We've gotten the "Grand Bargain" sideshow out of the way, so the question now is what will be the actual debt ceiling deal? Is it possible that the "clean" bill (with respect to spending cuts) McConnell option will be the end result? Absolutely not. The question is, as it has always been since last December, how much in spending cuts will the GOP extract in exchange for raising the debt ceiling. The talks resumed this morning:
Congressional leaders trooped to the White House for a Saturday morning meeting called by the president Friday night to discuss what options existed for moving forward with the negotiations. [. . .] To meet Republican demands for dollar-for-dollar cuts to correspond with any rise in the borrowing authority, Congressional aides said there were discussions about extending the debt ceiling for a period of months tied directly to cuts, with a second installment then subject to the McConnell process. Democrats and Mr. Obama were insistent that the increase be guaranteed to take the Treasury Department through 2012 without another fight.
In the short term, I think we will see the debt ceiling raised to cover a few months coupled with commensurate spending cuts. Then a similar deal to get through 2012, probably tied to the budget. The total cuts will amount to about $2.4 trillion. And no, there will not be any revenue increases. I expect Medicaid to get hacked, but Medicare and Social Security to be untouched. My view has always been that the substance of the deal would be that. My hope is that the cuts are in out years and not in the next 18 months. After all, the 2012 election will bring a new Congress and possibly a new President. They will be the ones to determine our path after 2012. Nothing anyone agrees to now will bind anyone then.
Is this a good deal? Of course not. But the President and Demsin Congress must make this bad deal. The consequences of not raising the debt ceiling would be catastrophic. But having to accept this bad deal is a consequence of making a bad deal in December that did not have to be made - the deal to extend the Bush tax cuts without agreements on spending and the debt ceiling.
Yesterday, Jonathan Bernstein wrote a post titled
The context of liberal surrender and Barack Obama’s choices:
It was never at all plausible after November 2, 2010 that Obama and the Democrats could get through this year and next without losing on several fronts compared to what they had in the very liberal 111th Congress. And yet liberals seemed to believe that if only Obama negotiated properly he could avoid those losses. It just wasn’t going to happen. So the proper way to see the current negotiations are in the context of watching both sides surrender.
I'm not seeing how agreeing to an all spending cuts deal constitutes surrender by the Republicans. Will it be all they asked for? No. But being effective negotiators, Republicans knew to ask for pie in the sky, and then just settle for pie on the ground. They can get the sky on the next go around.
But the more interesting aspect to Bernstein's analysis is his failure to connect the December deal to extend the Bush tax cuts to the current debt ceiling deal (and the coming budget negotiations.) When the President surrendered on the Bush tax cuts, he lost almost all of his bargaining leverage. (Indeed, the only leverage Democrats have now is that a substantial number of Republicans do not want to vote for a debt ceiling increase under any circumstances, thus Dem votes will be required.) When some of us were explaining this in December, others were arguing The December Deal was a victory. Here is a post where I discuss Yglesias making that claim:
Yglesias thinks that progressive objections to the Bush tax cuts are based on concern for the short term deficit. Dead wrong. The concern is that extending the Bush tax cuts will lead to cuts in REAL effective stimulus - government spending. This is the "starve the beast" Norquist strategy. Pete Peterson is not going away. He was just quiet about TAX CUTS. When it comes time to cut spending, Pete Peterson will be back.
Yes, now President Obama and Democrats have to accept a bad bargain to raise the debt ceiling. But if they had negotiated better last December, they could have made a better bargain then. They didn't. The Deal was a terrible mistake. And 7 months later, people like Bernstein want to forget how the bad deal in December is leading to the bad deal in July/August on the debt ceiling (and the one after that on the budget.)
It is taxes that Republicans care about. It is the one thing that animates the party. In December, President Obama had the biggest stick he is likely to have until after the 2012 elections. He gave it up without getting back what he needed.
It was terrible bargaining and everyone should have been able to see it. Apparently, not everyone did.