House Minority Leader Nancy Pelosi (D-CA) leaves a House Democratic Caucus meeting on Capitol Hill in Washington on July 29, 2011. UPI/Kevin Dietsch
I’m watching the coverage of the debt deal, and it’s difficult listening to people like Chris Matthews who manage to sound clueless as they let their emotions overcome their ability to think.
Of course this is a short term win for the Tea Party and the Republicans. They had leverage, as enough of them were crazy enough and dumb enough to let the stalemate continue through August 2nd, risking economic catastrophe.
Also, President Obama took the calculated risk of going for a grand bargain. Those efforts failed, and that made it more difficult in the end game. That said, he earned long-term political points, as the public was educated about the need for a balanced approach and polls show they support that in overwhelming numbers.
Now we move to the new gang of 12 and the next phase of the debt deal. Ezra Klein makes a great point, arguing that Democrats will likely prefer the trigger as opposed to a deal if the GOP won’t budge on revenues.
Start from the premise that Republicans will refuse any deal that includes significant new revenue and Democrats will realize that that’s just fine from their perspective, as Republicans can either cut a deal with them in December 2012 or all of the Bush tax cuts can expire. Now take a good, hard look at the trigger.
The Joint Committee is charged with finding $1.5 trillion in savings over 10 years. The trigger would only cut $1.2 trillion over 10 years. The Joint Committee is likely to cut Social Security, Medicaid and a host of programs Democrats aren’t going to want to touch if taxes aren’t part of the deal. The trigger exempts Social Security and Medicaid, and $1 out of every $2 in cuts comes from the Pentagon. The Joint Committee is likely to cut a deal without revenue, and Democrats will have to explain to their base why they permitted, say, Medicare cuts while letting the GOP reject tax increases. The trigger lets Democrats blame Republicans for protecting the wealthy in the 2012 election.
The trigger would also result in massive defense cuts.
So, if the Democrats prefer a trigger if a deal can’t include revenues, and many Republicans will want to avoid defense cuts, this gives the Democrats leverage!
These details are important, and commentators like Matthews should wait to understand these dynamics before whining about the deal.
Speaker of House the John Boehner, R-OH, backed by House Majority Leader Eric Cantor, R-VA (L) and Republican Whip Rep. Kevin McCarthy, R-CA, discusses the Republican plan called “Cut, Cap and Balance” to avoid default which would occur if the debt limit ceiling is reached on Capitol Hill in Washington, DC, on July 19, 2011. UPI/Roger L. Wollenberg
Yesterday we saw a flurry of activity and plenty of consternation as the media and politicians tried to figure out what was going on behind closed doors. TPM has a very helpful account of what happened yesterday, and this passage sticks out:
Democrats favored one proposal: if Congress failed to pass tax reform by date-certain, then the top-bracket Bush tax cuts would expire — a hefty stick that would encourage Republicans to cut a deal. Boehner never agreed to that — and now that the grand bargain has been revived, Democrats are worried that Obama has abandoned that trigger, and perhaps his insistence on a trigger of any kind.
Multiple reports surfaced late Thursday that a trade-off might be in the works: Republicans would agree to the tax trigger if Obama and Dems would agree to nix the health care law’s individual mandate — an unpopular, but crucial component of the reforms Obama signed last year. This is precisely the sort of swap House Majority Leader Eric Cantor (R-VA) has argued for recently.
Referring to negotiations with Democrats, Cantor last week told reporters, “Every time the discussion started about, well, Republicans need to raise taxes, I would proffer back, then you put ObamaCare repeal on the table.”
By multiple accounts, Democrats left Thursday’s White House meeting unhappy.
I like this potential deal for many reasons. First, decoupling the Bush tax cuts so that those for the wealthy would expire is a big deal and would be a huge win for Obama and the Democrats. It would be a serious concession from the GOP, and I have no problem with the idea that this happens in the future if it’s locked in. The statement from Grover Norquist yesterday about the Bush tax cuts is a huge tell that the GOP is seriously considering this.
On the individual mandate, this has been the single most unpopular provision of health care reform. If this could be replaced by some kind of annual open enrollment period with penalties for people who don’t buy insurance so they can’t game the system, then this would be acceptable from a policy point of view. It would also be a significant positive from a political point of view, as it would remove the most controversial issue surrounding health care reform and dilute it as a political issue.
The Democrats were quiet last night, which tells me they aren’t out there trying to kill this potential deal, even if they aren’t thrilled about it. I just saw Claire McCaskill just said on MSNBC that she was open to it. Also, as pointed out in the article, Boehner can’t get behind it until the Cut, Cap and Balance bill gets killed in the Senate, so this won’t move in public until after today’s vote.
I will be stunned if a grand bargain actually happens, but if it does it will be a huge victory for President Obama, John Boehner and the country.
President Barack Obama announces Richard Cordray (not pictured) as his nominee to be the Director of the Consumer Financial Protection Bureau in the Rose Garden at the White House in Washington on July 18, 2011. Obama was joined by Elizabeth Warren (C), Special Advisor on the Consumer Financial Protection Bureau, and Treasury Secretary Timothy Geithner. UPI/Kevin Dietsch
Elizabeth Warren just declined on MSNBC to rule out a run for the US Senate in Massachusetts against Scott Brown in 2012. She indicated that she’s been working 14-hour days for the past year to set up the Consumer Financial Protection Bureau and that’s she’s very much wants to go home to Massachusetts and go on vacation with her grandchildren. Who can blame her.
This will, however, become a huge story if she decides to run. Scott Brown will be tough to beat, but Warren gives the Democrats a chance in a year where they will need pickups to keep control of the Senate. The decision by President Obama to appoint Richard Cordray to head the bureau instead of Warren will disappoint many liberals, but the left will be much better off with Warren as a candidate for Senator as pointed out by Ezra Klein.
One of the themes of the 2012 election will be the interests of corporations and the wealthy versus the interests of ordinary Americans. Obama is itching for this fight, and Warren will be a huge assets who will energize liberals and also appeal to independents.
House Majority Leader Eric Cantor (R-VA) speaks at the Faith & Freedom Conference and Strategy Briefing in Washington, June 3, 2011. REUTERS/Molly Riley (UNITED STATES – Tags: POLITICS)
The GOP discipline has completely broken down over the past week in the debt ceiling negotiations. All year they’ve been playing a game of Russian Roulette with the economy, trying to use a potential default to force massive spending cuts. In many ways the strategy worked well, as President Obama and the Democrats put just about everything on the table.
But, as usual, the ideologues are overplaying their hand, so much so that Mitch McConnell buckled under the pressure of the business community and basically said he’d let the president raise the debt ceiling without any cuts.
The guy at the center of all this is Eric Cantor, whose either too stupid or too ambitious to take yes for an answer. He can get massive cuts if he just includes some revenues in a deal, but instead he’s pushing the talks to the brink of disaster. Last night he also tried to imply that the President lost his cool in the last meeting, though all other accounts tell a different story.
Dana Milbank nailed it yesterday, even before Cantor’s latest performance last night in the negotiations where he again refused to budge.
He draws out the vowels in a style that is part southern, part smarty-pants. Had young Cantor spoken like this at his prep school in Richmond, the bigger boys may well have wiped that sneer off his face. Yet even then, Cantor was accustomed to having things his way. According to Cantor’s hometown Richmond Times-Dispatch, the quotation he chose to accompany his yearbook photo was “I want what I want when I want it.”
What Cantor wants now is power — and he is prepared to risk the full faith and credit of the United States to get it. In a primacy struggle with House Speaker John Boehner, he has done a deft job of aligning himself with Tea Party House members in opposition to any meaningful deal to resolve the debt. If the U.S. government defaults, it will have much to do with Cantor.
His antics from last night are being branded as childish, and the Democrats smell blood and are now taking direct aim at Cantor. Harry Reid is more than happy to negotiate now with Mitch McConnell who is desperate to avoid the potential catastrophe that he and other Republicans created.
They clearly thought Barack Obama would fold, but they were mistaken. Obama has called their bluff, and they look like panicked fools at the poker table.
U.S. President Barack Obama speaks during a news conference in the East Room of the White House in Washington, June 29, 2011. REUTERS/Kevin Lamarque (UNITED STATES – Tags: POLITICS)
It looks like we’re heading for an ugly end game for the debt ceiling confrontation. Ezra Klein explains:
The best advice I’ve gotten for assessing the debt-ceiling negotiations was to “watch for the day when the White House goes public.” As long as the Obama administration was refusing to attack Republicans publicly, my source said, they believed they could cut a deal. And that held true. They were quiet when the negotiations were going on. They were restrained after Eric Cantor and Jon Kyl walked out last week. Press Secretary Jay Carney simply said, “We are confident that we can continue to seek common ground and that we will achieve a balanced approach to deficit reduction.” But today they went public. The negotiations have failed.
“The primary goal of President Obama’s presser, which just wrapped up, was obvious,” writes Greg Sargent. “He was clearly out to pick a major public fight with Republicans over tax cuts for the rich.” That’s exactly right. But he didn’t want this fight. He wanted a deal. And he wasn’t able to get one that the White House considered even minimally acceptable. After putting more than $2 trillion of spending cuts on the table, they weren’t even able to get $400 billion — about a sixth of the total — in tax increases.
Klein goes on to explain that things will likely get ugly. Both sides are digging in their heals, and only a crisis or market meltdown will get them to move. Perhaps something else will change the dynamic, like the proposal coming from Kent Conrad and the Senate Democrats, but that seems unlikely.
As Klein explained, Obama has been quiet because he was hoping for a deal. Now that the Republicans want a fight, they are going to get one. Nobody likes taxes, but the notion that we can’t have any new revenues, including closing corporate tax breaks, when we’re facing a $15 trillion debt is totally absurd. The polls are in Obama’s favor when it comes to increasing taxes on the wealthy.
That said, the GOP is currently run by the extremists in the Tea Party who won’t compromise on anything. It’s probably going to get ugly . . .
Liberals are attacking President Obama on many fronts regarding the tax cut deal. They don’t like the deal itself, and many are also alleging that it’s stupid politics – he should have held out for a better deal.
Andrew Sullivan has a different take, explaining how a fight with his liberal critics actually helps him. Also, the deal itself will likely stimulate the economy, and a better economy helps his re-election prospects. I agree with Andrew.
A majority of Americans want Congress to keep the new health care law or actually expand it, despite Republican claims that they have a mandate from the people to kill it, according to a new McClatchy Newspapers-Marist poll.
The post-election survey showed that 51 percent of registered voters want to keep the law or change it to do more, while 44 percent want to change it to do less or repeal it altogether.
Driving support for the law: Voters by margins of 2-1 or greater want to keep some of its best-known benefits, such as barring insurers from denying coverage for pre-existing conditions. One thing they don’t like: the mandate that everyone must buy insurance.
The fight over health care reform will be one of the defining battles over the next two years. Expect the Republicans to overplay their hand.
I’m not suggesting that Obama policies alone are driving the stock market. Many factors, particularly earnings, drive the overall market.
But, many conservatives were quick to blame Obama when the market slipped in the spring, implying he was to blame as opposed to the economic crisis he inherited. Melissa Francis and some of the other conservative market worshipers at CNBC were just a few of the examples. Well, the market is now up, and we’re not hearing conservatives talk about it much any more.
One of the original supply-siders, Bruce Bartlett, explains in a brilliant op-ed why the ideas that worked so well in the early 1980′s are irrelevant today. Bartlett is promoting a new book, The New American Economy.
I continue to believe that what the supply-siders did was good for the economy, good for the country and good for the advancement of economic science. The best economists in the country were pretty clueless about our economic problems during the Carter years. It was widely asserted that the money supply had no meaningful effect on inflation, that marginal tax rates had no incentive effects, and that it would take decades or another Great Depression to break the back of inflation.
As all economists now know, these ideas were wrong. All economists today accept the importance of the money supply–perhaps too much; during the recent crisis many asserted that fiscal stimulus was unnecessary because an increase in the money supply was the only thing necessary to restore growth. (How this would have been accomplished when interest rates were close to zero was never explained.) All economists now accept the importance of marginal tax rates to economic decisionmaking, and organizations like the National Bureau of Economic Research publish vast numbers of papers on this topic.
During the George W. Bush years, however, I think SSE became distorted into something that is, frankly, nuts–the ideas that there is no economic problem that cannot be cured with more and bigger tax cuts, that all tax cuts are equally beneficial, and that all tax cuts raise revenue.
These incorrect ideas led to the enactment of many tax cuts that had no meaningful effect on economic performance. Many were just give-aways to favored Republican constituencies, little different, substantively, from government spending. What, after all, is the difference between a direct spending program and a refundable tax credit? Nothing, really, except that Republicans oppose the first because it represents Big Government while they support the latter because it is a “tax cut.”
Bartlett exposes the caricature that has taken over conservative economic thinking, the slavish devotion to dogma that makes it impossible to consider the circumstances of our new reality. Think about it. Talk to a conservative about economic policy, and the answer, regardless of the circumstances, is usually the same – spending bad, tax cuts good. I can teach a three-year-old to repeat that.
Bartlett goes on to explain why massive spending was necessary with the economic collapse we faced last year, and the obscenely stupid response of many conservatives who suggested addressing the problem with more tax cuts.
Bartlett was an adviser to Jack Kemp and helped write the Reagan tax cuts. This is a must-read for anyone who wants to understand the history of supply-side economics and why one of its chief architects is arguing that it doesn’t apply today.