Ezra Klein tells us what was in the Really Grand Big Deal and it’s enough to make you feel as if somebody slipped some LSD in your coffee:
I knew the White House wanted a compromise on the debt ceiling. I just didn’t expect them to do quite so much, well, compromising.
Here’s what appears to have been in the $4 trillion deal they offered the Republicans: A two-year increase in the Medicare eligibility age. Chained-CPI, which amounts to a $200 billion cut to Social Security benefits. A tax-reform component that would raise $800 billion and preempt the expiration of the Bush tax cuts — which would mean, for those following along at home, that the deal would only include half as much revenue as the fiscal commission recommended, and when you add the effect of making the Bush tax cuts a permanent part of the code, would net out to a tax cut of more than $3 trillion when compared to current law.
That last bit apparently killed the deal. But it was actually the biggest concession on the table. Currently, Democrats are bargaining for some revenues now, with the option of forcing much more in revenues later. All they need to do to get $4 trillion in revenues next year is fail to come to an agreement with the Republican Party. And is there anything Congress is better at than not agreeing?
The deal Obama offered Boehner would’ve traded away the option to force much more in revenues later in order to get slightly more in revenues now. And it would have thrown in a slew of entitlement cuts and spending cuts as a sweetener.
In part, this is because the Obama administration, much to the disappointment of liberals, doesn’t value the option to fight over taxes in 2012. They’d prefer to finish the debt debates now and move onto other issues after the election.
I’m fairly sure the Republicans didn’t see it as much of a concession. The idea that Democrats can “force much more in revenues later” is fairly remote unless they win in a landslide in 2012. (And judging from their behavior last time they won a landslide, they won’t do anything anyway.)Short of that, I would imagine the Republicans feel quite confident that they will be able to persuade the President to extend all the Bush tax cuts again and can keep him from raising taxes at all. Why wouldn’t they?
And I’m sure they’d love to have this allegedly “big fight” over taxes in 2012. It works great for them to win on the issue every two years. (And who knows, it’s always possible that Obama could lose, in which case the whole thing becomes moot.)
Ezra mentions in passing that the administration has no intention of letting all the Bush tax cuts expire, which seems to set off alarms. But I’m fairly sure he’s talking about the middle class tax cuts. The problem in 2012, as it was last winter when they faced this last time, is that the cuts needed to be decoupled when the Democrats held congress and had some juice during the early days of the economic crisis. Had they been smart enough to permanently extend the middle class cuts at the time and leave only the tax cuts for the wealthy n a temporary basis, the Republicans would be in a much weaker position. As it is, they’ll hold the middle class tax cuts hostage in the next lame duck just as they did before. I can see why the administration would have liked to get this one off the table. But why would the GOP have agreed when they have to give up nothing?
Update: This post theorizes that the White house put Medicare and Social security on the table just to scare Democrats into voting for the two trillion in cuts without getting anything in return. I might believe this if I thought they ever seriously thought there would be a problem getting Democrats to vote for the 2 trillion. Sadly, the President knows that the Democrats are not going to allow themselves to be the ones held responsible for default in any case. There wasn’t any need to scare them beyond that.
No, I think the Medicare and SS was as Ezra says — to sweeten the pot to get the Republicans to agree to take the Bush tax cuts off the table right now. And they didn’t see any need to give up one of their most potent weapons and agree to any tax hikes at all.
Keep in mind that Republicans don’t actually care about deficits. This is just a game for them. I’m not sure what it is for the Democrats. From the look of it they truly believe that austerity is virtuous and good for its own sake and that everyone will appreciate the “tough love” in the long run.