The Washington Post has a first draft of history piece about the debt negotiations last year that tells us mostly what we already knew: that the White House was ready to sign onto a document that increased the Medicare eligibility age and instituted chained CPI, which would cut Social Security cost-of-living increases. In exchange would be $800 billion in new taxes, roughly the cost of letting most of the high-end Bush tax cuts expire (though this would be achieved by actually lowering rates and broadening the tax base).
Harry Reid and Nancy Pelosi reluctantly agreed to try and sell this. Republicans would only do it if they could count “dynamic scoring,” the notion that tax cuts pay for themselves in economic growth, in the deal. Republicans say the White House accepted that. The White House denies it.
Then the Gang of Six came out with their deal in the Senate, which included much higher tax increases than what the Administration was about to sign off on. This blew up the deal when Obama seemed to endorse the Gang of Six process (which included more tax increases), Republicans immediately backed away from it; after the White House tweaked their deficit deal with House Republicans to catch up with the Gang, the Republicans summarily rejected it.
The deal could have easily become a reality were it not for the troublesome appearance of the Gang of Six. And it could still become a reality. It says right there in black and white at the end of the article: “White House officials said this week that the offer is still on the table.” What’s more, despite the change in attitude from the President, who’s in election mode, from a conciliator to a fighter, there’s a signifying event coming at the end of the year that will force a number of these same choices to be negotiated again.
By January 1, 2013, the Bush tax cuts will expire, the payroll tax cut will expire, unemployment benefits will expire, the “doc fix” on Medicare reimbursement rates will expire, and the “trigger” of $1.2 trillion in across the board defense and discretionary spending cuts will be triggered. Taken together, this mass of deficit-reducing changes would wipe out the primary budget deficit, leaving mostly a deficit made up of financing for the national debt. Debt-to-GDP ratio will fall, the key number often cited for sustainability. Oh, and the debt limit will run out around this time as well, making it more of a forcing event.
But we’re already seeing economists line up, on the right and left, to say that this shock of immediate changes would be unacceptable. Republican Martin Feldstein said that the changes would threaten economic recovery. Democratic economist Alan Blinder described the event as a “fiscal cliff,” which would eat away at up to 3.5% of GDP.
I agree with this to a certain extent. Clearly the combination of massive spending cuts and tax increases coming all at once would put a drag on the economy at a sensitive time. But I will note that Brad DeLong heh-indeeded Feldstein’s take on not being able to “afford” the end of the Bush tax cuts, while also linking within 24 hours to Christina Romer’s point that increasing marginal tax rates would not cause an economic armageddon. In other words, there’s a way to manage all this without saying that we “must not” increase those tax rates.
But sadly, that’s where the groundwork of the grand bargain talks comes in. Democrats and Republicans in Washington are going to look for a substitute deficit package in the lame duck session, the point of the lowest ebb of political accountability, with members of Congress who will never face voters again participating, after America has elected a new Congress and possibly a new President. We know that deficit hawks of both parties are already making their plans on this substitute. It could include slashes to entitlement programs when they actually need to be increased to be adequate. It could include a raft of tax cuts even though they have done the brunt of the work on exploding the deficit, without the value of helping the economy. And what it will most surely not include, unless the work gets done today, is the perspective of those ordinary Americans who would rather not see their futures sacrificed for the betterment of the well-off in society.
And remember, “White House officials said this week that the offer is still on the table.”





27 Comments


Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About FDL News Desk
We can be screwed by Romney or we can be screwed by Obama. Forgive me if I don’t see that as a choice worth 45 minutes of my time in November.
But President Obama famously said, “I don’t care if I’m a one-term president,” so how could “election mode” come into play at all?
And if Obama is reelected? Who can trust him with the future of our social safety nets?
I’m very chary of he would try to do in a second term.
> Harry Reid and Nancy Pelosi reluctantly agreed to try and sell this.
These two are unfit to represent The People. “Nancy SMASH,” my ass.
All those shameful Congress members need to be booted out the door. This program of taking from the poor to enrich the richer has nothing to do with being a Statesman or Stateswoman. This is complete fraud on the United Stat?es!
We have plenty of money for war and bank bailouts, but not enough to cover what people have already paid for all their lives. Somebody has more than a few screws loose. They have lost the entire operating machinery!
Their intransigence on cuts means that this is “policy”, something that they planned for and are willing to play the “long game” for in order to accomplish it.
I am going to guess that the reason people do not want to see this coming or to see it when it is happening like last year during the deficit bad bargain debates, is that their image of Obama is still compromised by “idealizing” Obama. It is sort of the same cognitive constraint on rational thinking for Democrats to think that Obama “means well” by cutting their SS and MA benefits, that Republicans suffer from when they automatically shun the idea of government intervening to create jobs or to provide a valuable service like single payer health care.
Wouldn’t be the first or last time Obama lied to the American people to be the Puppet-in-Chief. He probably wants to be remembered in the US History books as the “Democrat” responsible for destroying the social safety nets. The antithesis of FDR.
“we can….?”
How about ‘we will”…..cuz the people most depend on to fight for ‘em,like the union leadership has already sold ‘em out…..not even a month since AFLCIO & SEIU leadership agreed to carry water for the Obama 2012 campaign.
Keep voting for the Dems union members…..it’s not like you are not aware that we are in this shit cuz of both Dem & GOP.
Make the sacrifice so the Revolution can begin, vote for 3 party candidates.
All the huffing & puffing we did for the Dems in 2008 got us what ? Forceclosures,you can now be mourdered by the Prez if he wants to,more wars,spying on us,We can now be held indifeintely if they feel like,no jobs & our kids teachers are being fired by the thousands.
keep voting for the Dems & you will keep getting f***ked.
You can add to the list.
I gave up on 0′s blather when he gave his speech about “looking forward, not back,” and then hired rahmbo. The “health” deal was not surprising, but extremely disappointing. This will be more of the same. he’s probably wearing those ‘walking shoes’ that he used to support the WI occupation of the state house to walk to his goal.
I’m not sure much can be done any longer. I work for the federal government and in my small office of 25 to 30 people, a full 90 percent are extreme right wing conservatives. These boards represent such a small number of people. People view Obama, Pelosi, REid as out of touch liberal wackadoons. Now of course job cuts are of course on the table in my organization, and people don’t understand it yet as I said 90 percent rail on about how we need to slash and burn federal jobs…now of course the rooster has come home to roost. the cognitive dissonance of the populace is stunningly high. I work in a science field with all people with degrees, many of them advanced, and they’re fully on board with austerity and slashing spending despite making our living working for the federal government.
Does end of year mean Sep 30 2012 or Dec 31 2012? i.e. before or after the election?
The Washington Post story makes clear the Gang of Six were the relative liberals in the whole process. Lord help us.
Obama gets what he wants. He wanted no accountability for the banksters, and he got it. He wanted no revisions to FISA, and there have been none. He wanted to kill the public option and it was killed. He wanted the power of indefinite detention of citizens without charge, and he got it. He wants war with Iran to replace the winding down of war in Iraq and Afghanistan, and he’s going to get it. He wants to slash SSMM, and he’s going all out for it.
As has been said by others here previously, we are sooo fucked.
The Lord is probably the only one who can help us. But I seem to remember my father saying something about “the Lord helps them who help themselves”.
Dude…the end of the year would coincide with the end of the world, dontcha think….December 21.
I don’t think he wants war with Iran.
As far as the rest., you’re pretty much on target. IMO.
Stupid, duplicitous, ignorant, sell-out bastards.
While I disagree with many progressives that no compromise is ever acceptable in the face of intransigence, there simply can not be any compromise on Medicare and Social Security insofar as eligibility age and cost of living increases are concerned. First, most every impartial economist agrees that using the CPI-W more fairly adjusts SSI payments than other measures being proposed by either party’s leadership. Maintaining SSI and Medicare as is or improving its efficiency and underlying funding should be a priority for Democrats, but diminishing the safety net as an element of negotiation for something pushed solely by conservatives and not based upon sound economics is not acceptable.
How about a conversation about balance of payment deficits, the real deficit 5000 pound elephant. The budget deficit is a complete fanciful straw man concocted by and exacerbated by conservatives who wish to cut funding for the very programs that Obama held out as concessions in an effort to engage in some ridiculous deficit slashing.
It would seem that what happens in the lame duck session is dependent on the results of the election. And there is strong popular sentiment against such a grand bargain. Popular sentiment that might be on the warpath prior to the election.
When I hear “end of the world”, my first instinct now is to ask “Whose world?” To often it is the end of the world for those who were under the illusion that they could predict the end of the world; their world ends and they must discover a new world.
“there’s a way to manage all this without saying that we “must not” increase those tax rates.”
Yes – and it is obvious.
Stop with the Grand Bargain – there is no need to make a Grand Bargain as if you are under pressure when the only pressure is to a pretend because you want to give away the safety net and not disturb the rich.
It is easy to LET ALL THE CLINTON RATES RETURN AND LET THE DEFENSE CUTS TAKE EFFECT. Then the position becomes the GOP begging for tax cuts abd defense spending – and it is their turn to offer up the crown jewels.
Does anyone not believe that within 60 days of 1/20/2013 new tax cuts would be passed and military spending saved, so the bullshit about a 3.5% GDP decline would never happen? Only Obama wants to add in the destruction of the safety net because he is a mean soulless evil person that happens to be black, the “being black” meaning we can’t talk about the evil with those that are normally our allies.
Boy, did you ever hit the nail on the head (so to speak).
I wouldn’t count on popular opinion affecting what happens in a lame duck session.
Remember, the only reason Obama didn’t get his Grand Bargain last year was because Boehner couldn’t deliver the much sought after Tax Cuts (which really aren’t since the tax rates will be dropped so drastically for the wealthiest Americans). Chuck Schumer stated as much on Meet the Press, and Patty Murray (WA) reiterated this during a recent Senate committee hearing.
Vote downticket.
Why? So some Democrats can have a turn at the trough?
Look at it a different way: You can have Sonja Sotomayor or Sam Alito replace Ruth Bader Ginsburg, either creating a 5-4 liberal split on the Supreme Court or a 6-3 ultra-conservative majority.
Obama looks a whole lot better when you think of it that way, no?
If Ruth Bader Ginsburg gets replaced by one of Mitt Romney’s AEI picks, remember how much better it made you feel to stand up to the horrible Obama and declare your self-congratulatory independence.
No.
I’m not sure why you imagine that your holier-than-thou scolding is going to persuade me to vote for your party’s Presidential candidate.
But hey, good luck with that.