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There have been a number of diaries today taking sides on whether the yet to be finalized 'fiscal cliff' deal represents a 'cave' by the President. Lots of thoughtful commentary followed.

Yet I found this short piece by Jared Bernstein to be the most thoughtful and concise analysis of what the currently understood deal might mean.

But jeez…this meets the R’s further on their side of the field than one might have expected given the White House’s (WH) leverage.  The wealthy end up facing a considerably smaller tax increase under this deal—I’m sure the TPC will soon tell us how much smaller—than any other deal that the WH or D’s have offered thus far, including the Boehner-Obama deal under discussion in 2011.

As Ezra notes in the link above, the theory of the case for the WH is a) we avoid the cliff, finally break the R’s on tax rates, and get UI, and b) when we get to the debt ceiling fight, we’ll insist that for every dollar of spending cuts, there’s a dollar of new tax revenue.  If the R’s want a trillion in spending cuts for a debt ceiling increase of that magnitude, the WH will only agree if a) the R’s identify the cuts–no more D’s doing that work for them, and b) any such cuts are accompanied by the same amount in new tax revenues.

OK—but what are you gonna do, WH, when R’s say, “forget it…let’s default?”  Unless the President is willing at that point to tell his Treasury Secretary to go forth and borrow as needed—i.e., override the R’s—this plan will fail.

So, here’s my first blush response to this deal.  The thing that worried me most in the endgame is that the WH would be so intent on a deal that they’d lock in too few revenues with no path back to the revenue well, and that they’d leave the debt ceiling hanging out there.  Remember, the ultimate goal of Repubicans here is still to “starve the beast”–to shrink government by hacking away at both sides of its ledger–receipts and outlays.

Those fears will be realized unless the President really and truly refuses to negotiate on the debt ceiling and is willing to blow past those who would stage a strategic default.  If he is not, and if this cliff deal passes, then I fear the WH may have squandered its hard won leverage.

Little question there would be real winners, particularly the 1 million + unemployed whose UI otherwise would expire. But it also seems the wealthy once again get off easy, particularly given the impact the expiration of Payroll Tax 2% holiday will have on middle and lower income groups.  

And Bernstein raises legitimate questions about the impact of the deal on what comes next.

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Comment Preferences

  •  GOP knows Obama will cave on Debt Ceiling... (1+ / 0-)
    Recommended by:

    I mean come on - he makes line in the sand statements and then goes back on them all the time.

    He keeps accepting that the GOP is crazy enough to kill the hostage - it means he'll always give in.  

    I wonder how this plays in the international community.  I mean Iran, China and Russia have to be watching this and knows Obama will always give in.  

    The NRA is the Gun Manufacturer Lobby. Nothing more. Their pontification about the second amendment is nothing more than their ad jingle. They're the domestic version of the Military Industrial Complex.

    by Jacoby Jonze on Mon Dec 31, 2012 at 01:58:36 PM PST

    •  Lets see how many Republicans vote for it (0+ / 0-)

      Before we make definitive statements about lines in the sand. They have their own cross to bear.

      "What do you mean "conspiracy"? Does that mean it's someone's imaginings and that the actual polls hovered right around the result?" - petral

      by conspiracy on Mon Dec 31, 2012 at 02:54:40 PM PST

      [ Parent ]

  •  I agree with Jared. The ONLY way this deal (2+ / 0-)
    Recommended by:
    TheKF1, kaliope

    is a win for the President is if he truly sticks to his pledge about refusing to negotiate on the debt ceiling.

    Boehner and the GOP may just be setting themselves up for a HUGE fall.  If the President does not negotiate, Boehner/GOP will have to propose detailed cuts to entitlement programs and put it on the House floor for a vote.  They will have to do it without ANY votes from Democrats.  

    I believe the GOP is far too cowardly to do that.  They want the Democrats to do it, and then they can demagogue the hell out of it.

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