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December 19, 2012

Obama Proud of His Fiscal Slope Offer, For Some Reason

Posted in: Uncategorized

For some reason, liberals are agonized by the fact that a Presidential press conference about gun safety legislation devolved into questions about the fiscal slope. As if this has never happened before, or that reporters are Constitutionally obligated to stay on topic. Or that the fisal policy of the world’s largest economy shouldn’t stay in the foreground! To be honest, this mentality, this “tuning out” of fiscal policy in favor of something with more perceived emotional weight (because the ability of a senior citizen to have a dignified retirement isn’t emotional at all, or something), represents at least part of why liberals have lost on economic policy for three decades. It just doesn’t “get them right there”, I guess.

Anyway, the President had to defend his latest offer, with its spending cuts commensurate in level with the sequester, benefit cuts to Social Security, concession on marginal tax rate increases by moving the dividing line to $400,000 a year and allowing open the opportunity for debt limit hostage taking down the road. And he basically bragged about the wise centrism of his offer. He called it the “largest piece of deficit reduction we’ve seen in the last 20 years” and said it would resolve out deficit and debt issues for the next 10 years. Because that’s how things work, right? Deficit scolds just go into hibernation once some mythical level of stabilization gets reached.

Obama basically ignored the implications of the benefit cut in Social Security, and ignored the regressive tax increase for everyone associated with the move to chained CPI. He mainly expressed puzzlement that Republicans haven’t taken his deal, since he’s gone “more than halfway” in their direction. Um, that answers his own question. If by doing next to nothing, they can watch the President give up on things he long demanded – he said he would veto anything that extended the Bush-era tax rates above $250,000, and that he would not “play the game” anymore on the debt limit – then why wouldn’t they just keep sitting still and letting the President come to them? As Paul Krugman points out:

But sure enough, it looks as if Republicans have taken the offer as a sign of weakness, as a starting point from which they can bargain Obama down. Oh, and they’re not giving up at all on the idea of using the debt ceiling for further blackmail.

In other words, all of a sudden it’s feeling a lot like 2011 again, with the president negotiating with himself while the other side enjoys the process.

Krugman actually mentions one further concession that hadn’t been reported initially – a concession on dividend taxes, only moving them to 20% rather than 35%. This looks more like a problem of Senate Democrats not willing to go up to 35%, but it just adds to the mix.

The President apparently feels guilty over weaponizing the debt limit in 2011, but if he were truly guilty, he would draw the line in the sand today rather than two years from now. The debt limit is virtually the only piece of leverage Republicans have in an agreement. On all other parts of this, they have either caved before or will cave later. The President says he won’t negotiate on the debt limit. By offering up this debt deal now, he’s actually in the process of doing that. And he’s basically setting up a debt default in 2014, or a major conflagration anyway, by not shutting this down immediately.

So I think this all counts as news regardless of what press conference it emerged from.


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