|Obama - what the hell is wrong with you, man?!?|
Good God, it has been a ridiculous few days in DC. In general, rather bad for the country, though not terribly unexpected.
Let me explain.
Up until this week, the Obama Administration had been holding tough in its negotiations over the fiscal
Then, on Monday, Obama started to buckle, just like he did in the summer of 2011 over the debt ceiling. What the hell, Obama?
Anyway, on Monday, Obama started to give away the farm - raising the threshold at which higher taxes would apply, letting the payroll tax expire, $1.2 trillion in new spending cuts, and cutting Social Security - while in exchange he'd receive an extension of unemployment insurance and a two-year debt ceiling increase. Perhaps it's more important to Obama to get a deal period than what is in the substance of the deal - that would explain his seeming incompetence - but I sincerely hope that's not the case.
I'll turn to Paul Krugram for a detailed analysis of Obama's offer:
Indeed, it looked like Christmas had come early for the Republicans, and for John Boehner, the Republican Speaker of the house.First things first: cutting Social Security benefits is a cruel, stupid policy — just not nearly as cruel and stupid as raising the Medicare eligibility age. But sometimes you have to accept bad things in pursuit of a larger goal: health reform should have included a public option — heck, it should have gone straight to single-payer — but a flawed route to universal coverage was better than none at all.The question about this looming deal is whether the end justifies the means. Unfortunately, it’s not nearly as clear a case as the health care deal, and I’m agonizing, big time; as of last night I was marginally positive, right now marginally negative.Let’s talk about what’s going on.First of all, the comparison has to be with what we think Obama can get if he goes over the cliff; if that happens, all the Bush tax cuts expire, and he can propose and probably get accepted a new round of middle-class cuts — but nothing else: no extension of unemployment benefits (another cruel, stupid action), no infrastructure spending to boost the economy.So how does the possible deal differ? It doesn’t raise rates on the second-highest bracket, which means that the tax hike on earned income only falls on those making $400,000 or more. As I understand it — the reporting is weirdly silent on this, but it’s what I got from my own conversation with an SAO* — is that taxes on unearned income are going back to pre-Bush levels: capital gains at 20 instead of 15 percent, dividends taxed as ordinary income. If I’m wrong about that, this is easy: no deal.And there’s extra revenue too, notably from changing the treatment of itemized deductions: instead of being a deduction from taxable income, they offer a tax credit, not to exceed 28 percent — which means a further substantial tax rise for people in the top bracket. Overall, there’s more revenue in this deal than you get from letting the high-end tax cuts expire after the cliff.So the revenue side isn’t that bad; we do make some headway on unstarving the beast. On the other hand, I really don’t think of revenue — as opposed to preserving the social safety net — as being the most important thing.Also on the plus side, extended unemployment benefits and more infrastructure spending. But no payroll tax cut extension, which means a fairly big dose of austerity despite the deal.But then there’s the Social Security cut.Switching from the regular CPI to the chained CPI doesn’t affect benefits immediately after retirement, which are based on your past earnings.What it does mean is that after retirement your payments grow more slowly, about 0.3 percent each year. So if you retire at 65, your income at 75 would be 3 percent less under this proposal than under current law; at 85 it would be 6 percent less; there’s supposedly a bump-up in benefits for people who make it that far.This is not good; there’s no good policy reason to be doing this, because the savings won’t have any significant impact on the underlying budget issues. And for many older people it would hurt. Also, the symbolism of a Democratic president cutting Social Security is pretty awful.So is what Obama gets out of this — basically unemployment benefits and infrastructure — worth it? The hardship of the unemployed is important; on the other hand, the numbers here are only about half a percent of GDP. As I said, right now I’m not feeling positive.I understand that Obama prefers not to go over the cliff and face the political and economic uncertainty that this opens up; maybe my assumption that he can still get the middle-class tax cuts is wrong. On the other hand, cutting Social Security, even modestly, is a very big concession, especially because, as I said, it’s cruel and stupid viewed purely as policy.One thing is for sure: any further concession on Obama’s part would make this a total non-starter. And I’m waiting for clarification on capital gains and dividends. But even as it stands, it’s not a deal to be happy about.
Of course, the Republicans didn't take this offer as the final, take-it-or-leave-it, "I'm not making a better offer" offer, but, rather they saw it as a sign of weakness to try to exploit.
Yup, the Republicans (specifically, Boehner) decided to reject Obama's offer - even though Obama offered them far more than he probably should have, and admitted as much later - and decided to abandon talks with Obama and push for even more by going it on his own with the House Republicans.
Thankfully, Boehner's plan to push for even more backfired on him spectacularly - Boehner couldn't get the House Republicans to back his "Plan B," which was so ridiculously biased in favor of the rich and against the poor and elderly that it had no chance of passing the Senate. For the second time in his career as House Speaker, Boehner took a completely symbolic bill that had no chance of becoming law and turned it into a referendum on his leadership - and for the second time, he failed.
Boehner couldn't even manage to get the Tea Partiers in the House to support a bill so obviously extreme that it had no chance of becoming law.
In all likelihood, Boehner never had the votes to cut a deal with President Obama - not ANY deal, whether a grand bargain on deficit reduction or a piecemeal something-or-other to offset some of the more extreme aspects of the fiscal cliff. Perhaps "Plan B" was just an attempt at a face-saving maneuver to try to escape this disaster without having to admit that, just like in 2011, he never had the votes to deliver a deal.
In a parliamentary system, Boehner would probably resign and his party would elect a new leader - but that's not the way we do things here. It's sort of hard to see how this plays out; there are two different scenarios, and as silly as it sounds, they depend entirely upon the feelings of John Boehner:
- Boehner wants to remain speaker, so he has to tow the line along with the lunatic wing of his party. We'll go over the fiscal cliff; we'll probably hit the debt ceiling and default for the first time ever; and we'll enter another prolonged financial crisis - all because John Boehner wants to remain Speaker of the House and doesn't have the balls to stand up to the lunatics in his own party.
- If it wasn't before (though it should have been), it is now clear to everyone that there's no way to bring the lunatic wing of the Republican Party in on a deal over the fiscal cliff and/or debt ceiling. Boehner wants to do what's best for the country, so he works out a deal with the White House and Senate that can garner the votes of the House Democrats and just enough moderate Republicans to pass the House. It's by far the best outcome for the country, but Boehner probably loses the Speakership to someone more aligned with the Republicans lunatics.
And what should Obama do? Well, the lunatic wing of the Republican Party saved him from having to make good on the bad deal he offered Boehner - that's a good thing, both for Obama and the country - especially since it seemed like Obama might have been willing to give away even more. But thankfully, the Republican lunatic wing wasn't able to just say "yes" and accept a huge victory.
If I were Obama, I'd rescind all offers on the table and reach out to the few most moderate members of the Republican House and see what they would need to see in a deal to be able to vote for it, with the knowledge that the House Democrats and Senate Democrats would also have to agree to the bill.
That would be great, but don't get me wrong - I don't think it's going to happen. Unfortunately, I think it's more likely that Obama continues to capitulate (see below) and he and Boehner find something (even worse than Obama's final offer) that half the House Republicans and ~70 House Democrats can hold their noses to pass - at that point, I hope that the Senate Democrats have the balls to vote it down, even if Obama says he's OK with it.
Or we could go over the fiscal cliff. Honestly, I'd rather go over the cliff than agree to any more concessions. And to me, going over the fiscal cliff wouldn't be a big surprise.
All that aside - for me, the big questions is, WHY IS OBAMA SUCH A TERRIBLE NEGOTIATOR?
WHY? WHY WHY WHY?!?!?
Obama and I both went to Harvard - he apparently didn't take Negotiation classes there, like I did. Why does he negotiate against himself, offering concessions to the Republicans without getting anything in return? Why does he propose the politically unpopular cuts, instead of making the Republicans own them?
And why has he decided to start compromising over the debt ceiling, which is a terrible move for both him and the country? If the Republicans are intent on making the U.S. default for the first time ever, it would be better to do it now, while Obama is near the peak of his post-reelection popularity and can pressure Congress for a permanent debt ceiling solution, even if it does push the U.S. back into recession - what does Obama gain by putting this fight off for another year or two? Nothing! So grow some balls and have the fight now, Mr. President!