Actual legislative language of Senate-passed fiscal cliff deal. ow.ly/gsNPZ
— Bruce Bartlett (@BruceBartlett) January 1, 2013
Because the payroll tax cut is expiring and the Make Work Pay tax cut is not coming back, most working Americans will also see a tax increase. The most galling thing is that 98 percent of Americans will actually see a larger tax increase than some of the richest Americans. Working with our friends at the Center for Economic and Policy Research, we compiled the following chart to demonstrate this:
Some would argue that the payroll tax cut should be extended. I am not one of those. If they want to extend the payroll tax cut, they can re-enact the Making Work Pay refundable credit from the stimulus bill and leave Social Security entirely alone. If they want to play with the ceiling for higher rates to add that credit back in, then fine. That payroll tax holiday was and is dangerous and puts Social Security in play when it shouldn’t be.
Talk all day January 2nd about it, then wait to act until the new Congress is sworn in. Let the markets swoon a bit to put some pressure on Republicans and their portfolios.
Then get the deed done, include scheduled debt ceiling increases, toss sequestration aside, and go home.
[O]n the principle of the thing, you could say that Democrats held their ground on the essentials — no cuts in benefits — while Republicans have just voted for a tax increase for the first time in decades.
So why the bad taste in progressives’ mouths? It has less to do with where Obama ended up than with how he got there. He kept drawing lines in the sand, then erasing them and retreating to a new position. And his evident desire to have a deal before hitting the essentially innocuous fiscal cliff bodes very badly for the confrontation looming in a few weeks over the debt ceiling.
If Obama stands his ground in that confrontation, this deal won’t look bad in retrospect. If he doesn’t, yesterday will be seen as the day he began throwing away his presidency and the hopes of everyone who supported him.
I’m fairly sure that the Republicans are going to say they’ve already made their contribution to the “balanced approach” with tax hikes for the wealthy. That’s why they called it “moving the goalposts.” This round was all hikes — they expect that the next round is going to be all cuts. It’s nice that the president is looking for more revenue, but I think it’s fairly clear that he got all he’s going to get.
It’s now going to be about spending. And the Republicans know what cuts the president has already put on the table. Let’s just say it would be a lot better for the people if they didn’t. On the other hand, I have to wonder just how many times he has to offer them up before people believe that he really wants to do it? That many elite Democrats do too?
[T]his [deal] may not really have cost Dems all that much in new revenues. The more serious problem for liberals is what the outcome says about what comes next. Obama had repeatedly insisted he would not budge off his demand that taxes go up on all income over $250,000. That obviously didn’t happen. The risk is that this will set a bad precedent for the next round in this fight, in which Republicans will hold the debt ceiling hostage to extract the deep cuts to entitlements they want. It’s reasonable to worry that today’s outcome, by signaling Obama’s over-emphasis on getting a deal for its own sake, will set the stage for a cave later.
It’s on Obama to prove those worries unfounded. Obama has pledged to win more in new revenues from the rich via tax reform, has vowed not to agree to any deficit reduction that relies only on spending cuts, and continues to insist on a “balanced” approach. Only Obama, however, can ultimately define what he means by “balanced.” Liberals must continue to insist that this mean that the sacrifice necessary to reducing the deficit will not borne by the poor or seniors who can’t afford it.
In the end, how you think about this deal really comes down to expectations—for now and for the future. The expectations for now are about what you think the administration could have gotten (and maybe could still get) by holding fast to stronger demands. Given that all the Bush tax cuts expire at midnight anyway, the group Citizens for Tax Justice said, “America would be better off if Congress simply does nothing and allows the Bush income and estate tax cuts to expire completely.” AFL-CIO presidentRichard Trumka took to his twitter account to express his reservations, though he stopped short of asking lawmakers to oppose the deal. Wrote Trumka, “its not a good #fiscalcliff deal if it gives more tax cuts to 2 percent and sets the stage for more hostage taking.”
Could the administration have gotten more revenue by holding out for a better deal? Quite possibly. But could the administration have gotten a lot more revenue? That’s less clear. Administration allies point out that congressional Democrats frequently floated ideas, like extending all tax cuts for incomes below $1 million, that would have generated far less revenue. Meanwhile, the administration managed to get a deal that, despite the revenue, includes no spending cuts whatsoever—on discretionary programs or Medicare, Medicaid, Social Security—even though Republicans had been demanding them.
Here’s how one Democratic insider put it to me:
If you’d asked me, the Wednesday after Election Day, if I’d be happy with an [income tax] threshold at $450 billion, basically a split-the-difference on the estate tax—they got exemption, we got rates—unemployment insurance for a year, and a doc fix—which is the republicans main weapon to attack Obamacare—I’d tell you that’s a pretty fair deal. And I basically feel the same way today.
My far bigger gripe 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 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 Republicanscited the preservation of their majority—never mind that their own candidates receivedfewer total votes than House Democratic candidates—and polls showing 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 and almost entirely reversible. And doing so would immediately demonstrate to the GOP that public opinion was emphatically not on its side—polls showed 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 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.
For all of you trying to figure out what the unseen force is that prompted President Obama to take this deal now rather than simply go over the cliff and be in an even better position post-cliff, I think I have a good answer for you. All the arguments about Obama caving and being a bad negotiator and all the rest leave out one simple and fairly sufficient factor — Obama really wants a deal. That means more than it sounds like it means. He doesn’t want a deal at all costs. That greatly overstates it. But a deal to some real degree for the sake of finding common ground and having a deal is a big consideration for him. That’s not my personal disposition or the way I meet the world. But it is his. And once you get that, the storyline starts to make more sense.
Was it worth risking austerity policies that squeeze the middle class simply to lock in even higher tax revenues? Perhaps. People can certainly disagree, and personally, I’m not completely sold on my own rosy take. But when you’re dealing with House Republicans, who could have very easily passed a tax cut bill after going over the cliff that ignored EITC or unemployment insurance, or even set the tax threshold at $500,000 and dared Democrats in the Senate to block it, I find it very difficult to criticize the president too harshly.
In the end, Obama went with the bird-in-hand of a certain deal. Arguing that he could have gotten a better agreement had he held out sounds reasonable, but it ignores the potential obstacles in dealing with a political party that has no interest in the plight of working people or the responsibilities that come with running a large country.
And the consider this: about two weeks ago, the left was up in arms over the possibility of benefit cuts to social security and Medicare. None of that happened – the country’s social insurance programs will remain largely untouched. At least, for the time being.
In fact, when one looks at the likely deal that will resolve this latest fiscal crisis, it is only further evidence of the GOP’s utter hypocrisy on fiscal matters. Consider the major concessions the Republicans got from Obama: a less onerous change in estate taxes, which most directly affect the wealthiest Americans, and a tax break for those making between $250,000 and $400,000.
That’s right: we fought this entire battle so Republicans could make it harder for rich people to avoid paying more of their fair share in taxes.
A party that has made deficit reduction its clarion call, and in particular, reducing the size of government spending, appears to have received virtually nothing in the way of major spending cuts in this deal or deficit reduction for that matter. When push came to shove, reducing tax burdens was all that mattered to the GOP.
Like Cohen, it’s really hard for me to have a rosy view of the American future so long as one party (either really) takes a position that it will completely shut down the country for political purposes. I don’t know how this ends either, not with the science of redistricting ensuring Republican control in many states they receive the minority of votes, the very real possibility of Republican-led states changing election laws to split up their electoral votes before 2016, and an increasingly radical agenda. In the longer term, I feel better knowing that people of my generation and younger are beginning to play a larger role in politics. I may well be too optimistic here.
Of course, I had no hope for Obama when I voted for him and I’m not sure why anyone would. We all knew what Obama was by November 2012 and there’s no reason to think what we don’t like about him will change. Voting is not a morality tale–it’s a choice of who is less evil. That choice was clear. I’m not at all confident over his behavior in the debt ceiling. But at the very least, this bill does raise more revenue and taxes the rich more fairly without cutting social services. From a short-term view then, I guess this leans more toward a win. But short-term views aren’t the most valuable and real judgment should be withheld until the debt ceiling [is] resolved.
[W]e have gone over the cliff. There was no deal approved by Congress and signed by President Obama before the 1 January deadline.
This is important because the budget reporting on the “fiscal cliff” repeatedly asserted that the country and the economy faced dire consequences from not having a deal reached by this deadline. They repeatedly asserted that we risked a recession, grossly misrepresenting forecasts from the Congressional Budget Office, and others predicted the consequences of leaving higher tax rates and large spending cuts in place for the whole year.
There was also the prediction that the financial markets would melt down if there was no deal approved by the deadline. While the markets are not yet open, they actually rallied on the last day of 2012 on the news that the outlines of a deal had been agreed, even though the deadline would almost surely be missed.
In other words, the financial markets responded as many of us non-insiders predicted. As long as it was clear that a deal would be forthcoming, they didn’t give a damn about the fiscal “cliff” deadline. Chalk this one up as yet another example of the experts – the people who report on the budget and the economy for the Washington Post and other major news outlets – not having a clue.
So, after a day, and week, and year filled with manufactured drama, the US Senate not only failed its only goal – reducing the US deficit – but also built a mountain range out of the molehill of budget talks. But tell that to lawmakers patting themselves on the back.
“For the first time in years, we will have a major issue settled with a bipartisan vote,” Senator Dianne Feinstein crowed. Vice-President Biden, asked what was his selling point to Senate Democrats, modestly declared, “Me.” He expanded later on how he did it – not with reasoned arguments about the duty of the Congress and the American economy, but with this folksy negotiation tactic: “I said, ‘this is Joe Biden and I’m your buddy.'” Harry Reid graded his fellow failing congressional students on a curve: “It’s disappointing that we didn’t get the grand bargain … but we tried.”
Well, at least they tried, right? Except that won’t be good enough for the millions of Americans who have their pensions invested in the stock market and the bond market. We already know that the markets don’t care a fig about tax policy; but when it comes to the debt limit, they react disastrously.