I share everyone's outrage at the GOP threat to take SS and Medicare/Medicaid hostage to the "cliff," the debt ceiling or anything else. I share everyone's outrage that the VSP's like Peterson and Schultz are crying "Come Together" and do a deal that cuts benefits and preserves, e.g., the carried interest tax rate. I share everyone's outrage at the media idiots who say that "both sides must share the pain."
We are right about this, but as I've learned, it is better to be smart than right. Or as they say here in NY, Whaddayagonnado about it?
It's easy to talk tough and say "bring on the cliff. The GOP will be blamed." Hell, I've said it myself. But that benefit will likely only last if there's a deal in January. If the Cliff happens, and that finally brings a deal without benefit cuts, fantastic. But I fear that is not going to happen when you're dealing with nihilists on the other side.
What might happen if there's no early deal:
1. The cliff arrives.
2. The cliff lasts a month or more. Millions lose unemployment; demand decreases because of increased taxes, prices (e.g., milk).
What are the alternatives:
1. No deal. Continue the erosion of the economy and misery for the unemployed. Economy falls into a new recession.
2. Deal (including, wealthy tax hike, unemployment ext., debt ceiling deal and yes, something like chained CPI.)
What cannot be reversed: The effects of (1), especially the longer the cliff is in effect -- Notwithstanding polls showing voters blame the GOP, the Dems will likely be hurt in 2014 by the new recession. In human terms, millions will suffer.
What can be reversed: The effects of (2): In a Democratic Congress, whatever was included, e.g., chained CPI, can be reversed. But first the Dems have to win Congress.
Politically, (2) depends on framing the deal as the GOP forcing the benefit cuts. (Obviously the reason why it was a mistake for Obama to offer it). But that could be remedied by PR from the President -- the SOTU, e.g., even running ads. That will not be easy, in light of the media idiots, but at least you're starting with a climate in which the GOP is blamed.
I'm not naive enough to believe that the latter will surely work (esp. after the 2010 "He Cut Medicare by $500B" success for the GOP).
All I'm saying is that there are no easy answers, and while "hang tough" is great now and for a week or two in January, it has a diminishing return benefit as things get worse.
If anyone has a different analysis or scenario, or any other ways around the above, please let me know in the comments.