothing would be -- that they would be worse than the sequester itself -- but you can't credibly argue that the Republicans don't have a big hostage.

  • T2 on November 09, 2012 4:38 PM:

    there is so much to gain from simply letting the Bush Cuts expire. Obama can explain before hand that he'll support mid-class tax relief after that happens (which he's already proposed). The GOP has 0 ammo in this fight thanks to the recent election. This is an opportunity to put a stake in Grover Norquist, which would be sweet.
    Obama needs to call all the Dem senators in and lay down the law. Then he needs to appoint Simpson to Ambassador of Syria and send him on his merry, crazy way.

  • Peter C on November 09, 2012 5:53 PM:

    @TCinLA is absolutely right. Jonathan Chait has a very detailed explanation why:
    http://nymag.com/news/politics/elections-2012/obama-romney-economic-plans-2012-10/

    This is a Dr. Strangelove situation - as in "How I Learned to Stop Worrying and Love the Fiscal Cliff/Sequester".

    No one should be permitted to express worry about the sequester without accepting the fundamental truth of Keyneseanism! Keynesean-denialists should have their microphones switched off.

  • schtick on November 09, 2012 7:20 PM:

    The first thing the teapubs need to do to get anywhere on this argument is to make a list of all the rich boys that went bankrupt paying taxes. Then and only then should they have a leg to stand on in this argument.
    Oh, they might want to explain how their rich corporate buddies have made record amounts of money in this recession while sitting on it and not creating jobs while the rest of us lost so much.

  • Doug on November 09, 2012 8:02 PM:

    "Obama needs to call all the Dem senators in and lay down the law." T2 @ 4:38 PM

    Which could likely guarantee the Bush tax cuts remain in toto. Even worse could be the effect on some new proposal a la "Simpson/Bowles". There are just enough senators with a "D" behind their name who, if they voted with the Republicans, could cause a helluva lot of damage. I can think of no better way to accomplish that than by having President Obama "lay down the law."
    We are a democracy. Democracies operate by consensus. Consensus is NOT defined by going in and telling some politician what to do. It's that "big tent" thing in actual operation.
    Now, if you replace "Obama" with "Sen. Reid", I'm all for it. Reid's the leader of his caucus and can be expected to tell senators from it the requirements THEY have to meet to be a member. As long as Reid requires ALL senators caucusing with the Democrats to agree to vote to bring measures to a vote, I don't think we'll have much to worry about.
    Don't forget, the Republicans still control the House and I sincerely doubt we'll see legislation anything close to what we'd consider "progressive".
    "Regressive" legislation would be more apt...

  • emjayay on November 09, 2012 11:43 PM:

    I'm a huge supporter of Obama and his basic mindset. Looking at his record, all I can see is a folding to right wing Republican cant, with a teeny bit of stuff for the lefties. It's sad. I'm sorry. But somehow the guy just doesn't seem to have the balls to stand up for what he really believes until it's a done deal already.

    The "fiscal cliff" isn't all that bad. It's a small move in the direction of austerity which will contract the economy a bit. So what. The Republicans claim that government spending does'nt count in giving people jobs anyway. There's a lot of good stuff in there, like cutting our insane defense spending. But I don't expect Obama to stand up for what appear to be his principles. I'm very reluctantly ready for more spineless compromise.

    WTF is Boehner throwing into the mix about entitlement reform? Social Security needs some adjustments, but by its very nature it's self financed. What is he talking about? Higher income thresholds for SNAP? Cutting low income mothers out of WIC? Fewer subsidised school lunches? Arrrrghh.

  • pjcamp on November 10, 2012 1:21 AM:

    I have infinite faith in Obama's ability to open with a compromised position, and negotiate down.