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Hullabaloo


Wednesday, December 05, 2012

 
Fiscal cliff notes 12/5

by digby

Brian Beutler at TPM reports on the latest "fiscal cliff" maneuvering. If this is all true, it would appear that they're going to split the Grand Bargain into two parts: Boehner may not have any choice but to go over the cliff and then sign on for the new tax cuts (and remember, Norquist gave the thumbs up on the latter plan) but if that happens, is that the end of the story? I'm afraid not. The Democrats may find themselves in the same position the GOP is in now, in that they will then be "forced" to do the thing their base is adamantly against:
House Republicans are privately contemplating a quiet surrender in the fight over Bush tax rates for top earners, and a quick pivot to a new fight over raising the debt limit, in which they’d demand steep cuts to programs like Medicare and Social Security.

The White House’s official position on this plan is: cram it. Officials say they will not negotiate, or pay a ransom. Congress has to raise the debt limit, period.

“I will not play that game,” Obama told the Business Roundtable on Wednesday. “We are not going to play that game next year. We’ve got to break that habit before it starts.”

But privately, Obama and Democratic leaders have sought to weave a debt limit increase into ongoing negotiations to avert automatic tax increases and spending cuts at the end of the year. Their clear preference is to defuse that bomb now, in a bipartisan way, rather than to stare down the House GOP pointing a gun at the country’s economy.

And recent remarks by Democratic leaders and interviews with top congressional aides suggest Democrats have no consensus plan to execute if the debt ceiling isn’t increased before the end of the year.

House Minority Leader Nancy Pelosi (D-CA) and other Dem leaders say that once the long fight over Bush tax cuts for the rich is resolved, the playing field will be evened, and the parties can negotiate further deficit reduction next year.

“If we can take the middle-income tax cuts off the table, then we end the hostage taking that the Republicans have been engaged in,” Pelosi said at a Wednesday media availability when asked about the Democrats’ debt limit contingency plan. “We’re not going to do that unless you give tax cuts to the wealthy. I think that clears the debate to find areas of agreement as we go forward.

Her No.2, Steny Hoyer (D-MD), simply argued against using the debt limit for political leverage, without saying if or how Democrats could prevent Republicans from taking that tack.

“The debt limit ought not to be held hostage to anything,” Hoyer said. “It hurt our economy, we were downgraded for the first time in my career and I think in history by one of the rating agencies. The creditworthiness of America ought not to be put at risk, it ought not to be a negotiating item.”

Neither of those responses constitutes an answer to the GOP’s ongoing demand that new borrowing authority be matched dollar for dollar with cuts to federal spending.

The president was very tough today, saying that he refuses to play their game on the debt ceiling,  and maybe that will be enough to make the Republicans simply crawl away with their tails between their legs and agree to some perfunctory cuts to medicare providers and some defense cuts and call it a day. That would truly be a new day. However, I would guess that everyone is looking at this thing as a two (maybe three) part Grand Bargain in which the agreement is that they'll drive very carefully over the fiscal curb, cut taxes on the 98% (maybe even sweeten the pot a little) and then get down to some serious cutting.
Geithner on CNBC: Once Republicans agree to raise tax rates, White House will engage on spending cuts.
Obviously, we still don't know what they will be, but suffice to say that at some point in all this we're going to start talking about cuts. After all, just raising taxes on the rich wouldn't be a "balanced approach" would it? Even among the so-called reasonable Republicans, it must not only happen, it must hurt. A lot:
On Sunday, during an appearance on Meet the Press, Sen. Bob Corker (R-TN) reiterated his call for restructuring entitlement programs like Medicare, highlighting the “very painful cuts” he has proposed as part of a package to avert the fiscal cliff. Corker 242-page plan calls for a Paul Ryan-like proposal to transform the guaranteed Medicare benefit into a voucher plan for beneficiaries. 
Host David Gregory seemed to agree with Corker’s characterization and pressed fellow panelist Sen. Claire McCaskill (D-MO) to accept reforms that will shift health care costs to seniors in order to show that Democrats are “serious” about entitlements:
CORKER: Look, I laid out in great detail very painful cuts to Medicare. I just did it in a 242 page bill that I’ve shared with the White House [...]

GREGORY: Name some specific programs that ought to be cut that would cause pain in terms of the role of our government that Democrats are prepared to support.

McCASKILL: Well, I think you can see more cuts frankly and a lot of us voted for more cuts in the farm program…and defense. I spent a lot of times in the wings of the Pentagon. if you don’t think there’s more money to be cut in contracting at the pentagon, you don’t understand what has happened at the Pentagon. [...]

CORKER: David, as much as I love Claire, those are not the painful cuts that have to happen. We really have to look at much deeper reforms to the entitlements … I think the Speaker is frustrated right now because as you’ve mentioned, the White House keeps spiking the ball on tax increases for the wealthy. But has not yet been forthcoming on real entitlement reform. And without the two, there really is no deal.
Pelosi says no dice:
Those issues — Social Security, Medicare, Medicaid — they should be in their own realm. Whatever adjustments would be made in Social Security should be there to strengthen Social Security, not to subsidize a tax cut for the wealthiest people in America and say that’s how we balance the budget. The same thing with Medicaid and Medicare…
I don't think she means "their own realm" part of the debt ceiling fight either, FWIW. So, she's taking a hard line.

On the other hand, her second in command is eagerly playing the bad cop:
Hoyer, the Democratic whip, warned that taking entitlement benefits off the table is a bad place to start the negotiations. Such entrenched positions are little different, he said, than the Republicans' refusal to consider hikes in tax rates — a central element of President Obama's deficit-reduction proposal.

Hoyer said GOP proposals to raise the Medicare eligibility age, make wealthier seniors pay higher Medicare rates and limit the cost-of-living increases for some federal programs are legitimate ones, even as he warned he might not support them.

“They clearly are on the table,” Hoyer said of the Medicare changes during his weekly press briefing in the Capitol. “They were on the table in the Boehner-Obama talks. They've been on the table for some period of time. That does not mean that I'd be prepared to adopt them now, but they're clearly, I think, on the table.”

Hoyer said the GOP's proposal to reduce the cost-of-living increases to certain federal programs – the so-called chained consumer price index (CPI) – should also be considered as part of the fiscal cliff talks.

“We have many Republicans say 'absolutely not' ... on [higher] rates or revenues,” he said. “There are Democrats on our side who say 'absolutely not' if they do A or they do B or they do C. … You've got to put everything on the table.”
So, who knows?

Obviously the White House wants to get their tax hikes on the rich above all else, but from where I sit, a "deal" to do that just doesn't look very promising. So, I still think the Republicans need to go over the cliff so they can be reborn as tax cutters. But if that happens I cannot see why they will give up their leverage in the debt ceiling to get some cuts and inflict some pain, particularly since they know that there are plenty of Democrats eager to sign on. They like pain.

Update:

I'm watching Chris Matthews, Ed Rendell and Alex Wagner game this out right now and they apparently think that spending cuts are completely irrelevant to all this deal making and that even if the Republicans bite the bullet on the Bush tax cuts, they'll only use their debt ceiling leverage to try to get some goodies back for the 1%. Let's hope they're right about that.

But I have to point out that every time I see a Republican on TV talking about this they are hammering on "entitlement cuts." (And, by the way, so are quite a few Democrats.) So, while I think there's a good chance we're either going over the cliff ---- not the end of the world --- or that the Republicans will throw in the towel on the hikes and agree to Obama's proposal to extend the middle class tax cuts before the end of the lame duck, I still have a strong feeling that the Grand Bargain is still in the ether.

But as I always say, every day we go without slashing vital programs for average people for no reason is a good day. The more they put it off, the better chance it won't happen.

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