Note: Such are things right now that writing about the fiscal cliff struck me as a welcome diversion.
Ezra Klein is the White House’s favorite young journalist, so he’s been the guy when it comes to the post-election fiscal cliff negotiations — especially regarding trial balloons from a Democratic White House trying to find out how much it can concede before causing a freak-out on the left. Here’re the basics from the latest volley:
Boehner offered to let tax rates rise for income over $1 million. The White House wanted to let tax rates rise for income over $250,000. The compromise will likely be somewhere in between….
The total revenue raised…will likely be a bit north of $1 trillion. Congress will get instructions to use this new baseline to embark on tax reform next year. Importantly, if tax reform never happens, the revenue will already be locked in.
On the spending side, the Democrats’ headline concession will be accepting chained-CPI, which is to say, accepting a cut to Social Security benefits…
On stimulus, unemployment insurance will be extended, as will the refundable tax credits. Some amount of infrastructure spending is likely. Perversely, the payroll tax cut, one of the most stimulative policies in the fiscal cliff, will likely be allowed to lapse, which will deal a big blow to the economy.
As for the debt ceiling, that will likely be lifted for a year, at least.
As a left-of-center commentator, I will be breaking no new ground in arguing that this deal is, from my perspective, very bad if not outright terrible. Just to reiterate why, let’s one more time go through the situation at the present moment.
If Barack Obama makes no deal before the first of January then he automatically gets the hike on top-tier earners that he wants. He gets a hike on everyone else too, which he says he does not want, and which no one believes the GOP will want either. Right there you’ve got around $850 billion in revenue over the next decade. Done.
Obama doesn’t want all of the cuts scheduled to phase-in throughout 2013 to hit, though, because that would be bad for the economy in the short-term. (Bruce Bartlett argues it’d be good in the long-term, but Obama isn’t president for the long-term so I doubt he’s interested.) Considering how large a chunk of the scheduled cuts are coming out of the Pentagon, Republicans aren’t much interested in that either. So when it comes to delaying massive austerity, everyone’s on the same page again.
Where the GOP diverges from the White House — and, unlike the issue of upper-income tax hikes, actually has some leverage — is raising the debt-ceiling and extending unemployment insurance as well as the payroll tax cut. (There’s also the issue of further stimulus for improving infrastructure or the like, but there’s no chance in hell Republicans will accede to that in any feasible scenario.) On the debt-ceiling, Obama has repeatedly said he will not negotiate on that, full stop. So here’s what Republicans actually have that Obama wants and that they can give to him:
Extending the payroll tax cut. Extending unemployment insurance.
Now look back again on the deal Klein’s reported. It features: less revenue on top-earners, more cuts to social insurance (including a significant one to Social Security that no one in their right mind could argue has any value beyond it being a concession Boehner can brag about to his troops), negotiations on the debt-ceiling, and no extension of the payroll tax cut. The one thing Obama gets that he couldn’t get by taking a two-week-long nap? Unemployment insurance. That’s it.
This is an unacceptably bad deal.
[x-posted @ Jubilee]