December 31st, 2012

Handicapping the Fiscal Cliff Talks

The consensus used to be that President Obama held all of the high cards when it came to the fiscal cliff negotiations, and that Republicans would be forced to swallow a bad deal. But as a final deal to avert the cliff is taking shape, the consensus appears to be changing. Now, it is Republicans who appear to be getting the better of the deal, or at the very least, a far better deal than they thought they would get.

Joshua Green explains why the deal is good for Republicans:

With the caveat that no reporter is privy to the details of the offers being swapped, here is the deal that seemed to be emerging: Democrats would get an extension of unemployment benefits for 2.1 million people; they’d patch the alternative minimum tax for a year to protect the middle class from sharp tax hikes; and they’d implement a “doc fix” to ensure that Medicare reimbursement rates to doctors don’t fall precipitously and limit patients’ access to medical care. Republicans would get to preserve Bush-era income tax rates for households making up to $400,000 (rather than the $250,000 limit Democrats prefer). They’d also get a lower tax rate and a much higher threshold for inheritance taxes (set to revert to 55 percent on estates of more than $1 million on Tuesday). And significantly, Republicans would hold onto their greatest point of leverage in upcoming negotiations over entitlement cuts, because the deal wouldn’t raise the debt limit.

Here’s what’s important about everything Democrats would get: It’s temporary; everything expires (presumably) within a year. Here’s what’s important about what Republicans would get: it’s permanent. The tax rates won’t expire.

That means Democrats are offering a huge gift to Republicans and getting almost nothing in return because on Jan. 1, if no deal is struck, Democrats will get even more revenue than they’re asking for without conceding a thing. And if, as polls suggest, voters would blame Republicans for going over the cliff, Democrats are also offering to save Republicans from their worst impulses—which, at least for the time being, since they haven’t yet agreed, is to reject this deal.

I might argue with a few details here and there, but by and large, Green appears to have hit the major points in his analysis. The emerging deal has turned out far better than Republicans have feared, and far worse than Democrats have hoped.

It appears to have dawned on some liberal pundits and politicians that they ought to not like the deal. Timothy Noah calls upon congressional Democrats to kill the deal, and Tom Harkin threatens to rally fellow Senate Democrats against the deal. Matt Yglesias joins in the hand-wringing and Brian Beutler also appears to be upset. Paul Krugman calls Barack Obama “The World’s Worst Poker Player,” and then, having gotten more information on the deal, he calls the president "Conceder In Chief." Jamelle Bouie states that “if President Obama remains committed to getting a deal done before the new year, then in all likelihood, it won’t be favorable to his short-term or long-term interests.” This comment, of course, reflects the fact that Obamaphiles were and are willing to go over the cliff and risk damage to the economy in order to do better in negotiations (again, who are the real “hostage-takers” in these negotiations?). The only Obamaphile who seems to think that the White House has the better of the negotiations is Andrew Sullivan, who continues to meep meep away. One presumes, however, that if the deal does turn out to be as unfavorable to liberals as is feared on the port side, Sullivan will swiftly downshift into utterly and completely losing it, as he is often wont to do.

I guess that the only thing I have to add is that if the president does indeed end up getting outwitted and outmaneuvered in these negotiations, it will cause people like me to ask anew how it is possible that Republicans could have lost the 2012 presidential election to him. But maybe that’s a different matter for another day.


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