I'm not happy with the proposed deal and I hope the Rs kill it, but I'm not freaking out. Since the Rs want more, I think/hope the deal will die, but we'll see. I do understand it could be worse and there are some good things in it (more revenue and unemployment extension). But I do not like it.
For discussion purposes, here's Paul Krugman's take. He basically has a wait-and-see attitude:
[T]his contains stuff that Obama can’t get just by letting us go over the cliff: more revenue than he could get just from tax-cut expiration, unemployment and infrastructure too. But it has a cost, those benefit cuts.Paul Krugman
Those cuts are a very bad thing, although there will supposedly be some protection for low-income seniors. But the cuts are not nearly as bad as raising the Medicare age, for two reasons: the structure of the program remains intact, and unlike the Medicare age thing, they wouldn’t be totally devastating for hundreds of thousands of people, just somewhat painful for a much larger group. Oh, and raising the Medicare age would kill people; this benefit cut, not so much.
The point is that we shouldn’t be doing benefit cuts at all; but if benefit cuts are the price of a deal that is better than no deal, much better that they involve the CPI adjustment than the retirement age.
But is this rumored deal better than no deal? I’m on the edge. It’s not clear that going over the cliff would yield something better; on the other hand, those benefit cuts are really bad, and you hate to see a Democratic president lending his name to something like that. There is a case for refusing to make this deal, and hoping for a popular backlash against the GOP that transforms the whole debate; but there’s also an argument that this might not work.
I want to see more — and also want to see whether the Republican crazies scuttle the whole thing before it even gets off the ground. If they don’t, there will be some serious agonizing for progressives, yours truly included.
Since Boehner has rejected the deal, it can only get worse. Let's hope this was the last, best offer from President Obama.
Anyway, Krugman makes some interesting points that add to the discussion.
Update I: Thanks to David Mizner, here are Dr. Krugman's latest thoughts on the proposed deal:
First things first: cutting Social Security benefits is a cruel, stupid policy — just not nearly as cruel and stupid as raising the Medicare eligibility age.Please read the entire analysis.
The question about this looming deal is whether the end justifies the means. Unfortunately, it’s not nearly as clear a case as the health care deal, and I’m agonizing, big time; as of last night I was marginally positive, right now marginally negative.
As I understand it — the reporting is weirdly silent on this, but it’s what I got from my own conversation with an SAO* — is that taxes on unearned income are going back to pre-Bush levels: capital gains at 20 instead of 15 percent, dividends taxed as ordinary income. If I’m wrong about that, this is easy: no deal.
And there’s extra revenue too, notably from changing the treatment of itemized deductions: instead of being a deduction from taxable income, they offer a tax credit, not to exceed 28 percent — which means a further substantial tax rise for people in the top bracket. Overall, there’s more revenue in this deal than you get from letting the high-end tax cuts expire after the cliff.
So the revenue side isn’t that bad; we do make some headway on unstarving the beast.
Also on the plus side, extended unemployment benefits and more infrastructure spending. But no payroll tax cut extension, which means a fairly big dose of austerity despite the deal.
But then there’s the Social Security cut.
What it does mean is that after retirement your payments grow more slowly, about 0.3 percent each year. So if you retire at 65, your income at 75 would be 3 percent less under this proposal than under current law; at 85 it would be 6 percent less; there’s supposedly a bump-up in benefits for people who make it that far.
This is not good; there’s no good policy reason to be doing this, because the savings won’t have any significant impact on the underlying budget issues. And for many older people it would hurt. Also, the symbolism of a Democratic president cutting Social Security is pretty awful.
So is what Obama gets out of this — basically unemployment benefits and infrastructure — worth it? The hardship of the unemployed is important; on the other hand, the numbers here are only about half a percent of GDP.
One thing is for sure: any further concession on Obama’s part would make this a total non-starter. And I’m waiting for clarification on capital gains and dividends. But even as it stands, it’s not a deal to be happy about.
So am I dead set against? No, I’m still agonizing. Very uncomfortable times.