Obama’s Refusal to Deal Paving Way for a Deal

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U.S. President Barack Obama holds a news conference in the East Room of the White House November 14, 2012 in Washington, DC. This is Obama's first news conference since winning re-election on November 6.
Photo: Chip Somodevilla/Getty Images

Most of the news coverage of the “fiscal cliff” has come from the perspective of soothing bipartisan centrism, a point of view dramatized most explicitly by CNBC’s hysterical countdown to January, festooned with slogans urging the two parties to “Rise Above.” The premise is that there are two ways to handle the “cliff.” The good way is for the two parties to join together to consummate a Grand Bargain settling all their fiscal differences. The bad way is to “go over the cliff” and fight in January.

For a good example of that disposition, here is Wall Street Journal centrist columnist Gerald Seib:

That sputtering sound you hear in Washington is the sound of the deficit-reduction talks trying to get rolling again.

That other noise? Oh, that's the sound of a growing number of partisans on both sides strapping on parachutes, because they would be just as happy to go over the fiscal cliff that will be reached if those talks fail.

I’m curious — what sound does it make when people strap on parachutes? Is it a thwapping noise? A clicking noise? If Seib closed his eyes, would he be able to recognize it?

Anyway, Seib’s analogy of the sputtering noise versus the thwapping-clicking-whatever parachute-strapping noise is the operating premise governing most of the news coverage. The whole premise has always struck me as wrong, and it’s being disproven before our eyes.

Consider the Grand Bargain negotiating track. After laughing at President Obama’s offer, Republicans made a counteroffer, of sorts, the other day. One problem with the budget plan put forward by John Boehner is that it’s not a plan, just a sketchy bunch of topline numbers that doesn’t do any of the work of explaining where the higher revenue or lower spending will actually come from. Another problem is that even the sketchy outline has provoked howls of outrage from the right and probably couldn’t pass the House, even without putting any meat on its bones.

So the Grand Bargain track has gotten nowhere. By contrast, the mean, nasty partisan confrontation track is making steady progress. This alternate theory says that if Obama must force Republicans to accept the expiration of the Bush tax cuts for the rich before any deal can happen. And slowly but surely, Republicans are congealing around the recognition that they’ll have to accept the expiration of those tax cuts.

Now, part of selling this concession to the conservative base entails presenting it as exciting new opportunity to fight Obama on spending. Jonathan Weisman reports:

Republican leaders could take up legislation already passed by the Senate to extend tax cuts on income under $250,000, attach a deferral or cancellation of the automatic spending cuts, and give Mr. Obama nothing else, denying requests for increased infrastructure spending, help for homeowners to refinance their mortgages, and extensions of the payroll tax cut and unemployment insurance.

Then Republicans would demand deep concessions on spending and changes to Medicare and Social Security as a price to raise the debt ceiling a few weeks later.

Conn Carroll of the conservative Washington Examiner eagerly anticipates this new spending-based fight:

as a back up plan, passing a tax cut for 98 percent of Americans, while avoiding any of the additional new stimulus spending that Obama is asking for, may be the best Republicans can hope for right now. The American people will quickly realize that raising rates on the highest income Americans does nothing to solve the true cause of our fiscal crisis: entitlement spending. Then Republicans can then fight for real reforms on better turf. 

Let us reason together. Republicans understand, correctly, that they’ll have a hard time winning a public argument in which they’re forced to defend their demand for tax cuts for the rich, which are unpopular. So instead they want to shift the debate to … their demand for cuts to Medicare and Social Security? They do understand that those things are even less popular, right?

Republicans may need to convince themselves that extending the tax cuts for income under $250,000 sets them up to fight Obama, but it really sets them up for an easy deal. Once we get past the expiration of the Bush tax cuts for the rich, a deal becomes very easy to strike. Obama will have most of the revenue he needs. He can get the rest through restricting tax deductions — possibly giving the Republicans a small rate cut to boot, once he’s starting from a Clinton-era baseline. He’ll also be able to offer Republicans a favorable ratio of spending cuts to new taxes, and he’ll be able to throw in defense hikes alongside it.

That’s a deal that Republicans will be able to sell to their base. But the key is the expiration of the Bush tax cuts for the rich. As long as Obama is negotiating for that revenue, a deal is impossible. If he has that revenue in his pocket, a deal becomes very easy. The way to get to that place is to insist on their expiration and to convince Republicans that they can’t use the threat of the so-called fiscal cliff to force him to sign an extension. In other words, by ignoring the fiscal cliff doomsayers and Grand Bargaineers demanding that he compromise, Obama is doing the one thing that can result in an agreement.