No Deal
by David Atkins
The death of the supercommittee has left Democrats in a great political position, if only they're willing to seize the opportunity to simply do nothing. This is a point that a number of us having been making for some time now, including on this blog, but Ezra Klein summed it up succinctly yesterday:
Imagine if the Democrats offered Republicans a deficit deal that had more than $3 in tax increases for every $1 in spending cuts, assigned most of those spending cuts to the Pentagon, and didn't take a dime from Social Security, Medicaid or Medicare beneficiaries. Republicans would laugh at them. But without quite realizing it, that's the deal Republicans have now offered to the Democrats.
In August, Republicans scored what they thought was a big win by persuading Democrats to accept a trigger that consisted only of spending cuts. The price they paid was 1) concentrating the cuts on the Pentagon while exempting Social Security, Medicaid, Medicare beneficiaries, and 2) delaying the cuts until January 1, 2013. That was, they figured, a win, as it eschewed taxes. Grover Norquist's pledge remained unbroken.
But 12 years earlier, George W. Bush had set a trigger of his own. In order to pass his tax cuts using the 51-vote budget reconciliation process, he had agreed to let them sunset in 2010. A last-minute deal extended them until the end of 2012.
So now there are two triggers. One is an extremely progressive spending trigger worth $1.2 trillion that goes off on January 1, 2013. The other is an extremely progressive tax trigger worth $3.8 trillion that goes off on...January 1, 2013. If you count reduced interest payments, the two policies alone would reduce future deficits by about $6 trillion. That's far more than anything the supercommittee came close to discussing. It's distributed far more progressively than anything the Democrats have even considered proposing. And all that needs to happen for it to pass is, well, nothing.
Republicans can't stop these triggers on their own.
Klein points out that there are two main dangers for Democrats: first, that pulling back all the Bush tax cuts, including for the middle class, would be politically suicidal in an election year. Second, that the impact of all of these cuts and tax increases would be a very damaging shock to the economy.
But Klein is right: for once, the ratchet effect works in progressives' favor here. The Democrats can offer the Republicans a deal: extending the Bush tax cuts only for the middle class, in exchange for cuts to various unpopular programs that only fall mostly in Republican areas of the country. Or the Republicans can offer a more unpopular package, which Democrats can rightly refuse, leading to all the tax cuts being rescinded. That would likely end the Obama presidency, which is one reason the President will strongly push for a deal. But it could also have the effect of galvanizing support for the President against the GOP House. I'm not sure the GOP would relish the prospect of sending Gingrich and Boehner to a Clinton-era-style duel to the death with Obama in an election year. They just might back down, if the President were to stand up and refuse to negotiate except on Democratic terms.
Of course, given this President's history, that's fantasy talk. But that doesn't change the fact that the terrain is favorable to Democrats on this one. The ratchet is working to our advantage, and all Democrats need do is sit back, offer politically popular plans, and watch the GOP squirm and whine. The only things keeping this from being a slam dunk are the certainty that 1) the President will go into conflict avoidance mode and seek a politically damaging deal, and 2) the Villagers will lay blame on the Democrats for the conflict if they don't give Republicans everything they want.
Still, it's a risk worth taking. Time and popular opinion are on our side here.
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