Fasten your seat belts and get ready for a bumpy ride

Fasten your seat belts and get ready for a bumpy ride

by digby

I have probably been among those liberals who were slightly less agitated by this fiscal cliff deal simply because I was glad to see that the President didn't, in the end, succeed in putting SS and medicare on the chopping block. It's thin gruel, but in this environment a Grand Bargain failure is about he best I ever hope for. I never believed that they would go over the cliff although I kept hope alive. The body language was clear --- I'm afraid that nothing scares them more than the market gods and they truly believed that there would be a big reaction if they ended up going over the cliff --- which meant massive austerity, even if it was in the short term.

And that is so ironic I can hardly stand it. After all, the whole logic of this ridiculous battle allegedly hinges on our allegedly massive debt and yet the Market Gods know very well that to attempt to deal with it through massive austerity measures will kill their golden goose. It makes your head hurt to think about it.

I was all for making a stand and using the threat of higher taxes to eliminate the debt ceiling hostage taking, but I can't honestly say I thought the WH or the Democrats would do that. They just don't have the killer instinct. And the danger was that in search of the vaunted "balanced approach" they'd sell out the future in order to gain in the present and I just couldn't go along with that.

And anyway, there's nothing surprising about Grand Bargaining being done in stages. That's what they've been doing from the beginning and we've only been moderately successful in keeping needed programs off the chopping block. As long as we have a president and a Democratic leadership that continues to endorse austerity in one way or another, there's little anyone can do about it except keep trying to push the worst of it to the next phase in the hope that circumstances will be more friendly down the road.

So, fasten your seatbelts. The fight to stop them from giving away the store in the debt ceiling begins today. As Josh Holland wrote (bitterly):

It's simply a hostage exchange. The Republicans gave up the fiscal cliff, and will now take the debt limit, the federal budget and automatic across-the-board cuts to discretionary spending (the sequester), and have another standoff in 2-3 months time. The deal wouldn't have gotten 85 GOP votes in the House without the leadership giving right-wingers ironclad guarantees that they'll have another hostage soon.

What leverage will the White House have at that point? They've already rejected the "constitutional option" to avoid the debt ceiling -- and won't mint a big platinum coin. The Bush tax cuts on high earners will be off the table. That leaves cuts to defense -- which Republicans hate -- and public opinion, to which the GOP doesn't seem terribly responsive when its base is screaming murder and threatening primaries (which is always). That's pretty thin gruel given that the "austerity caucus" thinks it has a good shot at cutting Social Security and Medicare as part of a "grand bargain" with Obama.

Other than that, we'll only have the Democrats' legendary iron back-bone on which to rely. Nobody's ever gotten rich betting on that.

Indeed. Meanwhile the White House is dancing all over the TV claiming Grover Norquist has been banished from the beltway and the Republicans are all in on tax increases for a balanced approach. I sure hope they know that's spin because if they don't, we're in worse trouble than I thought. This was a one time deal and the GOP will hold the line in this next round unless the Democrats come after them with everything they have and accuse them of trying to kill senior citizens and sick children. I mean it. They are not going to agree to any more tax increases.

Also too, this. We cannot afford any more cuts. In fact, we can't afford the cuts we're already enduring:

The White House continues to maintain that it is investing in the middle class going forward, yet this clearly is not true. This is important to understand as we move toward further budget deals that could make matters worse.

The White House statement on the fiscal deal says: “This agreement will also grow the economy and shrink our deficits in a balanced way – by investing in our middle class, and by asking the wealthy to pay a little more.” And an accompanying fact sheet claims: “this agreement ensures that we can continue to make investments in education, clean energy, and manufacturing that create jobs and strengthen the middle class.”

As my colleague Ethan Pollack has pointed out, this is inconsistent with President Obama’s frequent bragging point that his budget brings the non-security portion of the budget down to record-low levels—“the lowest level since President Eisenhower.” The fact is that if you lower domestic discretionary spending, you necessarily are reducing public investments in education, research and infrastructure. As a reminder, here’s Ethan’s analysis of infrastructure, education and research and development spending in the Obama Fiscal 2013 budget: 

So, if we really want to invest in the middle class—as the president claims to—we will have to increase domestic discretionary spending, not cut it further as his most recent and prior budget requests have done (the president also offered to cut domestic discretionary spending by another $100 billion in the recent negotiations). Fighting to preserve social insurance (Social Security, Medicare, and Medicaid) benefits that the broad middle class depends on and making the public investments we need for growth and equity requires winning the battle over more revenues in the budget negotiations ahead. We should all be clear about that.

So you see what a bind we've been put it with this ridiculous austerity fetish? We're going to be arguing about cutting even larger chucks of the budget at a time when we desperately need to be adding to it.

(Oh, and by the way, it's not as if the tax hikes they just voted for could be used for any of that. Every penny of it is slated to pay down debt incurred during the time when the Republicans starved the beast and spent like sailors. What a racket.)