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28368Democrats' Cliff Compromise Is Bad; But the Strategic Consequences Are Disastrous

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  • Ed Pearl
    Jan 2, 2013

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

      Noam Scheiber
      Senior Editor, The New Republic: December 31, 2012
      I'll be blunt: I hate the fiscal-cliff compromise
      &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

      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.

      My far bigger gripe
      his-second-term> with the whole fiscal-cliff exercise has always been the
      strategic dimension-how it affects the next showdown with the GOP, and the
      one after that. Coming into the negotiation, Obama had two big problems:
      First, no matter how tough he talked, Republicans always assumed he'd blink
      in the end, for the simple reason that he pretty much always had. (This is
      one of the major themes of my book
      <http://www.amazon.com/Escape-Artists-Noam-Scheiber/dp/1439172404> about
      his first term.) Second, despite the results of the most recent election, in
      which Obama won a fairly commanding victory on a platform of raising taxes
      on wealthy people, the GOP continued to believe that public opinion was
      mostly on its side. House Republicans cited
      ans-no-mandate-for-tax-hikes> the preservation of their majority-never mind
      that their own candidates received fewer total votes
      than House Democratic candidates-and polls showing
      <http://www.cnn.com/election/2012/results/race/president#exit-polls> most
      Americans still think government is too big.

      Fortunately, the fiscal cliff offered Obama a chance to solve both these
      problems. He could afford to be unyielding because the economic consequences
      of going over the cliff for a few days or weeks would be relatively minimal
      012-10/> and almost entirely reversible. And doing so would immediately
      demonstrate to the GOP that public opinion was emphatically not on its
      side-polls showed
      n-tax-fight.html> that the public reaction to going over the cliff would be
      both intense and heavily trained on Republicans. Throw in Obama's
      post-election bump
      ms-if-fiscal-cliff-isnt-averted/> in approval ratings, and there was never
      a better time to hold out.

      Instead, the emerging deal will reinforce the convictions that have made the
      GOP such a toxic presence in Washington. If Obama will cave even when he's
      got all the leverage, when won't he cave? Never, the Republicans will
      assume. If Obama's too scared to stop bargaining and let the public decide
      who's right in this instance, when the polls appear to back him, then he
      must think our position is more popular than he lets on. Suffice it to say,
      these are not sentiments you want at the front of Republicans' mind as they
      prepare to shake him down over the debt limit in another two months. The
      White House continues to maintain that it simply won't negotiate over the
      limit. After this deal, why would any Republican ever believe this? I
      certainly don't, and I desperately want to.

      As in previous rounds of Obama-GOP negotiations, a lot of liberals are
      surely hoping that the lunacy of the House Republicans will save us from
      Obama's overly generous offers. And, it's true, House Republicans can
      normally be relied upon to reject a deal that's absurdly generous by any
      objective measure but falls short of their virtue-police
      e_Prevention_of_Vice_(Saudi_Arabia)> standard of purity. They may well do
      so again tonight, inshallah. But that doesn't solve the broader strategic
      problem. Obama has already shown his cards on the parameters that will
      define his negotiations with Republicans throughout his second term. And
      there's no one to save us from that.

      Update: The Huffington Post is reporting
      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.

      Update II: Changed "level of unemployment benefits" to "duration."


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