Friday, November 9, 2012

Taking on the counter-puncher

The campaign is over now and its time to get back to governing. First up on the agenda...spending and taxes. What makes this a priority is that in less than 2 months (on January 1, 2013) all of the Bush tax cuts are set to expire and dramatic defense cuts (part of the debt ceiling deal) go into effect. Its what folks are calling the "fiscal cliff."

A couple of weeks ago, I wrote about President Obama's interview with the Des Moines Register. Here's what he said about how he saw the negotiations with Congress on all that.
In the short term, the good news is that there’s going to be a forcing mechanism to deal with what is the central ideological argument in Washington right now, and that is: How much government do we have and how do we pay for it?

So when you combine the Bush tax cuts expiring, the sequester in place...we’re going to be in a position where I believe in the first six months we are going to solve that big piece of business.
A lot of people went into their "naive Obama" mode when they heard him say things like this..."there he goes again, expecting bipartisanship to work."

But I bolded the most important thing the President said in that interview - that he expected resolution in six months. Think about that for a moment. The so-called fiscal cliff happens in less than 2 months. Everyone expects the lame duck Congress to deal with this in the next few weeks. But the President is talking about six months. Why is that?

I'll let Jonathan Chait explain.
Here is how it will happen. On the morning of November 7, a reelected President Obama will do … nothing. For the next 53 days, nothing. And then, on January 1, 2013, we will all awake to a different, substantially more liberal country. The Bush tax cuts will have disappeared, restoring Clinton-era tax rates and flooding government coffers with revenue to fund its current operations for years to come. The military will be facing dire budget cuts that shake the military-industrial complex to its core. It will be a real-world approximation of the old liberal bumper-sticker fantasy in which schools have all the money they require and the Pentagon needs to hold a bake sale.

All this can come to pass because, while Obama has spent the last two years surrendering short-term policy concessions, he has been quietly hoarding a fortune in the equivalent of a political trust fund that comes due on the first of the year. At that point, he will reside in a political world he finds at most mildly uncomfortable and the Republicans consider a hellish dystopia. Then he’ll be ready to make a deal.
Later on, Chait goes into detail about the size and scope of that "political trust fund."
Last summer, Obama was pleading with Boehner to give him $800 billion in additional revenue. Come January, he’ll have $5 trillion in higher revenue without doing anything. Since Obama’s own budget proposes to raise only $1.5 trillion in new revenue and trim entitlement spending, he could then offer Republicans a deal that cuts taxes (by, say, a couple trillion dollars), increases military spending, and reduces entitlement spending. In other words, he could offer a right-wing bill—and the end result would be a mix of policies to the left of his own budget, and to the left of the Simpson-Bowles proposal.
One of these days maybe Boehner will wake up and recognize that - much like a Mohammed Ali opponent would be stupid to celebrate not getting touched in the first round (ie, "I got 98% of what I wanted") - you are going to eventually get crushed when you go the distance with the counter-puncher.


  1. I love it! In Washington, it's like thinking 2-3 years ahead is some sort of super power. But then we live in a world where Nate Silver modeling poll numbers is witchcraft.

  2. I was talking someone off the ledge over the "fiscal cliff" last night, pointing out that the people who are making the most noise about how bad it will be when it happens are the very people who most want to continue the Bush tax cuts.

    Will it be bad if no deal is reached by Jan 1st.? Possibly. Will it be an economic armageddon? Frankly, why would I trust the judgement on that to the very same people who were saying that the 2012 election was a tossup for months?

    Pundits are the last people you should listen to when it comes to judging the future.

    Hmmm, I wonder what Nate Silver thinks about the "fiscal cliff"?

  3. Smartypants, This post made my day. The visual of Thelma and Louise and the cliff has now vanished. Now things make more sense. Always love the NH video of The Crusher.