There are two lessons about this deal that most Democrats seem to be missing. First, in any "divide the dollar" type negotiation, the side that is most willing to see no deal take place has a big advantage. Second, the side that makes the proposals has a big advantage. In this case, both of those advantages were with the Republicans. We should expect, based on those two factors alone, that the Republicans would be able to get almost all of what they wanted.
The Democrats were divided between those, like Reid, who wanted a combination of modest cuts and modest tax increases and those on the left who wanted only tax increases.
The Republican House was demanding massive and immediate cuts to social security, medicare and medicaid all while refusing any consideration of tax increases. Some versions of their demands even demanded additional tax CUTS.
So what did they get? CNN has a summary of the deal here. The full text of the bill is here. The big thing is that the debt limit will be increased in stages such that we won't face this kind of crisis/deadline again until after 2013 (after the 2012 elections). There will be neither any immediate tax increases or cuts to medicare, medicaid or social security. With regard to the two biggest issues being debated, the compromises essentially punts. Neither spending cuts nor tax increases will take place immediately but both could be possible later. The bulk of immediate deficit reduction will come in the form of caps on military spending and domestic spending other than medicare, medicaid and social security. The second round of deficit reduction will take place this fall and will be proposed by a bipartisan joint committee of House and Senate members. If they can't get a deal then, the debt ceiling will automatically raised. The bottom line is that the deadline is postponed for a couple of years and one would be forgiven for thinking they're going to let the voters determine the actual outcome in November 2012.
The irony is that this is a fundamentally Keynesian deal. At least in the short term, the fragile recovery will not be burdened with either tax increases or spending cuts. So for all the wailing and gnashing of teeth on the left, we are going to see the Republicans sign onto a deal that implicitly acknowledges the legitimacy of Keynes' approach to economics. Von Hayek would not approve.
Many Democratic activists are running around bemoaning Obama's lack of backbone or the Democratic parties habbit of caving in to Republican demands. These are silly and, to the extent they hurt Democratic party chances in 2012, ultimately counter productive attitudes to take. Frankly, I'm inclined to think that Obama and the Democrats got very close to the best deal they could have gotten out of a Republican party willing to put the entire world into a global recession to prevent a few relatively minor tax increases on the rich and oil companies. Democrats had a very weak hand to play but managed to avoid their worst case scenario or even their second worst case scenario.
For those liberal activists convinced that Obama "caved," I'd like to know what they think he should have done in this situation. What should Obama have done with default looming? Should he have refused to sign anything that didn't include tax increases and dare the Republicans to join him in default? Doing that would not only be disastrous for the economy, it would be unclear who voters would blame for the misery that would result.
12 comments:
The Republicans may have failed to get everything they were demanding, but the Democrats got nothing, absolutely nothing. Raising the debt ceiling was not a "win" for the Democrats--not unless you believe the G.O.P. actually wanted the government to default, and aside from a few crazy Tea Partiers, no one truly did.
I agree that the Republicans had by far the best bargaining position since at least some of them were willing to drive us over the cliff. Given that, I agree that this is probably the best negotiated deal the Democrats were going to get. The mistake was in agreeing to play the game at all.
Obama should have refused to negotiate entirely. He should have drawn a line in the sand and demanded a clean debt ceiling increase. If the Republicans wanted to submit a budget with cuts, they could do that--but Obama erred in agreeing to negotiate with people who were holding a gun to his head. Obama would have taken some hits for being confrontational, but I think he would have gotten higher marks for standing up as a matter of principle.
I'm probably not looking at this situation as rationally as I should be. What RbR writes above has merit. But I'm angry. The Republicans got their way by threatening to blow up the nation's financial system. Obama should know better than to negotiate with (fiscal) terrorists.
I realize that refusing to negotiate would have risked default. But I think Obama could have made a very good case that it would be on the Republicans' heads if they failed to do their duty. And I'm just pissed enough that I am wondering if a default, under those circumstances, might have been better in the long run than giving in. Imagine what the Republicans will ask for next time. And don't think they're going to stick to this agreement either--do you really believe they negotiated in good faith? When the time comes for the second installment, expect the Republicans to filibuster it or do something else to try to gain more concessions. It worked so well this time I think it will be hard to refuse. And the cuts they want will harm our economy perhaps as badly as a default... OK, maybe not. Not sure. Like I said, I'm just peeved right now :-(
This was a totally phony crisis. The majority of the GOP is not Tea Party and also wanted to avoid a default as much as the Democrats. Your analysis, RBR, depends on believing that the GOP actually was more willing to tolerate default than the Democrats. Despite the idiocy of a few Tea Partiers, that's basically not true. And you discount the ability of the President to change the whole game by going public with a dead set refusal to negotiate with a gun to the head of the nation's good credit, a cherished national treasure since Alexander Hamilton. It was as absurd as the Democrats threatening to allow Social Security to go belly up unless the GOP gave in on taxes, and the GOP then doing so. That's the problem.
Dr. S. I'm pissed too. But I'm not in a position to weather a renewed recession unscathed. I recently saw a large pleasure yacht on the Mississippi. I thought to myself, "I wonder if that guy would have to sell the yacht if his taxes went up by 2% or if the unemployment rate spiked to 12%?" My guess is that either change would not significantly effect his life style. Sadly that's not true for for the millions of people who would lose their jobs in the event of a renewed recession. I guess I'm a little less willing to roll the dice on default.
I blame the Republicans for being willing to risk the unthinkable and use that willingness to blackmail Democrats who - in my opinion - did the responsible thing by taking what they could get and avoiding default.
I agree that the Republicans did not negotiate in good faith. They do not intend to follow through on any of the long term features of this compromise. But to be fair, I hope the Democrats will pull some sneaky moves in future rounds as well. Imagine Obama wants to make the 2012 election about Republicans defending the rich and oil companies against the "average American" that benefits and even depends on programs like social security, medicare etc. If the Democrats can be successful in 2012, all of this will be renegotiated with the Democrats in a much stronger position.
It's also worth pointing out that this bipartisan joint committee will make its proposals under a closed rule (i.e. no amendments to the proposal from the floor of the House or the Senate). That means that the Tea Party could potentially be cut out of the crucial proposal stages and be forced for the first time to "take it or leave it." At the same time, once the proposal is brought for a vote in the House Beohner and minority of the Republicans can pass the bill relying largely on Democratic votes without any support from the Tea Party. And in doing that Boehner can use the joint committee as cover by claiming his hands were tied. In effect, round two of these deficit reduction negotiations will be rigged in favor of the center whereas this round was rigged in favor of the far right. In other words, repealing the Bush tax cuts is still in play.
So when you say the Democrats got absolutely nothing, that's not entirely true. They got the Republicans to agree to postponing the tackling the two most important issues (social program cuts and tax increases) and they got them to agree to do it under procedural rules that favor the more rational voices among the leadership rather than the wild eyed radicals on the back benches.
Boehner was unwilling to openly propose anything the Tea Party opposed. Many in the Tea Party are still demanding default - Michelle Bachman for example. So while you are right that many Republicans did not want default, the most important Republicans (Boehner and Cantor) were dangerously more willing to see default than risk a rebellion on the back benches by the Tea Party.
I think that the effects of a default - higher unemployment, interest rates, mass lay offs of federal employees - would have been indescribably worse for Democrats' constituents than for Republicans'.
Of course I discount the value of "going public." It's a crap shoot at best and a fantasy at worst. There is no guarantee that if Obama made the arguments you wanted him to that they would be received the way you imagine. It would have been a very risky strategy.
The idea that Obama could under cut Boehner by going public depends on Obama's ability to shift public opinion, not nationally but in dozens of individual Congressional districts where Republicans have significant electoral advantages. In effect, Obama would have to have shifted the public opinion in exactly that 30% of the population that hates him with a white hot passion. Frankly, I'm glad he didn't stake the economic health of the nation on that slim chance.
The Bush tax cuts will expire at the end of 2012 if nothing happens. My fear is that the joint committee deal will include an extension of those cuts, which will pass due to the closed rules you mention. Remember that a previous compromise last Christmas led to exactly the same "solution" to the Bush tax cuts. Obama pledged never to do that again, but the joint committee may force his hand. To my mind, the joint committee guarantees the Republicans votes on issues that never would have made it out of Senate committee. I see nothing for the Democrats here.
Next time, mark my words, the Republicans will hold the debt ceiling hostage to pulling funding for abortions. They almost managed that in the budget negotiations early this year, where their hand was not as as strong--and before they were emboldened by this victory.
Sigh.
Double Sigh.
Of course, you're almost certainly right that Obama did the responsible thing by protecting the economy from default (although not from these cuts). I see that. I'm mostly just venting here. But at some point, Obama really does need to start taking a stand, if for no other reason than to fire up his base.
I still support Obama strongly and I will work to r-eelect him, but I'm getting really tired of watching "Mr. Halfway" sell out Democratic values for next to nothing--and I fear other Democrats will not be as supportive next year. The good guys could really use a win here.
President Obama was doing a great job with the chess game until, well, today. He may be just a pretty, shiny package without much in there...but I still like the guy but I don't know what is worse...believing that he lost is mind (and who wouldn't / hasn't) by thinking these people compromise or negotiate anything. IT is the definition of insanity isn't it? Doing the same thing over an over, expecting a different result. I maintain that he should have used his 14th amendment powers.. "Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void." I think could have won this battle in the courts.
I also do not believe this is about debt. Social Security is fully funded at 2.5 trillion, cost to administer is 1%, funded for the next 20 to 25 years. The Repubs just want to eliminate payroll taxes forever. ANd the money for social security is not a tax payer paid program is ti? We pay about 8% every paycheck and our employers do a dollar for dollar match...it is our money, not the public trough. This crisis was spawned to kill aid for working people and victims.
The best quote of the day was Emmanuel Cleaver, chair of the Congressional Black Caucus, calling the deal, "a sugar-coated Satan sandwich." When asked about that quote by her colleague, Nancy Pelosi added that it probably was, and "with Satan fries on the side," but she was going to vote for it anyway.
I find it difficult to see how a bill that cuts billions of dollars of spending at a time of economic crisis--so much so that the government will actually spend less than last year--can be described as "Keynesian." If anything, it's anti-Keynesian. The reason the cuts are "only" in the low billions is that the truth is there simply isn't that much to cut.
Obama should have insisted that any budget that runs a deficit automatically raises the debt ceiling to allow for it. But of course that would require the Republicans to vote in favor of a debt ceiling (instead of this ludicrous "resolution of disapproval"). Remember that even the Republican budget called for $1.9 trillion to be added to the deficit. That's why this whole crisis was so phony. Until the GOP is honest with the American people about the budget, I have no time for them.
A good compromise, according to proverb, is when no one is happy. So by that measure, I guess this is a good compromise. I sure don't like it. Too many "ifs", and "maybes", and "hopfullies" involved.
This deal, however, is a reminder that we now effectively have a 3rd party in the country.Will the Tea Party last? Don't know. But it is a reality and I don't think the centrists of either party have had a good strategy for dealing with them. What makes the Tea Partiers difficult is that they proclaim that they don't care about getting re-elected. And I hear shades of this in interviews during this crisis. Once you take that fear out of the equation, you can always threaten the worse. In other circles, we call it terrorism.
In the last election, the Republicans tried to sell us the tail that the stimulus had failed to work. There were no new jobs,and even fewer projects to show for this "wasted money". That is the Tea Party line. Small government. Kill government. Get government out of my SSI.Wha???
All of this ignored the corporate welfare that Obama had to had out to save banks and auto companies, all turning profits now. The auto company bailouts I don't mind so much because they actually produce something and have been doing rather well. And finally, they couldn't argue with the President's new CAFE standards. So I count that as a win.
However, the Republicans, pissed off that they failed to kill medical care reform, succeeded in killing off the Stimulus. Now they will change their song. They will now try to run on job creation. The last thing they want is for the President to succeed in healing the economy. That wouldn't work for their re-election bids.
So, they will now blame the president for his inability to create jobs. And they will find slick ways to argue about how you have to keep taxes low on "small businesses" (still trying to figure out what they mean by that. I know we've posted on this before.) because they "create jobs". This will result in maintaining tax cuts for the wealthy. They will re-package trickle down. They will support government subsidies to business in the form of tax credits and breaks, just as they usually do.
The Democrats will cry foul. But it won't matter. The Republicans seem to have an easier, less nuanced position to defend. Americans are inherently skeptical of "big" government. This makes the Democrats' message harder sell and they always complicate it with all the their nuance. They need to take up a new marketing method.
I disagree with the proverb about compromise...it assumes that both sides are awful negotiators...because one should always start at the extreme of what you want...like with health care, if Obama started with wanting a single payer system, he might have gotten a public option. So I think reaching a comprise can at times, make both sides feeling good.
With regards to the tea Party...I do not think there really is a tea party. I think it is a manufactured entity and that they are employees of big business. Every picture of the rallies I see of them, it looks like there are like 20 of them and they always look the same. Give it some consideration...with the likes of Karl Rove and Dick Army behind them, it just could be completely made up and much, much smaller than we think it is...making what has happened even more scary.
Since the government has been co-opted by corporate America, I think the corporations then, should pay all of the government payrolls. That way, no on pays taxes, you do not need the IRS...you have a small government, all paid for by corporate America. Then we all just fend for ourselves but with fatter pockets perhaps!
Dems positions are always more complex because they actually try to deal with and find solutions for complex problems...the current make up of the Republican party has less than zero interest in anything but their anger at everything...notice how they always spew on C-span...always yelling at us...they are simply frauds. The old Republican platform looks a lot what we may feel is the Democratic platform today...Barry Goldwater might look like a hippie today. It is a real shame what has happened and I never thought I would wake up and find our America in this condition.
On the Debt:
What a topsy-turvy world when the same credit rating agencies that gave the thumbs-up to the bankers’ toxic mortgage-backed securities and credit default swaps now threaten the AAA rating of U.S. Treasury bonds. According to them, it is not enough to merely lift the debt ceiling — what had been assumed by both Republican and Democratic presidents to be a routine act.
In addition to that, as the credit agency Standard & Poor’s has insisted, more than $4 trillion has to be cut from programs that mostly benefit the victims of the banking meltdown. Otherwise the agencies will downgrade the U.S. credit rating, leading to higher interest rates that will destroy what remains of the U.S. housing market, dim the prospect for any improvement in employment and further enrich the Chinese government and other holders of U.S. debt.
I think Dr. S. is right that we should simply find a way to abolish the debt ceiling by making all budgets defacto raises of it - or through some other mechanism. Most countries do not have such ceilings. But that would require another massive Democratic electoral victory with nothing else on the agenda to absorb political capital (like urgently needed stimulus packages or health care reform).
US West, the joke about Congress is that there are 535 parties. But I see your point about the Tea Party being a de facto third party. That's not unusual. Mostly rural, mostly Southern, right wing populists have always been a rogue element in America's otherwise stable two party system. In the 50s and 60s they were called "Dixiecrats." In the 80s they were "Boll weevils." In those days the Democratic party was stuck trying to manage this often anti-democratic, nationalist, pack of wild eyed reactionaries. Now the same bunch of people shouting many of the same cluster of pseudo-ideological cliches are called the "Tea Party" and the Republican Party has yet to figure out how to manage them.
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