Home / General / Bargains, Grand Bargains, and Conceptual Confusion

Bargains, Grand Bargains, and Conceptual Confusion


Since this is likely to come up again, it’s worth clarifying an issue that is likely to come up as the “fiscal cliff” “gentle fiscal incline” approaches.   As stated in the most extreme form by Jessie Levine in comments, some people seem opposed to any deal using the leverage of the expiring Bush tax cuts to get something, even if we assume the final deal is favorable to liberals.  This doesn’t make sense, of course.   But some of this logic seems to come from confusion stemming from the use of the term “grand bargain.”  This conflates things that should be kept distinct:

  • A “grand bargain,” — a long-term deficit reduction deal — is almost certainly a horrible idea for two reasons.   First, while in theory a deficit deal could be struck at any level of expenditures and taxation, in practice such deals tend to be proposed by Pain Caucus types who just want to slash social spending in order to preserve or extend upper-class tax cuts.   Simpson/Bowles was heavily tilted to conservative interests, even though it was made nominally progressive by proposals like an elimination of the mortgage interest deduction that have no chance of enactment.   And more importantly, even in the extremely unlikely event that you could get a “Grand Bargain” on favorable terms the deals are entirely useless because they’re completely unenforceable. The Clinton surpluses were just used to fund massive tax cuts (with Alan Greenspan solemnly informing the public that we were in danger of paying down the the debt too quickly.)  Since the Republican Party is if anything less interested in deficit reduction now, you’d have to be a world-class rube to fall for that again.
  • The fact that a “grand bargain” is a terrible idea doesn’t mean that any legislative bargain is a bad idea.   One advantage of my not being a Republican is that  I can feel free to evaluate a legislative deal based on its contents, and it’s silly to criticize a deal without knowing what the deal is.   I’ll grant that “getting a legislative deal in which you gain more than you lose” isn’t a “battle cry of freedom,” but that’s also a pretty dumb standard to evaluate the outcomes of ordinary politics.   What, if Obama was a real liberal he’d be sending federal troops to burn down the suburbs of the capital of every state that voted for Romney?
  • There’s no reason to assume in advance that any possible deal will be bad.  You may not have noticed, but Republicans really like tax cuts.   In 2010, they had the choice between severely damaging Obama’s re-election chances and extending the Bush tax cuts, and they chose the tax cuts.  Maybe this can be leveraged into something, maybe it can’t, but there’s no reason not to try.   Unlike with, say, the PPACA negotiations, this is a negotiation liberals can walk away from just as easily; four years from the next election, letting the Bush tax cuts expire in their entirety is fine.
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  • Craigo

    We should also stop using the term “fiscal cliff” to describe something that is really more of a slope. Even if the deadline passes and no changes are made, the effects of the tax and spending changes won’t be felt for months. (Not to mention it pushes the debt ceiling back even further, kicking the legs out from whatever leverage the Republicans had). “Cliff” is just scaremongering from the pain caucus.

    • tonycpsu

      Harrumph. The GOP has their Frank Luntz Batphone that rings whenever they’re not using the correct focus group-tested terminology for their policies, and the Dems would do well to learn from their example in setting favorable terms for the debate by choosing favorable terms for the debate.

      I don’t think Charlie Pierce’s offering of “Gentle Fiscal Incline” has any chance of being picked up by the mainstream media, but perhaps they could just go with “fiscal slope” and then explain the many reasons why the world doesn’t end on Jan 1 if there’s no deal.

    • Scott Lemieux


    • This is true.

      This was also true of just about all of the “austerity” cuts floated over the past two years, and we might have had more intelligent discussions if a similar level of precision and nuance had been present during that period.

      • Scott, please go back and edit all references to austerity for the past two years for the same level of precision and nuance.

        Thank you.

  • mpowell

    I think whether you can walk away from letting the tax cuts expire depends at least somewhat on whether you think monetary policy can take the place of fiscal policy in avoiding the recessionary pressure increasing taxes would have and what you think the fed’s likely response will be.

    I think monetary policy of the right variety could be sufficient and I’m feeling better about the fed now that it seems Bernanke has assembled a reasonable coalition of like-minded inflation doves, but this not a risk free test.

    • rea

      I think monetary policy of the right variety could be sufficient

      We been fairly close to the zero bound of monetary policy for a while now. Negative interest rates on T-bills?

      • mpowell

        The zero bound only applies to the funds rate target. It doesn’t mean by definition that it’s the limit of what monetary policy can do. That’s the whole debate, but I think Scott Sumner basically has the right idea.

        • Anonymous

          Look at what Bernanke had to do to get another round of what has by now been accepted as conventional ‘unconventional’ monetary policy. It is not a technical policy question of whether there are things the Fed could do to offset contractionary fiscal policy. It is a political question: what are the chances they will do any of it? Sumner’s on that is one of a deluded and naive economist (and I quote from a comment thread in which he was being drawn out on the question): “the president controls the Fed.” He said that. Don’t trust Sumner on the political question of what the Fed will do under various economic conditions.

          • Mike D.

            Soy yo.

    • There’s “walking away from the tax cuts expiring” and then there’s “walking away from the tax cuts expiring until the next Congress.”

      The high likelihood of getting a tax deal, a favorable one, after January means that walking away in December is a low-stakes move.

  • NonyNony

    I made the point in the linked comment thread, but I’ll say it again. I seriously question the veracity of this sentence:

    You may not have noticed, but Republicans really like tax cuts.

    Republicans do not actually really like tax cuts. They really like tax cuts targeted at the top 5% or so of the population. To get those they will cut deals that include tax cuts for other people as a bargaining chip to get liberals and moderate Democrats on board, but their desire is a cut for the top 5%. If the deal doesn’t include keeping all of W’s tax cuts in place for the top earners, then I honestly think that they’ll walk and hope that there’s a deeper recession this time so they can pick up more seats in the House in 2014.

    I hope I’m wrong. I’ve yet to see evidence that I’m wrong, but I continue to hold out hope.

    • ploeg

      Agreed, if you take tax cuts in isolation. If you throw in decreased defense spending (so you are ticking off another GOP constituency), they might be content to take the lesser tax cut. We shall see.

      • Yes, there is more than one chip in this game. And many possible outcomes on non-defense spending, defense spending, the tax cut mix, etc.

        Getting the carried interest tax rate raised to regular rates is a win that could be paired with restoring some defense spending impact, for instance. Without any impact on the top tax rate or services cuts.

        The Democrats need to remember learn Jim Baker’s negotiating rule as well: Nothing is in the deal until the deal is done, roughly. Don’t give up anything until you get something of equal or greater value in return, don’t let the Republicans pocket your first offer as the starting point to negotiate on the rest of the Democratic concessions to be sought.

        Seems obvious, but let Marc Ambinder remind you of how that works. Or even better Grover ‘Date Rape’ Norquist.

    • Anon21

      The thing is, the so-called “middle class” tax cuts portion of the Bush tax cuts is actually also really favorable to the wealthy, for the simple reason that they have a lot of income taxed in those lower brackets. So if Obama allows the whole thing to expire and then re-proposes the “middle class” portion as a standalone bill, I do not think their wealthy controllers will permit them to turn the smaller bill out of spite or principle.

    • Scott Lemieux

      Well, since the expiring tax cuts in fact include upper-class tax cuts, I don’t really see how this changes the calculus.

  • rea

    four years from the next election

    2 years from the next election. We need to win that one, too, and it will be hard for structural reasons.

    • NonyNony

      Honestly – the rout of 2010 where state Democratic Parties just kind of gave up in probably the single most important off-year election in 20 years – is going to be sticking with us until 2020.

      I’m hoping that demographic shifts in the population move that timetable up. But if you look at how the districts in, say, Ohio are drawn, you can see how difficult it’s going to be for us to get more than 4-5 Democrats out of 16 anytime in the next decade. That kind of advantage is going to be amazingly hard to overcome, unless the rural population of Ohio starts abandoning the GOP in droves (which I’m sorry to say I don’t see happening any time soon, despite how generally awful the GOP in the state has been).

      • JoyfulA

        And Pennsylvania is gerrymandered worse than Ohio!

        • John

          Is it? I mean, it’s likely worse for Democrats, but even a non-gerrymandered Pennsylvania would likely favor Republicans, due to the concentration of the state’s Democrats in Philadelphia.

          A Democratic state government could have done a Democratic gerrymander of the sort that happened in Maryland – with black neighborhoods in Philadelphia divided out among six or seven bizarrely shaped districts winding out far into the suburbs and exurbs – but that would make Pennsylvania more gerrymandered, not less.

          • Marc

            There is a big concentration of people in Philly too. The way this works is seen most clearly in cities like Columbus. There are no county-wide elected Republicans in Franklin county; the metro area is about 1.8 million. A “fair” distribution would have at least 2 Democratic districts, or perhaps 3 Democratic-leaning ones. Instead they packed all of the Dems in one district and created two safe Republican seats.

    • Janastas359

      Honestly, the next election likely to matter is going to be in 4 years. Even if the GOP increases it’s margin in the house, it’s unlikely to matter much, as they already control it. As long as a Democrat is in the White House he can prevent the excesses of the Republican party. If we take an economic hit now as part of these negotiations, it’s likely to have faded by the time the next President needs to be elected.

      • Janastas359

        What we need to worry about when negotiating is whether the Republicans can get what they want without the help of the Democrats… and there really isn’t a way until 2016.

    • Mid-terms don’t matter. It’s not like ignoring 2010 hurt us or anything. Now’s the time when we should be focusing on people who might be voting Green in 2016.

      • Scott Lemieux

        Who’s in favor of ignoring the midterms?

        • Possibly the same people that did last time?

  • DivGuy

    I agree with the broad gist of this post, but one thing I want to clarify:

    Unlike with, say, the PPACA negotiations, this is a negotiation liberals can walk away from just as easily; four years from the next election, letting the Bush tax cuts expire in their entirety is fine.

    The Dems can walk away from the lame duck sessions and let the tax cuts expire.

    However, the Dems have to cut a deal eventually to prevent a variety of really bad things from happening. The shitty budget deal of 2011 includes a bunch of things we can’t let happen – expiration of unemployment benefits, expiration of the payroll tax holiday, and unspecified but nasty broad-based cuts in discretionary spending. A deal needs to be made which restores the payroll tax holiday and safety net spending.

    The deal doesn’t need to be cut today, and it doens’t need to be cut this year, so Dems can walk away now. But cutting a deal is not just an acceptable outcome. It is, eventually, a necessary outcome.

    • This should be easy enough: you propose an extension of the Bush tax cuts in exchange for all of that, and then flog House Republicans to death if they don’t agree. Alas, Obama’s fancy for deficit reduction puts something of a wrench i that.

    • Richard

      As I understand it, the payroll tax holiday expires on December 21 so paychecks of January 1 will be smaller if a deal is not made by then. The payroll tax holiday is a relatively small amount of money but it will expire if a deal is not made by the end of the year. Is that not correct?

      • Richard

        December 31

  • david mizner

    So you’re willing to accept an extension of the Bush tax cuts for the rich?

    There’s no plausible deal that could both extend the tax cuts for the rich and favor liberals.

    • Word. We need more Keynesianism, not deficit spending bitches!

      God you’re a moron.

      • Wido Incognitus

        Maybe his point is about the liberal goal of a more equal after-tax distribution of income. It would still be an exaggeration, but it would make some type of sense.

        • Wido Incognitus

          It would still be an exaggeration, but it would make some type of sense.

          That should read “it would make more sense.”

          • Wido Incognitus

            And blog comments do not always have to make sense anyway.

            • david mizner

              Better if they don’t.

              • rea

                I can see why you two would agree on that . . .

        • david mizner

          It’s 2010 all over again. Dems “can’t” let the budget busting, enrich-the-rich tax cuts expire.

          • Good Christ, what the fuck is wrong with you? Care to point out who said that?

            • david mizner

              How do you see your screen through all the spit marks?

              • So that’s a “no” on referencing such a remark, then?

              • You don’t get to say this, ever, Mr. Dead Muslim Children.

                • dlankerlanger

                  you’re looming so large right now, joe

            • Leeds man

              Perhaps no-one said it, but I doubt I’m alone in saying I’ll believe it when I see it.

    • I should also note that this makes especially little sense in a reality where the GOP controls the House and, as such, a proposal to repeal the tax cuts AND pass progressive stimulus measures is highly unlikely to happen.

      What we have here is basically an admission that Mizner cares fuck all about actual people or progressive goals, but rather just cares about beating his political opponents.

    • mpowell

      This is really stupid.

    • NonyNony

      There’s no plausible deal that could both extend the tax cuts for the rich and favor liberals.

      “We’ll extend Bush’s tax cuts for the rich for another, oh, 2 years in exchange for a transaction tax on Wall Street trading, restoration of Glass-Steagall, and restoration of [insert all of the things that DivGuy put in his comment above]”

      • NonyNony

        Do I think they’d go for it in the House? Possibly not – but damn I’d like to watch the guys who just screamed about being against the bail out have to come between the hammer of the bankers who have been shaking the Tea Party tree and the rich folks who want to keep their tax cuts.

      • david mizner

        I said plausible.

        Follow Krugman’s advice: don’t give into GOP terrorism (again). Let the tax cuts die and then do a deal. Pretend you won an election. The GOP has always caved on unemployment benefits — something like 7 times.

        Jeez, I’m not fan of Obama, but I’m glad he’s negotiating instead of the LGM comment crew, which is terrified of both politics and the GOP>

        • JKTHs

          I’d do that, but only after offering up an absurd Fregosi-for-Ryan type trade for the House GOP just to see what happens.

          • david mizner

            I guess it’s a worth a shot.

            It’s funny, I actually think the Obama administration is prepared to do what I’m recommending.

            • JKTHs

              That would be shocking.

            • I guess it’s a worth a shot.

              Then I guess all of your fake macho posturing was bullshit.

            • Marc McKenzie

              Sure…..delusions, they sure are wonderful…

        • NonyNony

          Dude – Scott already said that the best negotiating position is exactly that. I agree with that – let it expire and then negotiate.

          But then you have to, you know, fucking negotiate. Which means giving them something they want in exchange for something you want. What they want is a tax cut for the top 5%. That means that at some point you have to consider giving them some element of that just to get what you fucking want.

          Do you understand that? Do you get that at all? You’re making a strawman argument if you think anybody here isn’t saying “negotiate from a position of strength”. But it needs to be a fucking negotiation which means that they’re going to fucking get something out of it.

          • JKTHs

            Obama promises not to have the EPA go ahead with CO2 regulations in exchange for a stiff carbon tax.

            • Anon21

              That would be great, since the Clean Air Act is a poor tool for regulating carbon emissions. Also, a carbon tax would be regressive, so there’s at least some chance of getting the GOP on board.

              • JKTHs

                Hah they could sell a carbon tax to conservatives with a line like “You know those parasitic 47 percenters? A carbon tax is a perfect way to stick it to ’em.”

          • Do you understand that? Do you get that at all? You’re making a strawman argument if you think anybody here isn’t saying “negotiate from a position of strength”.

            Mizner sounds like the Iraq War hawks in 2002. If you don’t do exactly what he says, you’re not manly enough, and want to surrender.

          • Marc McKenzie

            Exactly. Negotiation is a part of the political process, which is a messy, ugly thing.

            Plus, no one ever gets everything they want. You would think that people would have learned this lesson by now (and also give Obama a chance).

        • Serious question: which party do you think has an incoming majority in the House during the next Congress?

          • Scott Lemieux

            Yeah, but if Obama was really a liberal he would ram single payer and the nationalization of the banking system right down John Boehner’s throat.

    • njorl

      The Republican majority in the House can destroy the US economy if it decides to do so. Eventually, we need them to consent to some sort of spending. If the choice is the complete collapse the US as a nation, or tax cuts for the rich, I’ll consent to tax cuts for the rich.

      I think they wouldn’t go that far, but it isn’t out of the question. If they’re willing to do the unthinkable, we do have to give in, but we must also be sure to show them for what they are, extortionists who serve only the rich.

    • Murc


      The last deal was a pretty good one. We got a ton of stuff we wanted (hell, DADT repeal alone might have been worth it, but other stuff was thrown in as well) in exchange for… the opportunity for the Republicans to come to us again now and offer MORE things we want.

      I’m not saying they might propose a deal we like. But if (for example) they offered to continue the payroll tax holiday, to extend unemployment benefits, to get rid of the discretionary spending sequesters, repeal DOMA and not bring up the Keystone Pipeline, plus maybe a couple other goodies… yeah, I might consider that a win for liberals.

      Maybe they won’t but an acceptable deal on the table. But such deals are within the realm of plausibility.

      • david mizner

        You do realize that the Bush tax cuts for the rich are very bad, right?

        • Would you rather raise taxes on the rich or increase spending to help everyone else/stimulate the economy?

          • Craigo

            Well, that depends on what Obama decides to do. David will support the opposite.

          • david mizner

            Both, of course. To accept now that Dems, coming off a commanding victory, can’t get through any new spending is defeatism and cowardice of a high order.

            Granted, the job is tougher now because Obama didn’t run on any short-term measures to fix the economy.

            One thing he did run on — it was arguably the core position of his campaign — was to allow the tax cuts on the rich to die.

            • “Both, of course. To accept now that Dems, coming off a commanding victory, can’t get through any new spending is defeatism and cowardice of a high order. ”

              Oh. My. God.

              Suddenly I’m wondering if I haven’t been suckered in by an elbaorate parody of Mizner.

              • mpowell

                No kidding.

                • I put the odds that he thinks the Democrats won the House at 50-50.

              • I think you’re right.

                Calling out people for their unmanliness is not a miznerian maneuver.

            • Njorl

              To accept now that Dems, coming off a commanding victory…

              You’re as self-delusional as a Republican.

              • I don’t think ‘commanding’ properly describes the retaining of the same positions as before the election.

        • Murc

          They are indeed very bad. But that’s not what we’re discussing, is it? You made the assertion that there’s no plausible deal in which extending them is good for liberals. Respectfully, I disagree. Liberals often get deals which are good for them but contain very, very bad things. The entire New Deal was constructed as a giant ‘fuck you’ to blacks in order to get it passed, for example.

          I think we could continue to let these very bad tax cuts continue to exist if the Republicans sweeten the deal enough, and that it’d end up being a net win.

          That said, it would need to be a sweet deal.

          • Meh, I’m not sure how sweet it really has to be. Politically I would say it needs to be sweet, if only because you’re giving in to Republicans on their number one priority, but from a short term economic policy standpoint, trading potential tax hikes that you don’t really need for basically any amount of economic stimulus or relief for the working/middle class is a net benefit for liberals.

            • Murc

              Well, that’s the tradeoff, isn’t it?

              Policy is important, but politics is the vehicle by which it is made, and politically speaking if the Republicans are going to keep throwing tantrums, we need to make it as difficult as humanly possible in order to discourage the behavior.

              I would even go so far as to say that I find it plausible that, one day, we may need to actually let the Republicans shoot their metaphorical hostage, because the constant ransoms just aren’t worth it anymore.

              • I think I worded that poorly. In political terms, any sort of economic stimulus or direct aid to the middle class will be good for Democrats as the governing party. I meant that, since Republicans care more about upper class tax cuts than anything else, you’d like to extract as much value as you possibly can in exchange for acquiescing to an extension of the rates.

                • That seems pretty self-evident for any negotiation of any type.

                  The real concern should be: Given the past performance of Democrats in negotiating on behalf of its constituents, how can we influence them to do better than say the Bankruptcy Reform Act of 2005.

                  Get full value for your compromise. The terms of the FISCAL compromise are almost beside the point – what is important is if, in terms of $, income growth and equality the terms are favorable to Democratic interests in EQUAL measure to what the Republicans get for their interests.

                  That’s a win-win. Thinking you can negotiate a win-lose with the House Republicans is delusional. Of course, their whole theory (and practice) has been predicated on poor Democratic negotiation skills. I think no deal at all will likely be a lose-lose, which is always a possibility when incompetent negotiators are dealing with known lunatics.

            • bobbyp

              if only because you’re giving in to Republicans on their number one priority

              To me that raises questions. Why is that their no. 1 priority? Do they have a no. 2,3, or 4 priority? Why don’t we bargain over those? If they get to maintain their no. 1 priority in the bargain and we don’t get anything for our no. 1 priority (whatever that may be), can we say we have “won” in any meaningful sense?

              • Well if a hypothetical world in which Republicans offered not to repeal PPACA in exchange for Democrats agreeing to something else I guess that would be an interesting question, but this is the hand we have to play under current law.

          • Scott Lemieux

            The entire New Deal was constructed as a giant ‘fuck you’ to blacks in order to get it passed, for example.

            Exactly. I think we can all agree that apartheid is rather worse than tax cuts for the rich. So I guess by Mizner’s logic it was immoral for FDR to sign legislation creating Social Security and national unemployment insurance.

    • Scott Lemieux

      There’s no plausible deal that could both extend the tax cuts for the rich and favor liberals.

      You know, except for the last one, without which we get no extension of unemployment benefits, no DADT repeal, and most likely President Romney. Seems like a pretty good deal to me.

      • …no food safety overhaul, no nuclear reduction treaty…

    • There’s no plausible deal that could both extend the tax cuts for the rich and favor liberals.

      This is an excuse not to think.

      A defense mechanism for those intimidated by a shades-of-grey world.

  • Left_Wing_Fox

    Is there an actual event people are referring to as the “Fiscal Cliff” or is it just a game of telephone like “Clean Coal”, where a potential future possibility morphs through sloppy repetition into something happening in the present?

    • Richard

      Yes, there is an event. Taxes go up on the middle class and the rich on January 1. The payroll tax holiday expires on December 31. Long term unemployment benefits expire on December 31. 20% cutback on all government services (except Social Security and Medicare but including Medicaid) starts on January 1. Of course, the cuts and increases can start and then be retroactively revoked after January 1 but, in the absence of a bill passed by the House and Senate and signed by the President, real things happen on January 1.

      • JKTHs

        It’s not 20%. More like 9%.

        I agree the term has been repeated by so many people who say it but have no idea what they’re talking about it essentially becomes meaningless to the general public. I’m sure half of people think it’s about those big evil deficits finally coming back to bite us in the ass or something.

        • John

          I love how the various people constantly warning us about the fiscal cliff are, in fact, the same people who are constantly warning us about how awful the federal deficit is.

          There never seems to be any acknowledgement of the fact that the “fiscal cliff” will greatly reduce the deficit. It is not surprise if ordinary people think that the fiscal cliff is going to increase the deficit, given that the very serious people who warn about it are the same ones constantly hawking on the deficit.

  • Joshua

    Republicans have all said since Tuesday that their red line on this deal is Mitt Romney’s tax plan. They will accept a plan that lowers rates and eliminates deductions, as long as, I am sure, the lobbyists get a crack at those deductions next year.

    They are full of shit. Let the tax cuts expire. Obama has made it crystal clear what he wants to do with them and he isn’t running for re-election in 2/4/6 years.

    • Richard

      But all the other Democrats are running for reelection. If the tax cuts expire, payroll checks are less in January (because the end of the payroll tax holiday), taxes go up on the middle class (which means that pay checks are further reduced because income tax witholding goes up) and government services are drastically cut and unemployment benefits stop for the long term unemployed.

      The probable effect of this (unless a deal is reached relatively soon after the first of the year to revoke all of this) is recession which means the Dems lose more House seats in two years and lose control of the Senate. This is what you fucking want?

      Obviously, you negotiate hard from a position of strength but then, at some point, you reach a compromise because each side can offer something to the other side that they can’t get alone. Unless you don’t care about the country and don’t care what happens to the Democrats two years from now, the position can’t be “let the tax cuts expire” unless the Republicans give us everything we want.

      • Murc

        But it CAN be “let the tax cuts expire unless we get a whole bunch of things we want.”

        Not everything.

        But if the Republicans really, truly want their delicious upper-class tax cuts, they can pay us off. And the price will be commensurate with the value of what they’re buying; there are no discounts to be had here.

        • Richard

          Absolutely agree. I was taking issue with Joshua’s “let the tax cuts expire because that is what Obama wants and because the President isn’t running for reelection” idiocy. (Didn’t even bother to point out that Obama wants the tax cuts for the rich to expire but not the tax cuts for the middle class but, in the absence of a deal, they all expire)

          A deal, however, has to be struck at some point in time whereby they get something they want and we get things we want. Would be different if we controlled the House but that didn’t happen, not even close.

          • Janastas359

            Richard, it feels like in both of these threads you’re arguing that it would be better for the party and the country to go ahead with a deal before the end of the year, for fear of setting off a recession. You have multiple times tried to remind everyone that a failure to make a deal would be a disaster for everyone, and it seems like you think it would be better to deal now than to let the first of the year pass and deal from a stronger position. Do you think the President should try and make a deal before the end of the year? Because from where I’m sitting, if the President’s primary goal is to make any kind of deal to stave off the effects of the “cliff,” he’s going to have no leverage.

            It seems to me that the Dems are better off going past the deadline and then dealing from the new baseline, but you make it sound like you think getting a deal done before the deadline is the most important thing. Do you think this is the case? Genuinely curious.

            • bobbyp

              Yes. The question is: Do the dems have more leverage to make a deal before 12/31 or after? I don’t get the sense that anybody is suggesting there should be no deal whatsoever. There will be a deal of some kind.

              • I don’t see how timing makes a difference. Assuming that the Democrats put forward an offer of extending the tax cuts in exchange for whatever it is they want, when they make the offer makes no difference. It’s whether or not they stay committed to their demands that gives them leverage.

                • Richard

                  The only reason timing matters here is that most of us are going to see decreased paychecks in January if a deal is not made before that. And extended unemployment will end and spending cuts will take place. The paycheck decrease, however, is not so great that the Prez should cave if a deal can’t be reached before the first.

                • WEll then it seems to me that that would be a reason to at least get the offer out there and make it known that the Democrats want to make a deal before the cuts expire, then. Though again, the important thing is sticking to your demands in the face of Republican intransigence.

            • Richard

              No, Im not saying that. I dont think it matters much whether you make a deal on December 15 or January 15 (although if you make it on January 15, youre going to find tens of millions of people upset with decreased paychecks). But a deal needs to be made no later than end of January in my opinion.

              You may be right that its better to go past the deadline. I have no firm position on that. My point is only that, at some point, a deal will have to be made before we go into recession since the voters will vote against the party in power in two years if we go into recession again.

              • Richard

                And just to make clear, I think the effect of raising taxes on the middle class and cutting all government spending by 20% will trigger a recession (or, at the very least, strangling the recovery we are now seeing). Thats why a deal has to be cut but I leave the timing to the administration.

          • Joshua

            Please point me to the place where I said that Democrats shouldn’t budge until they get everything they want.

            • Richard

              ‘They are full of shit. Let the tax cuts expire. Obama has made it crystal clear what he wants to do with them and he isn’t running for re-election in 2/4/6 years”

              I dont know what else this could mean other than not make a deal unless you get everything you want

  • Jesse Levine

    Scott, you got me wrong. I didn’t say no deal. I was responding to a comment that suggested to me the author was prepared to accept a minimal or face saving benefit in exchange for giving up the biggest weapon in the arsenal. I am not prepared to accept a repeat of the 2010 deal.

    • Scott Lemieux

      The 2010 deal was not, in fact, minimal. Indeed, since without it Romney almost certainly wins you wouldn’t even get higher taxes on the rich out of rejecting it.

      • To be fair, while I wouldn’t call it minimal, I think it’s fair to wonder if Democrats couldn’t have gotten more out of it, namely fending off the debt ceiling fight.

        • Marc Ambinder certainly thought so – in real time.

        • Scott Lemieux

          I agree — they clearly should have gotten that resolved as part of any deal.

          • Mike D.

            That too sounds a bit magic-wandy to me. “{T]hey clearly should have gotten that resolved as part of any deal.” I would accept, “They clearly should have explored getting that resolved as part of any deal.” But the reality was till that the no-deal outcome was transparently (symmetrically visible) worse for Dems, and in any case R’s had the party-of-crazy whip hand on top of that. (Now they only have the latter.) Your bottom-line position is more correct: considering the needs of the players and their relative bargaining position, what was won by Dems was more than worth what they gave up. “They should have gotten” statements have little place in retrospective assessments of the bargaining. They (Obamaite Dems) were not in the position to do the demanding given their macroeconomic needs in those days. That this was a problem of their own making is immaterial.

          • And dropped what from the deal they got?

            It’s entirely possible that the Democrats could have gotten somewhat more out of the deal, but getting the debt ceiling extended past the election would have been a major, top-line item. The Tea Party candidates all ran on refusing to increase the debt ceiling; it was one of their big items.

            So it seems unlikely to me that “more” would mean “everything they got plus two years worth of debt ceiling increase,” which means getting that would have meant dropping some, perhaps a lot, of the goodies they did get.

            • but getting the debt ceiling extended past the election would have been a major, top-line item. The Tea Party candidates all ran on refusing to increase the debt ceiling; it was one of their big items.

              You mean they might have lost say 73 seats in the House instead of 63?

              Sorry I underestimated both their negotiation skill and their political acumen.

              • What are you talking about?

                Did you reply to the wrong comment?

                You do know that the negotiations I’m talking about took place after the 2010 elections right?

              • I think I see your problem: “past the election” in my comment, and in Scott’s, refers to getting a debt ceiling extension, in December 2010, that would last past the 2012 elections.

                Hope this helps.

                Obviously, the December 2010 negotiations had absolutely no influence on the elections that took place a month earlier.

      • Walt

        I doubt this is true. Bernanke’s strategy seems to have been to wait until events panic enough inflation hawks into flipping their support to him. Without the fiscal stimulus, this would have happened sooner.

    • rea

      One can tell you’re not gay. Minimal, indeed.

      • dlankerlanger

        Minimal, indeed.

        No you’re right, it’s hugely significant that gays have the same rights as everyone else to sign up to kill pakistanis.

        You know, to white people.

  • tomk

    What do folks here think about the mortgage interest deduction? It’s expensive and regressive (the vast bulk of savings goes to the wealthy). It’s come up as something the deficit hawks would like to eliminate, and if it comes up at all Democrats seem to support it. I know it’s a touchy issue because so many middle class people benefit, and housing is still sputtering, but it’s the kind of thing that policy people on the left should be working with. Could it serve as a possible bargaining chip in negotiations?

    • rea

      Cap it.

      • Richard

        Only if the cap is very, very high (which would mean little revenue is actually realized)

        • Start high, and don’t adjust for inflation for a decade or two.

          • JKTHs

            It already is capped at $1 million (unindexed) which is why it’s more of an upper middle-class than an upper upper class targeted subsidy.

            I’d convert it to a credit. It makes it available for the vast majority of people who don’t itemize (assuming they have a mortgage of course), while limiting it for the fat cats.

    • Richard

      No. Too many people have planned their entire financial lives assuming this deduction. If you want to see a real tax revolt, try to get rid of this.

      • chris

        Too many people don’t *have* financial lives because in order to have one you have to have income above the subsistence level.

        I can’t find a violin small enough to express my sadness for upper upper middle class people whose house value would exceed any cap likely to be put in place and might have to pay ever so slightly more taxes.

        • Richard

          Its not just upper middle class people. I dont know what any cap would be but people, like my stepfather and my uncle, have based their retirement on being able to deduct the interest paid on their mortgage. If you want to put in a provision that eliminates the mortgage deduction or caps it at a low level , be prepared to lose all elections in the next decade.

          If you put in a very high cap, lets say the equivalent of loans over one million dollars, then the amount of revenue raised will be insignifcant.

          • Set the cap high initially, but don’t adjust it for inflation.

            Phasing it in gradually will give such people time to adjust, and it also backloads the hike as the economy and housing markets get back on their feet over the next few years.

          • tomk

            It’s not just but it is mostly upper class people that benefit. The MID is the largest deduction, and it’s a horrible regressive policy. I would gladly give up the $300 or so I save a year if I knew that a half dozen much wealthier families were giving up thousands, which is about how it would be (in a fantasy world of total elimination). What I don’t like is that a bad policy, that some Republicans want to eliminate, is not really discussed among progressives because it’s popularity is thought to make it untouchable, and/or they’re not informed enough to know how regressive it is. It’s popular because of the perception that it helps middle class people, which it does. The reality that it helps rich people far more (and helps fuel credit bubbles, and distorts the housing market) makes it a bad policy that thoughtful progressives should want to eliminate, while mitigating the political repercussions through education, or finding a way to let Republicans take responsibility for ending it.

            • Richard

              No, upper class people benefit more from it (because their loans are larger) but more middle class people benefit than do upper class people (because there are way more middle class people than upper class people). To imply that one middle class family benefits for every half dozen much wealthier families is absolutely wrong. The day the Dems start agitating for its demise because it benefits the rich is the day the Dems would cease being an electable party.

              Yes, it does distort the housing market by making purchase of a home somewhat cheaper and therefore more available to more people. That is not a bad thing.

              • liberal

                Yes, it does distort the housing market by making purchase of a home somewhat cheaper and therefore more available to more people.

                Highly exaggerated.

                To the extent that valuable housing supply is inelastic, the value of the deduction is priced into the current value of the house.

                So, to that extent, getting rid of the deduction would hurt current homeowners (like myself—I’d get creamed), but home values would decrease quite a bit as a result, offsetting much if not all the cost for future owners.

                • Richard

                  Hey, all I said was “somewhat cheaper”. I dont see how that could be highly exaggerated.

                  In any case, the deduction is so popular that any party proposing its elimination, unless capped at a figure so high that it brings in almost no revenue , would suffer a serious erosion of its base (unless its in conjunction with an idiotic fixed rate tax plan like those advocated by Ron Paul and Herman Cain).

              • tomk

                My formulation was wrong, hurriedly written. It is correct though to say that a substantial majority of the MID benefits go to people whose income is >$250,000.

        • That’s one good idea to turn California back to being a red state.

  • rea

    Meanwhile Boehner was on the news (the newly elected Senator from Arizona said much the same thing yesterday)–explainiing the Republcian starting point for negotiations–more revenue!!! It’s simply–all we need to do is cut taxes for the rich more, beyond even the Bush cuts, and we’ll generate more revenue, which the Republicans will graciously allow the government to keep.

    • Richard

      The one thing that Boehner floated was the idea of reducing or eliminating deductions that the rich take (and thus increasing revenue). I have no moral objection to this (revenue is revenue no matter if it comes from increase in rates or an elimination of deductions) but I can’t think of any deduction which could be eliminated which would bring in the same revenue as getting rid of the Bush cuts on the rich.

  • Anonymous

    What are the chances that a bargain with the insane Republican House is going to be a good one?

    After having been insultingly told here that I was stupid even to worry about what Obama was going to do, I expect now to be insultingly told that I’m stupid to object to the wonderful deal he gets.

    • chris

      What are the chances that a bargain with the insane Republican House is going to be a good one?

      What are the chances that you could wait for the deal to actually be written before declaring it a failure?

    • What are the chances that a bargain with the insane Republican House is going to be a good one?

      Fortunately, we don’t have to make up our minds about a potential bargain based on the odds, and neither does the President. He, and we, can judge any floated deal on its individual merits.

      I agree, though, about the chances of a good deal with “the Republicans,” meaning with the Congressional leadership working to keep its caucus together. I think the way forward is not a deal with “the Republicans” in toto, but with a faction that splinters off after the Republicans, acting behind Boehner, suffer another drubbing in public negotiations with Obama.

      Also, if you act like a pouty asshole, the chances of being told things insultingly increases exponentially.

  • As stated in the most extreme form by Jessie Levine in comments, some people seem opposed to any deal using the leverage of the expiring Bush tax cuts to get something, even if we assume the final deal is favorable to liberals. This doesn’t make sense, of course.

    Remember when zero of the Republican candidates would take a deal of $10-$1 spending cuts to tax increases?

    Same thing.

  • Ed

    My hunch is that the Bush cuts will survive and the Dems will argue they collected enough face-saving crumbs and weren’t totally steamrollered. Would be delighted to be wrong about this.

    • My guess is that anything the Democrats get in a deal will retroactively be declared to be “face-saving crumbs,” even if they were the top six items on the House Progressive Caucus’ agenda a week before.

      • Scott Lemieux

        Yes. One nice thing about being a leftier-than-thou critic is that it’s easy to tell what’s a progressive priority — if Obama gets it done, it wasn’t one, no matter what progressive groups thought ex ante.

        • Marc McKenzie

          Blunt, but sadly, very true.

          Obama has many progressive achievements under his belt, but for some, it’s better to ignore them and complain that he’s worse than GWB.

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