Tweet
President Obama should not count a tax increase on the wealthy or raising the debt ceiling as real Republican concessions, because they would ultimately be forced to accept those anyway
A simple look at who holds the legislative and political leverage would reveal there is very little actual need for President Obama and Congressional Democrats to compromise with the Republicans on almost anything related to the so-called “fiscal cliff.”
Most of the things Obama is publicly saying he wants will either happen automatically, can be accomplished through executive action, or would be all but politically impossible for Republicans to deny him. Since Obama will never face re-election again (but most Congressional Republicans will), he is in better position to hold out in a game of political chicken.
Let’s go down the list. The tax increases on the wealthy are going to happen automatically at the end of the year when all the Bush tax cuts expire. In the new year the GOP can try to defend the wealthy by refusing to vote for a tax cut simply because it doesn’t cut taxes enough for rich people, but that would be a political nightmare for them. Many top Republicans and conservatives are openly admitting the party has no leverage on this.
Next is increasing the debt ceiling. The GOP thinks they have a lot leverage here but they don’t. The only reason they had “leverage” last time is because Obama was foolishly willing to help manufacture a crisis to try to get a grand bargain.
Obama can theoretically address this problem using the trillion dollar platinum coin, invoking the 14th amendment, or saying conflicting Congressional laws force him to ignore the debt ceiling. If Obama doesn’t want to take unilateral action on the debt ceiling, he can just threaten a government shutdown. There would still be enough tax revenue to pay bondholders, as well as for essential services, even after the debt limit was reached. Government contractors and Medicare providers, though, would start getting I.O.U.’s. Faced with so many angry rich people, the GOP would likely fold rather quickly.
The final big issue is the sequestration cuts. No one in either party seems to like them, but the military-heavy nature of the cuts means Republicans are most upset by them. If Obama just demands their repeal, it is hard to see how the GOP would be able hold out once faced with heavy lobbying pressure by the defense contractors. Obama doesn’t need their donations again, but Republicans in Congress do.
There are a few things that Obama publicly claims to want that he couldn’t get without compromise, such as an extension of unemployment benefits, but those make up only a small part of the overall negotiations.
This should be in the forefront of people’s minds when judging any deal Obama may or may not reach with Republicans. By simply being intransigent, Obama could get much of what he claims to want without giving anything to the Republicans in return. What Obama “gives up” should only be weighed against what he couldn’t have gotten eventually. Things like accepting a tax increase on the wealthy or raising the debt ceiling should not even be counted as a real concession by Republicans because they would be forced to accept those anyway.
31 Comments
Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About FDL Action
The closest Obama has come to playing “hard ball” was in the final moments leading up to ACA passage when he used his stick on Democrats.
The smart money says he will give up something or many things he doesn’t have to in order to get his coveted grand bargain.
He’ll fold like a $5 Kmart lawn-chair. I’d love to play Poker with him. I’d own him, his family, and his family’s family inside of three hours.
Time for another liberal enabler to say go ahead and cut SS with a chained CPI, “it ain’t so bad”.
Derek Thompson at Atlantic:
http://www.theatlantic.com/business/archive/2012/12/chained-cpi-the-sneaky-complicated-idea-that-could-avoid-the-fiscal-cliff-explained/266098/
The real thing to keep in mind is that Barry isn’t “giving up” or “compromising away” anything. As long as the myth prevails that Obomba and the Dims are after the opposite of what their long history of the last 40 years shows, the longer this meaningless kabuki will continue.
Or Obama could simply take Pete DeFazio’s advice, and wait until the damn Congress gets back into full legislator mode after the New Year.
But what we the sheeple aren’t being told by our Congress critters, or by the President, is that the main reason why the rich must have action on the “Fiscal Cliff” right now is this one: the Obama/Bush tax cuts for the Elite expire on Dec 31st if nothing is done. And don’t forget – most people in Congress are RICH.
The real Obama isn’t the one we imagine he is .
I agree, President Obama has the Power to do it almost all on his own. . . There will be no deal, because the best deal the GOP can get IS the “Fiscal Cliff” they’ll never get real spending cuts any other way.
The way I see it, the House will pass an extension of the Bush tax cuts for the lower 98% of tax payers, thereby the top 2% will get their tax rates increased on Jan 1st. Then everything turns to spending cuts.
Here’s what I’ll keep in mind.
There are economic theories that say deficits are good, not bad, during a downturn, or that deficits are meaningless in a country sovereign in its money supply.
If one doesn’t subscribe to these theories, there are ways to resolve the debt and deficit without harming the majority of the people of this country, now or in the future, and which will actually benefit them in some ways. People’s Budget link.
We know how the deficit and debt were created (Bush/Obama tax cuts which primarily benefited the wealthy, Bush era prescription drug program, Bush/Obama wars, lack of revenue due to under/unemployment caused by the financial crisis)
We know which income levels of people and which corporations got wealthier as a result of the events and programs that caused the deficit and debt.
Any solution to the deficit/debt should be paid for by those people and corporations who became wealthier.
Anything else is deliberate and needless cruelty inflicted on people by politicians of both parties.
Roman empire , German empire both failed when the protection from the military cost more than they could ever afford .
We can’t afford a trillion dollars a year for oppression without destroying the country.
Converting the Bush Tax Cuts For The Rich to Bush Tax Cuts For The 98% is expected to bring in $80B next year.
Where to get the next $Trillion to cover the rest of next years deficit?
Leading Democrats have taken public positions against giving up cuts to Medicare and Social Security. Doesn’t that pretty much kill the “Grand Bargain”?
Thank you. You laid it out clearly and simply. We need to engage our friends and neighbors and with these points we can make a very good case.
Excellent analysis of the array of power.
The only sticking point that faces Obama about doing nothing are the expiration of the middle-class tax cut, the cuts that will happen automatically in some specific programs, and the economic effects of a short-term shock. He has to make the appearance (and likely the reality is not too different) of a good faith effort to negotiate on those items in order, come January, for the onus to fall on the House Republicans.
The bet here is that John Boehner cannot control his House caucus sufficiently to pass the Senate’s middle-class tax cut bill or any other bill that has a tax increase. And that what Boehner wants is enough compromise to sucker all of the Democratic caucus into voting for significant cuts to Medicare, Social Security or other “entitlement” with just a few Republicans from safe seats joining them. Of course, as in past votes such as the ones in 2011, Boehner expects the President to whip the Democratic caucus in the name of a deal.
But as you point out, this is not 2011. The conventional wisdom in the comments here is that Obama either will not recognize that or philosophically agrees with Republicans. My position is that we will find out by the time the Presidential budget in introduced in February whether that conventional wisdom is correct.
On the debt ceiling issue, I suspect that instead of asserting the 14th amendment or mint a $1T coin the President will shove Congress’s nose into the hard decisions about revenues and spending. Congress overall has a 9% approval rating. How low can it go? And those hard decisions fall increasingly on the Republicans in the House, who have the power of the purse and a narrative about the economy that over testing for a generation has proved to be utterly false.
Businesses taking that $4 T in money off the table and investing in substantial private infrastructure improvements could do that. There are lots of opportunities: improvement of the track on the US rail network to permit high-speed trains, upgrading broadband service and finally broadband to residential customers, deploying electric utility smart-grids to permit distributed generation of electricity, investments in wind farms, further weatherization of private buildings and upgrading to more efficient heating units and low-flow plumbing, and on and on. It would not take much to generate enough economic activity to have $1T + in federal revenue increases by September 2014 without raising rates further.
What Congress can do is strip specialized business tax breaks from the tax code (and there are oodles of them).
“… Democrats have taken public positions against giving up cuts to Medicare and Social Security. “
When the times comes, we will be told that “we must not allow the perfect to be the enemy of the good.”
Translated this means that we must accept “the barely tolerable in order to avoid the unimaginable“.
Nice article Jon.
I am watching “the great capitulator” very carefully to see exactly what “he gives away” in exchange for nothing. I think he works for the 1%. And, I didn;t vote for him last time and I won;t for him next time.
What???????
Never mind. Damn.
Regretfully, I think they alread have the program printed until 2016.
Hang on alan. $1 trillion minus $80 billion is….let,s see, that’s 2, carry the one……shit! That’s still a whole helluva lot o’ money.
Certainly puts a whole lotta holes in it. I think whatever we get will be more like a “Grand Shafting”.
But that’s just me.
Excellent analysis as always.
Let’s not forget that the republicans don’t have a conscience and only care about their benefactors, the 1%. The question is, how much nose are they willing to cut off to spite their face?
Good argument.
But, ya’ know, you don;t hear the word “oodles” used very often these days in debates on economics and/or taxes. Reminds me of my mom. :-)
Lets just say since debts and deficits are meaningless to a currency issuer, any effort to use those things to gain an advantage is at least dishonest and likely immoral.
Like your comment. I also don’t expect him to mint a coin or use the 14th. We will find out soon enough, but I think Obama wants a grand bargain. What might give him pause is his sense of what history will think of him cutting popular programs. We will see.
Why do you want to cover the deficit? I know what the Rs want but why do you want to do that?
I don’t dispute that. But it’s equally dishonest and immoral to pretend that the only way to resolve those issues, for people who think or choose to think the issues are real, is by harming millions and millions of people who didn’t cause the debt or deficit, when the money is available from those who profited from the situations that caused the deficit/debt.
I simply do not believe any of the PTB don’t really understand how money works. And if they don’t that’s not my problem. Time they got at least as smart as me. I’m making no more excuses for those people. That is one of our problems. Oh, we say, they don’t understand so cut them a little slack right. Graduates from the best Ivy League schools yet. Dumb asses.
Just a short story you may appreciate. My niece is poor. She and her husband never finished high school. He has been a janitor for twenty five ears, she raises toy dogs for sale and takes care of kids. I said to her one day that government could not go broke bc they printed the money. She said something like ” I always knew that but was afraid to say so”. So Ivy League school grads ain’t got a clue?
It’s a once-popular term of art in economics.
fwiw, high level of description of debt that I like via Yves at Naked Capitalism: Fable of Moral Arithmetic
Prof. Dean Baker has been excellent asking the elites and Obama a critical question, “where did the money go?” As Prof. Baker points out, capitalism works because one person’s debt is another person’s treasure. Money is exiting the system, for several reasons. Among them, we let Wall Street siphon off trillions and then hide it offshore. We off shored our manufacturing to folks who do not get paid enough to buy our exports.
Those that count understand capital flow,but the mosaic of the the entire corporatist narrative is dependent on deficits squeezing out “a finite amount of money” from the private sector that would otherwise be invested in job creation .Trickle down economics was spun by Hill and Noltoni to make the masses see money within national borders.The same is true of free market fundamentalism,which means capitalist who hate capitalism,opt for predation as opposed to competition ,extraction over expansion,confiscation over production ,and all the tax evasion and outsourcing schemes .
I disagree bluedot on one very important point ,we cut them zero slack .We cut ourselves slack ,because beyond denial we really know corporations are in complete control of our government and we are being ruled by the anti-capitalism ethos of monopolists ,yet we don’t have a clue as to how we rid the country of this tyrannical kleptocracy .
Ok, then what’s the point of raising the rates to get the $80B if the rest of the $1T doesn’t matter?