The fiscal cliff "Deal" in my opinion will prove to be a huge strategic blunder in the long term for progressives, because we fell victim to a shell game the GOP was playing. If we don't understand what really happened in this Deal, we will continue to lose major battles against them and ultimately the New Deal will be in jeopardy.
I just wrote a diary here that explains that in order to evaluate the fiscal Deal, you have to understand the long term strategy of the GOP is to lower revenue to force cuts to entitlement programs.
During the negotiation of this Deal, all of the focus was on the threshold for the cuts, i.e., whether the tax rates would go up at $250k or $400k or $1 million. As well as other short term measures like unemployment extensions, etc. In reality, thre tax increase threshold was actually the least important item in the negotiation. I think many (not all) Republicans realized this and were just making a lot of noise about the threshold for show.
What was the most important item in the negotation that nobody ever discussed? Whether the reduced tax rates for people below the threshold (whatever it was) would ever expire. I could be wrong, but I never heard any discussion of that issue.
Viewed in isolation, the terms of the Fiscal Cliff/Curb "Deal", on balance, should make progressives happy. Paul Krugman explains why:
Obama wasn’t going to let all the Bush tax cuts go away in any case; only the high-end cuts were on the table. Getting all of those ended would have yielded something like $800 billion; he actually got around $600 billion. How big a difference does that make?
Well, the CBO estimates cumulative potential GDP over the next decade at $208 trillion.So the difference between what Obama got and what he arguably should have gotten is around 0.1 percent of potential GDP. That’s not crucial, to say the least.
And on 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.
However, this "victory" is the textbook definition of a Pyrrhic victory
. Obama has secured short-term success, but by making the tax cuts for incomes below $450,000 permanent
, Obama has made sacrifices that will put progressives in a significanly weaker strategic position long-term.
Follow me below the squiggle.
One thing that has astounded me from watching the talking head shows, particularly in the last week, is that nobody seems to have a sense of urgency about why its taking so long to stop the leak. The only person I've actually seen show some emotion about the issue is Chris Matthews.
Even environmentalists, who you would think would be the fiercest advocates for stopping the spill, have been coming on these talk shows the past couple of weeks, and they just talk about how America needs to reduce its dependence on oil, or we need more regulation of the oil industry.
That is a bit like advocating for fire-proof houses while you watch your house burn to the ground.