How to Go Over the Cliff W/out Losing Your Mind

Obama just won an electoral victory bigger than any Republican has won since 1988. Last year he gave the GOP an all-spending-cuts-and-no-tax-increases deal on the deficit/debt. The president likely has a mandate to raise taxes on the rich, but he wasn't re-elected to raise taxes on anyone else or drastically cut spending. He was re-elected to make the economy work for more people than it is now. 


Given that context, here's a deal I won't scream bloody murder over.


Let the Bush tax cuts expire. Then demand that Republicans pass tax cuts which include a payroll tax cut and re-instating the Bush rates for the middle and lower classes. Since Republicans are supposedly in favor of lowering taxes, as is every politician, they get to share in the credit of passing bipartisan tax cuts.


For their cooperation and for losing the upper end cuts, Obama can negotiate some long-term spending cuts. However, just as Republicans had a chance to repeal Obamacare/an expansion of social insurance in a subsequent election - the ACA was passed in '10 but the majority isn't coming on-line until '14 - Democrats should have a shot to repeal any cuts to social insurance. So no cuts to medicare or medicaid that start before 1/15.


It goes without saying that Social Security isn't on the table b/c it doesn't contribute to the deficit. 


Any other spending cuts should also come after '15 and only be agreed to in return for a temporary extension of unemployment insurance for all of '13.  


If, during negotiations, Obama absolutely must entertain spending cuts before '15 they should be backended as much as possible, not exceed 20% of the post-'15 cuts, and be divided into equal parts military (non-VA and non-pensions) and non-military. 


That's more than a fair deal to a party that just decisively lost the executive, is now down 10 seats in the Senate, and had substantial losses in the House. 


If you can't get a deal along these lines, Obama, then just demand that the current tax/spending framework stay in place and push the cliff/sequesters/bullpuckey/fake fiscal crisis until 1/15. No debt ceiling negotiations in the interim either.


And for God's sake, start coming up with and advocating ideas on returning the country to strong growth and helping with the jobs crisis, dilapidated infrastructure, and climate change; stop scaring everyone about the deficit, advocating Hooverism, and ginning up fake crises. This isn't an auspicious beginning to your second term.

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Obama's fiscal proposal


It's a good opening offer that contains short term stimulus spending, as well as extending unemployment insurance and the payroll tax cut.


If Obama wants to utilize social media and some of his campaign organization, I would sign petitions, put up a post on my fb wall, etc. in favor of this plan.


I'm happy to be able to support the candidate I voted for.

I'm honestly surprised that Obama didn't open with higher bids


in the first term. He'd generally offer a reasonable centrist compromise as the opening (instead of the final settlement), while the Republicans would make an opening bid of doing away with the welfare state. Apparently, however, he's got a better sense of things for term two.

The left is shocked


there's a kind of blank stare feel to nearly liberal blog post I've read yesterday and this morning. 


The President didn't put out a pre-compromised, centrist, crappy proposal. How did this even occur?

I Certainly Didn't Expect That Kind of Offer


And I'm Leftier than you.

I have no idea how lefty I am


This country is so right wing -- there's mass unemployment, wages aren't rising, most peoples' wealth and income have been falling, the filthy rich's wealth and income have been exploding, etc. etc. and all the while conservative economic orthodoxy still reigns supreme. 


All I know is that many common right wing economic assumptions are obviously false, but I haven't had an opportunity to develop my boundaries or positive views. Or rather, it's pointless - we don't live in my world so there's no point in fleshing it out. 

The left?


Check out some right-blogs, especially the comments. They are stunned that a democrat would offer up a plan that the dems actually want -- and campaigned and  won on-- let alone the fact that there's no solid concessions to the GOP. The groupthink as I see it is that this is an illustration of Obama as a failed leader who cannot compromise and is unserious, etc. Apparently Obama should be arguing with himself, and doing otherwise means he's a tyrant or something. Obama is always held as weak and all-powerful at the same time, a lazy man who can single handedly get elected twice and bring about the downfall of the USA. The power of laziness? The refrain I see over and over is "let it burn" as if a small increase in taxes on income above $250,000 will literally bring about the end of the United States as we know it and usher in a socialist-fascist nightmare.  


Hope this keeps up. Will be interesting to see the media reaction to this. I'm sure there's a lack of available fainting couches around the national newsrooms today.

No. That would be gross.


Check out some right-blogs, especially the comments. 


Systematically underestimating austerity


If they've been doing it in Europe, they'll probably do it here:


Still Too Vague


I think it's time you put a face on this.


Why are European politicians doing this? What constituency are they serving? 

People think economics is a morality play

stinerman's picture

That if we had a lot of "easy money" and people were buying things they can't afford, we are now being punished for it.  If only we suffer for long enough, then we'll have paid our penance and the economy will grow again.  I used to believe this a few years back.


This is very similar to those who are have weight problems.  They believe that they are overweight because they indulge themselves too much (very often true).  The indulgence is a type of guilty pleasure.  The logical fallacy comes when they believe that to make up for those guilty pleasures, they must punish themselves.  If things they like make them fat, then punishing themselves must make them thin.  Of course, this doesn't work, so they feel depressed and overeat which starts the cycle anew.

The Constitution does not vest in Congress the authority to protect society from every bad act that might befall it. -- Clarence Thomas

Its not a question of penance.

mmghosh's picture

Its a question of fraud, at multiple levels, from government to the people.

freedom is a fundamental value that does not need to be justified in terms of some other value like efficiency

Germany is growing. n/t

mmghosh's picture


freedom is a fundamental value that does not need to be justified in terms of some other value like efficiency

Germany never implemented significant austerity for itself



They did not need it. n/t

mmghosh's picture


freedom is a fundamental value that does not need to be justified in terms of some other value like efficiency

The Bankers Never Do -nt



Don't take from them, then. n/t

mmghosh's picture


freedom is a fundamental value that does not need to be justified in terms of some other value like efficiency

Don't lend more than is prudent


and expect third and fourth parties to make you whole. Less obvious for Greece, but still true, and crystal clear for Spain.


Meanwhile, austerity across Europe is punishing the European auto market


How is BMW  -- of Deutschebankland -- responding? They're selling more cars in North America and China, where demand is robust. And also where austerity has so far been avoided.

Hold on for just a sec.

mmghosh's picture

No one lends with the expectation of a default.  In fact, euroloans IIRC are made on the basis of a standardised assessment.  A fraudulent submission is the fault of the lendee, not the lender.  


That apart, you won't get any support from me for increasing growth or consumption.  Consumption has to be cut if we are to not go over the 6 deg C cliff in 50 years.


We have all to learn to be frugal.  If Euroausterity is the way that happens, so be it .

freedom is a fundamental value that does not need to be justified in terms of some other value like efficiency

So You're Suggesting German and French Banks


were tricked by by Greek and Spanish counter parties?


The solution there is to go after the counter-parties (private banks in Spain (debt nationalised at the request of bondholders -- why'd they ask for that?)) rather than push the masses into penury.


WRT slow growth, what an odd thing to hear from a third worlder -- especially one old enough to have been educated in a Marx-tinted school system. Must we all become Luddites to avoid the coming climate catastrophe? If so, we're indeed doomed.

Sustainable growth is slow.

mmghosh's picture

And no, I do not think that the masses in Europe are being "pushed into penury".  One does see penury in Europe, but rarely. There are some economic issues in Greece, I agree.


As for the climate catastrophes, they are already here.

freedom is a fundamental value that does not need to be justified in terms of some other value like efficiency

Ah, you aren't familiar with the latest trends in US business

HankP's picture

one of the main reasons we had a financial crisis is because companies drew up mortgages, packaged them into securities and sold them, knowing that the individual mortgages were junk and that many of the people making them could not make the payments. But since they got the rating agencies to rate the securities highly, and they got paid their origination fees on the mortgages, they didn't care.


I blame it all on the Internet


HankP's picture

who's supposed to be the experts in risk assessment and management again?


I blame it all on the Internet

Obama's opening offer


Outline - 4 trillion deficit reduction.


1.6 trillion in revenue almost entirely from the wealthy and corporations.


1 trillion in war savings from winding down Iraq and Afghanistan.


340 billion spending cuts to medicare and medicaid, almost entirely to providers.


1.1 trillion of a spending cap originally agreed to in the debt limit deal.


Details here.


If your goal is deficit reduction instead of growth, this is a favorable deal for those left of center.


But it's worth noting that in addition to the direct drag on the economy from even these cuts and tax increases, Obama is not spending any of his political capital on extending the payroll tax cut or unemployment insurance. 


David Dayen comments: This would absolutely create a drag on GDP of at least 1%, for no discernible reason, since we’re not in a debt crisis.



Obama is running a serious of risk of having his legacy include 8 yrs. of low growth and relative stagnation.

Tax increases on the wealthy will help growth


not as quickly as extending the payroll tax cut would but it will help.

How so?


I get the argument that they help preclude speculative bubbles from forming and bursting, and therefore preclude wealth destruction and negative growth.


But actually encourage growth that isn't taking place? How so? 



By reducing inequality


which encourages the formation of human capital.

I'm too stupid to understand your comment


could you give me a bit more to go on if you have a chance, Floater?

Think about it this way


In a modern post industrial economy the most important driver of economic growth is a well educated population. Call that your human capital. Do high levels of inequality and lack of social mobility reduce human capital formation? I think it does though I'm sure you can find some folks who disagree.

If the Post Industrial Economy is Global


and for capital, it almost is, the capitalist doesn't really have to worry overmuch if human capital formation is retarded here or there, just that enough is formed globally to keep her capital busy  generating margins.


In other words, Davos Woman doesn't care if her management and creative staff speak English, Mandarin, or Polish. 

No, that helps


income mobility - which is directly tied to more income equality, which is directly tied to taxing the wealthy - increases the incentive to acquire skills with which to secure more income.


I can buy that.

The simplest explanation

HankP's picture

if you reduce the availability of bad investments (speculation), by definition more investment is funneled into useful areas.

I blame it all on the Internet

Even if you use the revenue to pay down the deficit?



Different question

HankP's picture

but of all the revenue increases, this one has the least effect on the growth of the economy.


Also, remember that the house is still in Republican hands, so unless he can peel off enough representatives (very doubtful) the only option he has is to make deficit cutting extremely politically painful for Republicans. We still have divided government.


I blame it all on the Internet

That's one thing you and I don't make a big stink about

stinerman's picture

I'm pretty sure we agree, that given current interest rates, we can keep the bush tax rates in place.  That's better than raising them, all else being equal.


As much as I'd like to raise those rates and start cutting the Pentagon budget, now isn't the best time to do it.  Better keep those taxes low for two more years until the next lame duck session.  Hell, we can go lower for all I care.

The Constitution does not vest in Congress the authority to protect society from every bad act that might befall it. -- Clarence Thomas

Whose Interests are Served by Slower Growth?


Banks and bondholders, one supposes.


Obama's legacy is secured by Obamacare.


Now he's securing his seat in the boardroom and his place on the lecture circuit?

Agreed that this is a deficit scold's fiscal plan, BUT


what are the chances that this offer is the beginning & end of Obama's economic plan for his second term? You have your hand on his shoulder, you're eyeing the bus as it approaches, but you have no way of knowing at this point whether there's more to come. 


In the speech I posted in my diary, Obama says loud & clear that he believes his mandate is growth and jobs. Will we see a growth & jobs initiative in January/February? 


I'll go as far as saying we'd damn well better...but unlike you I'm not ready to draw conclusions from this one opening offer in the lame duck session.

"Hell is truth seen too late." --Thomas Hobbes

Obama thinks cutting the deficit will lead to jobs and growth


all indications are that he's a centrist DLC-type guy when it comes to economics.


The spending freeze in the debt ceiling deal that's being extended precludes any new spending on growth/jobs initiatives.


Deficit reduction and immigration is what Obama is spending his political capital on.


I heard talk of investments and jobs etc. during his press conference today, but it's just word salad. No money spent means no jobs and no investments now or in January.


The economy is in a precarious situation going forward. We must sacrifice it at the alter of the deficit.

I don't believe that. I think he's talking the DC game,


but knows better. Guess we'll see.

"Hell is truth seen too late." --Thomas Hobbes

For every silver lining there is a cloud nt

HankP's picture


I blame it all on the Internet

Obama met today with labor leaders, AFL-CIO, SEIU,


as well as representatives from MoveOn and similar groups. Early word out of the meeting is that Obama seemed to affirm that a) taxes will be going up on the rich and b) whatever savings come out of entitlement programs, benefits would not see a cut. Good news?

The labor and liberal organizations said they made clear their opposition to any benefit cuts to Medicare recipients or increasing the eligibility age. Max Richtman, president and CEO of the National Committee to Preserve Social Security & Medicare, said after the meeting he was confident that "whatever savings come out of those programs would not come out of beneficiaries or citizens, it would be focused more on providers."

"Hell is truth seen too late." --Thomas Hobbes


stinerman's picture

whatever savings come out of those programs would not come out of beneficiaries or citizens, it would be focused more on providers.

Seeing as my employer's customers *are* providers, it sounds odd coming from me, but we need to squeeze the providers pretty darn hard.  Medicare and Medicaid are not programs that exist to make providers comfortable.  They exist to make sure old and poor folks get necessary health care.  Competitive bidding has done a lot to get some of the waste out of the system.  It's a little rough around the edges, but moving away from fee for service to bundled payments or managed care is a step in the right direction.


Basically, I look at what the doctors are saying about changes to the government insurance programs.  I'm for what they don't want to do.  Our doctors are way overpaid compared to just about everywhere else (especially specialists).  If you want a grand bargain arrangement to work on the malpractice suit side, I can be persuaded. 

The Constitution does not vest in Congress the authority to protect society from every bad act that might befall it. -- Clarence Thomas

Doctors are overpaid? Is that a universal sentiment? nt

mmghosh's picture


freedom is a fundamental value that does not need to be justified in terms of some other value like efficiency

I don't believe so

stinerman's picture

Folks around here will prove me right or wrong.


Generally the general practitioners aren't, but the specialists certainly are. 


In my opinion doctors are just like any other professional.  They have interests and incentives just like anyone else.  They aren't some sort of magical wonder-person that is immune to trying to pad the bill, just like your shady mechanic.

The Constitution does not vest in Congress the authority to protect society from every bad act that might befall it. -- Clarence Thomas

There are all kinds of ways to rationalize overbilling


some patients. You know, so you can take better care of the others. Or you take hooker money from the pharmacy companies to make your practice stronger, more able to hand out real medicine. 


The human mind is a marvel, and it can convince us to feel that we're entitled to many, many things.

"Hell is truth seen too late." --Thomas Hobbes

But everything is pretty precisely laid out these days.

mmghosh's picture

So much for so and so procedure, or consultation.  And all insurance companies have guidelines about how much a certain procedure is charged.


Here is a Kaiser Permanente fee schedule I was able to find.  We have pretty much the same thing here (much less complex, it must be said).  A colleague of mine works for a BPO that does the back office calculations of medical costs in the US - he says its pretty much standardised.  

freedom is a fundamental value that does not need to be justified in terms of some other value like efficiency

And what's left to the doctor's discretion?


Whether to do the procedure or not, of course.

"Hell is truth seen too late." --Thomas Hobbes

My beef is with the layers


My beef is with the layers and layers of redundant middle men and large back offices needed to code and process things for insurance reimbursement.  There is a ton of waste in the US medical system, cut that and pay the physicians/providers who do the actual work.

Congress has abdicated responsibility

stinerman's picture

This is one place where they absolutely need to define standards.  I mean there are standards.  NCPDP D.0 for pharmacy claims and X12 5010 for medical claims.  But there are no standards for what an insurance company can reject the claim for.


I know I've said this before, but it bears repeating.  My employer had to make a program change because a particular commercial insurance company decided that they would reject any claims where the ordering physician's name was not in all capital letters.  Here's one we heard about this week.  This is a CMS-1500 form, which is the industry standard for billing on paper.  See there in Box 10 there are checkboxes relating to how an injury occurred.  See that box for the place?  That's supposed to be used to describe in which state the accident occurred, if there was one.  Well a particularly large commercial insurance company decided that that box always had to be populated with the state wherein the patient resides if 10b is "No".  Oh, and if there was no accident, you are to not check any of the boxes.  That's right, if you checked each box as "No", even if that was an accurate representation of the situation, they'd reject the claim as being in an incorrect format.


In some circumstances, if you send too much information, the insurer will reject the claim.  On pharmacy claims there is an indicator that the drug dispensed was compounded (a compound created form several individual drugs).  Some of the PBMs will reject the claim if you send it with the indicator that the drug was compounded.  They instead prefer that you send the indicator such that the compounding status is "unknown".


Stuff like this, frankly, keeps us in business, but it's a detriment to our customers who are simply trying to get paid for services rendered.

The Constitution does not vest in Congress the authority to protect society from every bad act that might befall it. -- Clarence Thomas

If CMS reimbursements are cut


If CMS reimbursements are cut too much, nobody will take medicare/medicaid patients anymore.  Unless the govt forces physicians to do so.

That's true

stinerman's picture

All I'm saying is that we should set the rate at the bare minimum that physicians will accept to take Medicare and Medicaid patients.  It isn't a jobs program for providers.  It's health insurance and it should be stingy with paying providers.

The Constitution does not vest in Congress the authority to protect society from every bad act that might befall it. -- Clarence Thomas

I respect the opinion that


I respect the opinion that specialist make too much.  Some things to consider --


-- Specialists have to spend more years in training earning nothing/negative or less than minimum wage.  I myself will have done 10 years after college before I will be able to take a job earning more than minimum wage.  A primary care doc is trained in 7 years while an ARNP or PA take less than half of that.


-- The pay for doctors is wildly distorted by the government.  The CMS reimbursement schedules are the baseline for most insurance carriers.  The CMS fee-for-service schedules are generally dictated by several panels, the granddaddy is the AMA's RVU update committee (RUC).  Most of the RUC is made up of specialists with primary care represented by a rotating member.


-- In comparison to fee-for-service, capitation is an alternative payment method where an organization is paid a flat fee per diagnosis/patient/etc... and the organization manages the costs themselves, keeping the difference between capitated payment and cost.  Accountable Care Organizations (ACOs) are the PPAC's version of HMOs which have the potential to be paid on a capitation schedule.  As of now, ACOs are paid fee-for-service but the ultimate goal, and a likely source of savings, is the move toward capitated payments to ACOs.  When this happens, expect specialist reimbursements to drop even more.


-- The job market for specialists is shrinking while it is expanding for primary care.  This is due to the depressed economy (which does drive medical care), rapidly falling reimbursements for specialist care, and expected changes due to PPAC as above.



So, there are several forces that drive specialist reimbursement.  In the past, their high pay was kind of built in thanks to the RUC committee and lobbying by the big specialty groups (cardiologists are the biggest and most notorious).  Their pay will continue to fall and primary care will increase.  That's ok with me though it will impact my future earnings.  My feeling is there is way too much waste in American medical care and some of it goes to specialists.  My goal is a functional and efficient medical system, that will rebuild the goodwill that physicians/providers have lost lately as well as make the country stronger.  


As I said elsewhere, a large amount of the waste comes from layers and layers of middle-men who extract money out of the system but provide little to no value.  These guys are in government, hospitals, and insurance companies, kept in business by an overly-complicated bureaucracy and fragmented insurance industry.  Unfortunately, these groups had buy-in with PPAC and so the waste will continue.  If I had my way, we'd have single payer for all and a simplified private insurance system for those who want a higher level of care.  Cut the waste, cut the middle-men.



Student debt, too:


I know too many residents with 6 figures worth of student loan debt they have to deal with. Any wonder why primary care specialties don't look all that appealing?

"I've been on food stamps and welfare.  Anybody help me out?  No!" Craig T. Nelson (6/2/2009)

That's the only thing on the other side of the coin

stinerman's picture

Our post-secondary institutions are extremely expensive by world standards.  Becoming a doctor should not require taking out 6 figures worth of loans.  We can fix them both at the same time.


There was once a time when you could get a degree from UC-Berkeley for a few thousand dollars.  I remember tuition at Wright State being over $10,000/yr...and that's a state school.

The Constitution does not vest in Congress the authority to protect society from every bad act that might befall it. -- Clarence Thomas

And all it takes is a little less capital accumulation


in the hands of people likely to spend it on second or third yachts.

"Hell is truth seen too late." --Thomas Hobbes

So I'll save commenting on this til more details come out


since the current proposal might be significantly different from Grand Bargain I.


Boy are you lucky wags.

Social Security providers


Who are they and how are you going to extract savings from them?

25% of SS is disability

HankP's picture

so I'd assume tightening eligibility requirements and lowering payments to service providers.


I blame it all on the Internet

That's Code For. . .

M Scott Eiland's picture

. . ."we're going to try to lift the earnings cap in the hope that Republicans are too demoralized to fight it."

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

I wish

stinerman's picture

An easier way to do this is to start charging the employee share of FICA on capital gains.  The idle rich don't work, so raising the wage base doesn't do much to punch them in the nads.  That or make them the same rate as ordinary income.  I'm game for either.  You can choose.

The Constitution does not vest in Congress the authority to protect society from every bad act that might befall it. -- Clarence Thomas

Republicans Will Block That One, Too

M Scott Eiland's picture

And not suffer in the slightest for it, as lower income people get capital gains, too.

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

Oh please


THe vast majority get absolutely nothing/next to nothing from capital gains. 


No offense, but conservatives often don't seem to understand the income, assets, and finances of the lower tiers very well.

LOL...I Did Raise My Eyebrows Myself at That...sure we do! Ha.nt



Ryan was probably the biggest liar on that one


He constantly claimed that his proposals to eliminate taxes on capital gains would benefit the middle and lower classes.


 ... a Republican lying about cutting taxes for the wealthy. Very novel.


HankP's picture

yes, I'm sure the bottom 80% will be obsessed over the tax rate on 0.7% of their income.


I blame it all on the Internet

What Hank said!



We do

stinerman's picture

However we have something called a 401k that isn't taxable until the money is withdrawn.  Along with IRAs, HSAs, 529s, etc. there are plenty of middle-class ways of getting out of capital gains taxes.  Opening an eTrade account and plopping down $25,000 to bet on the derivatives market ponies pretty much excludes the middle class by definition.

The Constitution does not vest in Congress the authority to protect society from every bad act that might befall it. -- Clarence Thomas

Taxpayers, so, raise or remove the cap. -nt-



"Hell is truth seen too late." --Thomas Hobbes

Yep. Called It.

M Scott Eiland's picture

A week out, and the blueprint for Democratic implosion this cycle is already up and running.

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

I don't think you can "call" something by mentioning it


4 seconds after it happens. :)


Not saying I advocate raising the cap now, but in principle making our most regressive tax more progressive is a good idea.

"Hell is truth seen too late." --Thomas Hobbes

What part

HankP's picture

of "raising taxes on the wealthy is popular" don't you understand? It's not like Obama didn't repeat this over and over again during the campaign.


I blame it all on the Internet

The Earnings Cap Is At $110,000 Right Now

M Scott Eiland's picture

Obama would be going directly back on his word if he tried that--and even the squishier Republicans in the House would vote it down. Not soon enough to remind a lot of voters why they didn't trust Democrats on tax issues, though.

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

Actually not true

HankP's picture

the earnings cap is as high as 220,000 for a couple earning roughly equal incomes (I know this for a fact, we pay FICA on quite a bit more than $110 K). That aside, I don't think it's a political problem for Obama.

I blame it all on the Internet

He Couldn't Even Kill The Bush Tax Cut Last Time

M Scott Eiland's picture

And he's facing a Republican House just itching for a low risk point to slap him down over. Hard to think of a more obvious trap for him to fall into.

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

You forget

HankP's picture

that he didn't have the leverage then, he does now. Also, he got several things he wanted last time. So unless the GOP is willing to offer him something he wants, they don't have a leg to stand on. Because if they just say no, taxes go up. And remember, they were the ones who created this expiration date in the first place.


I blame it all on the Internet

That'll Work For The Bush Tax Cuts

M Scott Eiland's picture

It won't get a much, much larger tax increase for Social Security anywhere at all--and he's going to get part of the blame when *all* of the Bush tax cuts go away, not just the ones for the much despised top 2%.

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

So simple

HankP's picture

let them all go away, then say he'll only sign tax cuts for < $250K. Republicans will have to argue why they won't cut taxes on regular people unless they can cut them even more for the wealthy. Loser argument. And, FTR, cutting taxes on < $250K does cut taxes on the wealthy. It cuts taxes on everyone. It just doesn't give an extra bonus to those making > $250K.


I blame it all on the Internet

Since You're Now Ignoring It. . .

M Scott Eiland's picture

. . .I'll take that as a tacit acknowledgement that you know that any attempts to lift the SS earnings cap are dead on arrival and will only succeed in making Obama and the other Democrats look stupid.

And that "loser" argument already routed Obama once before when he had promised it wouldn't. What does that say about him if you're right?

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

The ony thing I acknowledge

HankP's picture

is endless Republican whining about this and every other issue. Unfortunately for the GOP, there's no evidence in the real world that higher marginal tax rates for upper income earners damages the economy - in fact, quite the opposite.


I blame it all on the Internet

Very true!


He's been a shockingly bad negotiator to date. 


That also means there's a lot of room for improvement and maybe we'll actually find out the limits on Obama's capacity to use the bully pulpit.


According to some reports he's not opting for mostly secret negotiations and golf games this time but a public push to pass his deal. If so, no one has any idea how this'll work coz it hasn't been tried.

Very good news

HankP's picture

one might say it's a catchy approach.


I blame it all on the Internet

The Case Against the Grand Bargain


The New Yorker's James Surowieski weighs in:


What Washington should do instead is that thing that everyone hates: kick the can down the road. The sequestration spending cuts should be repealed—no one is in favor of these cuts as a package, and putting them in place would have a direct and immediate negative impact on jobs and economic growth. If Congress wants to pass smarter, better-designed spending cuts, it can do so in the new year, when it’ll get plenty of credit for being fiscally responsible. The payroll tax cut, which puts money directly in the pockets of the Americans who are most likely to spend it, should be extended. As for the Bush-era tax cuts, Republicans may well remain intransigent about refusing to raise taxes on the wealthy. But, as many have pointed out, they don’t have all that much leverage. The Democrats can just let the tax cuts expire at the end of the year and then offer up a retroactive tax cut for ninety-eight per cent of Americans in January. Perhaps Republicans would be willing to vote against that, but it doesn’t seem likely.


TL/DR: Cancel this crapola.

I might be hopping up on those barricades after all, Catchy.


Haven't seen it posted here, but Bob Woodward came out on MTP yesterday with a memo from last year's budget negotiations, and it's a doozy. First, I have to eat some crow...if this is true, Obama did in fact offer Medicare & SS benefit cuts, along with quite a bit more (raising the Medicare eligibility age, making small but why god why cuts to TRICARE, indexing Social Security payments to "superlative CPI" and so reducing benefits, means-testing SS plus other benefit reductions & perhaps tax increases). This is fairly vomitous. 


Now I'd be willing to hear an explanation/context/justification, but if Obama's planning to go back to the table now with this same offer, we've got to stop him. The amounts involved don't look massive ($1 trillion over 10 years) but nor do they look necessary, given the infinitesimal tax increases that would be necessary to pay for them while still bringing down the deficit. 


Also a curiosity: who sent the memo to Woodward? I'm going to assume someone in the WH authorized the release, either as a trial balloon or to remind everyone how good the Republicans had it when they turned down the best offer in decades. Or maybe it comes from the GOP camp. I dunno. Tea leaves.


(link through to NBC for the other 2 pages)

"Hell is truth seen too late." --Thomas Hobbes

On The Other Hand, It *Is* Woodward

M Scott Eiland's picture

Some Obama Administration member currently known to be in a coma might have "mailed" him this.

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

More likely

HankP's picture

there was more than one position, and position paper, and the losers sent it to Woodward as a pre-emptive strike.


I blame it all on the Internet

Not that specific, but similar reports came out at the time


It's a terrible deal, morally reprehensible, bad economics, and nothing like it should've been on the table.


I don't get how it's good politics, either. 


It appears to be born of the worst kind of "centrist" dead end beltway CW, and we may again have to hope for Tea Party intransigence to curb Obama's unfortunate penchant for Hooverism.


I wonder if Obama could've won this last election if he'd screwed his base that hard in '11 and I shudder to think what '14 is going to look like if he pulls something similar now.


Here's hoping he doesn't try, but I ain't holdin my breath.

I didn't completely trust the Firebaggers,


many of whom were making dire pronouncements with scant evidence. It seems they were right.

"Hell is truth seen too late." --Thomas Hobbes

Re: the wealthy paying their fair share


The last three years of expansion was fueled by the government running a deficit, and 93% of all the income gains from this expansion have gone to the upper 1% of households. 


If we've now decided to close this deficit, the 1% should be paying down the lion's share given that they've benefited disproportionately from it. 


A deficit reduction ratio tilted toward spending cuts that affect the bottom 99% is massively unfair.

Re: rising healthcare costs


There are many experimental cost controls in the ACA which are unproven and so the CBO doesn't include them in its deficit projections.


While their unproven nature was a reason to opt for a greater expansion of public insurance (which is proven) in the ACA, it's also a reason to wait and see before implementing massive cuts to medicare and medicaid. For all we know, the experimental cost controls in the ACA might pre-empt a need for deficit reduction.


The basic rationale on the entitlement "reform" side of the Grand Bargain is to inflict known harm immediately in order to avoid potential and entirely uncertain harm in the future.


The rationale is so poor it's likely a fig leaf for an anterior right wing goal of cutting public insurance.



Uh oh - NYMAG is reporting that Obama


is getting ready to throw the base under the bus with a Grand Betrayal, which I hope isn't true, but here it is:


To bring home a grand bargain, Democrats will have to compromise, too. But among the party’s congressional leaders, “the fact that there is going to have to be entitlement reform has been internalized,” says one of the savviest Democratic lobbyists in the capital. And while there will no doubt be some resistance on the left, this person adds, “Obama doesn’t give a damn about those people—he will happily throw them under the bus. That’s what reelection really means for him: He no longer has to worry about his base, about labor, about his left flank.”


Fool Me Once. . .-nt-

M Scott Eiland's picture


. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).



It's not quite like that tho since Obama only reportedly offered cuts to SS and medicare, but never implemented them. 


So the hope is that perhaps he's had a change of negotiation strategy and/or wasn't that wedded to the cuts in the first place. 


Not voting for Obama would've been enacting a known harm (Republicans) in order to avoid an unknown future harm (possible Grand Bargain cuts to SS and medicare).


That would've been dumb for the same reason it's dumb to inflict entitlement cuts right now in order to avoid unknown possible future harm.

You're Off The Hook. . .

M Scott Eiland's picture

. . .but you know that a significant number of Obama voters were muttering to themselves in the booth, "Now that he doesn't have to worry about being re-elected, things will be *different*, darn it!"

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

I think that's true of some Obama supporters


What's also true for some is that anyone holding the president to any standards is ipso facto a unicorn-loving dreamer who was on acid during the entire election.

Krugman is chickening out here


This is not the kind of leadership I'm used to from the guy. 


The following is from a post mostly on a schism w/in the Republican party. At the end, he turns toward a potential schism in the Democratic party, as a result of the fiscal cliff (I think a lot of people are expecting this, yours truly incuded, tho happy to be wrong). Krugman describes the following scenarios where Obama might break apart the coalition assembled during the election:


"A sellout on key Democratic values as part of a Grand Bargain. If, say, Obama raises the retirement age in return for vague promises on revenue (promises that would be betrayed at the first opportunity); if he appoints a deficit scold to a major economic post; it could all fall apart."


The clear suggestion is that it's fine for Obama to raise the retirement age as long as he gets actual revenue increases in return. No it's not. Krugman knows as well as anyone that revenue increases should be at the bottom of our list of priorities when the economy is depressed, unless they're going to be used to fund new stimulus.


But as a trade-off for raising the retirement age? They're not remotely worth it. That's the absolute worst case scenario of what one day a broke government might, heaven forbid, be forced into. We're not anywhere near there and there's no reason on God's green Earth to accept a deal whereby we make sure it happens today. if Krugman's not going to get out in front and play point on a Grand Betrayal we're in trouble on this one.

Revenue increases on the rich


Would have a very minor effect on growth.


It looks like the compromise will be a cap on deductions... Maybe $20-50k or so. Taxes on the rich will effectively be raised, but Reps will be able to say they held the line.

"I don't want us to descend into a nation of bloggers." - Steve Jobs

I'm not terribly worried about the revenue increases either way


By the way their lack of importance to economic growth counts against a Grand Bargain, not in favor of it.


Maybe it's time to start talking about the spending cuts that are going to be given up for these mostly insignificant revenue increases. Last time around the spending cuts were at least twice as large.


Do you think raising your retirement age in return for closing some loopholes is a good deal? At this stage I don't see why the left should trade even 1 billion in short term cuts to social insurance for these tax increases. 


The important point during the election was about the wealthy paying their fair share to fund essential government services. It wasn't about cutting essential services to get a tax increase. 

The ironic thing is


You're criticizing Obama for prioritizing Tax Hikes on the Rich over the Economy.


Do we forget so quickly that the last time he gave up tax hikes on the rich in a deal with plenty of short-term stimulus you went ballistic? It seems the economy was way worse then.

"I don't want us to descend into a nation of bloggers." - Steve Jobs

The last time Obama extended the Bush tax cuts


in December 2010, he had historic majorities in the House and Senate yet wouldn't exercise those majorities. 


It's different now - Republicans have the House.

Oh, forgot


We're pretending that the Filibuster could be flipped if only the Prez gave his say-so.

"I don't want us to descend into a nation of bloggers." - Steve Jobs

No, you're pretending that only Republicans


can pass tax and spending policy by majority votes.


Anyone remember reconciliation on both Bush tax cuts for the wealthy and the Deficit Reduction Act of 2005?


But I'm not trying to re-litigate that, just out there's not a straight up inconsistency in wanting the president to have fought much harder in 2010 and wanting him to at least open with an offer that contains short term stimulus now. 


However, I also admit that I thought expiring the Bush tax cuts was more important back in 2010. Floater and Hank have me reconsidering placing more emphasis on them.

It's a different time now


The fundamentals are much sounder: housing prices, household debt, etc. You should have been more worried then and less worried now.

"I don't want us to descend into a nation of bloggers." - Steve Jobs

My recollection


is that the economy being much worse in 2010 actually made raising the payroll tax very politically unpopular. Thus a 1 yr. extension of the payroll cut wasn't much of a win in return for giving a weakened minority *two years* of the unpopular tax cuts they were seeking.


Unemployment insurance wasn't a no-brainer, however again the president lost his shirt and got only a 1 yr. extension in return for two full yrs of the Bush cuts to a minority that wasn't challenged and never paid a political price for holding the economy hostage. Perhaps we might agree that that was a dangerous precedent to set in the run-up to the debt ceiling catastrophe, also known as the all-spending-cuts-and-no-tax-increase deal that Obama managed to secure.


It's because people were worried about the economy that they were pissed the president underplayed his hand. 


You can construe these critiques as congenital and irrational Obama disdain if you want, but I see a reasonably consistent complaint that Obama does not sufficiently identify and/or fight for non-conservative economic policy.



That was the ratio of stimulus to tax cut extensions.


You have a much stronger case when you talk about him underplaying his hand with Boehner later in the Grand Bargain talks in 2011, but the deal he struck in 2010 might well have been the deal that allowed him to be re-elected.

"I don't want us to descend into a nation of bloggers." - Steve Jobs

Can I Hire You As A Spokesperson?

M Scott Eiland's picture

When I point out these same things, I get mocked to the extent of nearly violating the posting rules.

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

I've already been hired as a spokesperson


for what I think is an exciting and fresh political campaign



Not one billion? So essentially any deal is a bad deal. I think with that position you'll lose your moment of greatest leverage and have to swallow a worse deal in five or ten years.


As to your question, no, raising the retirement age is beyond my red line. But a deal in the vicinity of the gang of six deal would be acceptable.

"I don't want us to descend into a nation of bloggers." - Steve Jobs

Yes, the status quo is likely better than any deal


I am highlighting of how little importance, at least right now, raising taxes on the wealthy is. 


I sense from your comments that you believe (i) there is a real problem being addressed (ii) real solutions are being proposed and (iii) solutions today will obviate deficit reduction down the road. 


Since I deny (i) - (iii) we may be having a disconnect here. 


(i) is false b/c we should be running a bigger deficit than we are now.


(ii) is false b/c 1. a short term deficit reduction deal is likely to harm growth and not significantly reduce the deficit/GDP ratio; 2. any long-term solutions must address our broken private health care system and that isn't being addressed.


(iii) is false b/c Republicans will never stop using the deficit and debt as a pretext for coming after social insurance. The only reasonable strategy is just to hold the line whenever and to whatever extent possible.

I guess the natural reaction to revolutionary conservatism


Is conservative progressivism. You've arranged yourself in a defensive crouch over the glories of last century liberalism. I think we should have bigger fish to fry than protecting the perquisites of oldsters. We should be investing in the next generation: education, infrastructure, green research. We should be imagining new glories: like universal day care, which would take a huge  weight from parent's shoulders as well as unleash a torrent of productivity. That's not possible without broadening the tax base.


Yes, I would oppose raising the retirement age. But raising the SS cap (to make the most regressive tax there is less regressive) along with adjusting indexing would be a great trade-off.


Yes, we need to take care of health care spending, but that's driven by demographics as well as rising costs. I think Obamacare's experiments in Pay-for-Performance will likely bear fruit, but I wouldn't wager the nation's fiscal outlook on it.


To address your points:


i) This is willfully obtuse. We're talking long-term.

ii) Addressed above.

iii) You've defined yourself completely in opposition. It's like the fiscal crisis isn't real except as a political football. The deal is going to have to come. What can't go on forever doesn't. So when do you make the deal? At the moment of greatest leverage. It could be that 2014 will be an anomaly like 1998 was, but it is likely that Dems will lose seats in Congress. It could be that 2016 will be an anomaly like 1988 was, but it is likely that after 8 years of Democratic government the people will look for a change. Now is the moment, after a rousing victory, when the Republicans are shell-shocked. Think bigger.

"I don't want us to descend into a nation of bloggers." - Steve Jobs

But you've boxed yourself in

HankP's picture

letting the tax cuts expire is austerian, so is every possible negotiation except the one where stimulus is the only acceptable choice. Politics doesn't work like that.

I blame it all on the Internet

the Obama admin and GOP are welcome to drop negotiations


and their misguided obsession with coming to an agreement on deficit reduction. they could instead agree to extend the tax cuts and stall the sequesters b/c it's just too hard to find common ground. That'd be more than fine by me since the status quo is likely better than any deal they're going to hash out. But if hash out a deal they must, see the above diary. 


I thought I was thinking outside the box here by pting out that the common assumption that fiscal consolidation is both necessary and desirable is nonsense. Isn't that the very kind of philosophical thought for which you're paying me to comment here? 

The deals got to come


Because our fiscal trajectory is unsustainable. Do you think there's going to be a time in the future when the Dems will have more leverage? Maybe, but I doubt it.

"I don't want us to descend into a nation of bloggers." - Steve Jobs

And why is our fiscal trajectory unsustainable?


Short term, the deficit is entirely a story of low growth caused by the housing bubble bursting:



So you fix the short term deficit by focusing on growth. It's all anyone should be talking about, not throwing the economy back into recession/very low growth with a grand bargain.


Long term, the fiscal trajectory worries are entirely based on rising health care costs, but these aren't going to be avoided by just cutting medicare or taxing the rich a bit more. You've either got to address structural issues in the way private health insurance drives up costs, or it may be the case that rising future cost estimates are entirely overstated.


Either way, people left of center shouldn't want anything like what's being contemplated on this right now. It's not today's problem and it's not clear it's tomorrow's either.



I've seen nothing to indicate otherwise.


It's all about healthcare, not austerity. Throwing the economy into recession because we can't figure out healthcare for aging baby boomers makes no sense. Slowing research and infrastructure spending on that score is even more destructive.


Voting for Obama and getting Merkel is a bait and switch if there ever was one.

This was clear enough to Larkin, whose patriotism rested on the notion that England was the worst place on earth with the possible exception of everywhere else.

Yes, healthcare

HankP's picture

I forgot where I saw it, maybe from Brad DeLong, but if the US spent the same amount as Europeans did for health care and had the same cost inflation in healthcare that Europe has, we wouldn't have a long run deficit problem.


I blame it all on the Internet

Not only would we not have a deficit, if the US spent as much


as any other developed country per person on health care we'd be looking at record surpluses.

Too specific

HankP's picture

philosophy only works as airy generalities.


I'd prefer an emphasis on growth at this point, and if we're extremely lucky we might get it. But I'm not counting on it. There are too many forces against it. The election didn't change that.


I blame it all on the Internet

How you get anything like stimulus spending through the House


without first at least trying to placate the deficit hawks is a feat I'd like to hear catchy explain. So let's see, we tell them to pound sand on taxes, we get them to hold off sequester cuts (note this configuration all by itself helps the deficit as if it matters). Then we go back to them and say, what do you chaps think about a new round of stimulus spending?


Why would they vote for that? How do you get the aye votes out of the House for new spending?

"Hell is truth seen too late." --Thomas Hobbes

I don't expect stimulus


You *could* try for short term stimulus wrapped into a long term deficit reduction package. I have no idea why that would be off the table at least as a starting negotiation position from the Ds. 


You could also just advocate for stimulus policy and then demand the status quo be extended when you don't get it.


But all I'm asking for here is to not have a disastrous round of Grand Betrayal (see the requirements outlined in the diary).


My prediction is that the admin will begin this week to leak conflicting reports on the spending cuts side of this, which will be designed to confuse and exhaust the D base. Obama has been trying to force feed everyone a sh%t sandwich on this for years.

I can see putting stimulus on the table


as a starting position. The argument being of course that rising GDP will increase tax revenues (this is an argument that can be measured in numbers, unlike the GOP fairy tale about expansionary tax cuts).

"Hell is truth seen too late." --Thomas Hobbes

Cuomo is asking for $30 billion to rebuild from the fed gov


Imagine if Obama was spending his political capital putting pressure on the House to pass hurrican infrastructure relief vs. wasting most of it on deficit reduction.


The hurricane is a very good opportunity to push for stimulus - it's a special circumstance and the Republicans are already on their heels over their callous position on FEMA.



Mr Clinton for Treasury Secretary?

mmghosh's picture

Not bad.  One Clinton to run FP, one Clinton to run domestic.  Oh, and Mr Gore as Energy Secretary. He could do worse.

freedom is a fundamental value that does not need to be justified in terms of some other value like efficiency

Hillary is no longer Sec State


The US hasn't had a white male in the post since '97. 


Jezebel wonders if the US is ready for one.