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Democrats' Cliff Compromise Is Bad; But the Strategic Consequences Are Disastrous

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  • Ed Pearl
    http://www.tnr.com/blog/plank/111521/the-cliff-compromise-bad-the-strategic- consequences-are-disastrous# Democrats Cliff Compromise Is Bad; But the Strategic
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      consequences-are-disastrous#

      Democrats' Cliff Compromise Is Bad; But the Strategic Consequences Are
      Disastrous

      Noam Scheiber
      Senior Editor, The New Republic: December 31, 2012
      I'll be blunt: I hate the fiscal-cliff compromise
      <http://hosted.ap.org/dynamic/stories/U/US_FISCAL_CLIFF?SITE=AP&SECTION=HOME
      &TEMPLATE=DEFAULT> that Mitch McConnell and Joe Biden are hammering out
      today, which will make the Bush tax cuts permanent on income below $450,000,
      renew the current, relatively generous, duration of unemployment benefits
      for a year, along with some low- and middle-income tax credits, and grant
      the GOP a reprieve on the scheduled reversion of the estate tax to its
      Clinton-era level. I think the president made a huge mistake by negotiating
      over what he'd previously said was non-negotiable (namely, the expiration of
      the Bush tax cuts on income over $250,000). Then the White House compounded
      that mistake by sending Biden to "close" the deal when Harry Reid appeared
      to give up on it. As a practical matter, this signaled to Republicans that
      the White House wouldn't walk away from the bargaining table, allowing the
      GOP to keep extracting concessions into the absolute final hours before the
      deadline.

      Having said that, I disagree with my colleague Tim Noah
      <http://www.tnr.com/blog/plank/111520/kill-deal> a bit: I think a
      reasonable person can defend the bill on its own terms. The fact is that
      nudging up the tax threshold to $450,000 only sacrifices $100-200 billion in
      revenue over the next decade (against the $700-800 billion the
      administration would have secured with its original threshold), while
      allowing unemployment benefits to lapse would cause real pain to both the 2
      million people directly affected and, indirectly, to the economy. Yes, Obama
      could have gotten the latter without giving up the former had he just waited
      another few days-at which point what the GOP considers a tax increase
      suddenly becomes a tax cut. But these things are always easier to pull the
      trigger on when you, er, don't actually have to pull the trigger. I can't
      begrudge Obama his wanting to avoid some downside risk for only a marginally
      better deal.

      Update: The Huffington Post is reporting
      <http://www.huffingtonpost.com/mobileweb/2012/12/31/fiscal-cliff-deal_n_2388
      823.html?1356976452> that the deal will make up some additional revenue by
      capping deductions for the most affluent. I suspect there will be more
      updates as the afternoon goes on.
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