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New Year’s Day Reads: The Lousy Deal

Posted: January 1, 2013 | Author: | Filed under: Fiscal Cliff, morning reads, U.S. Economy, U.S. Politics | Tags: , , , , , |35 Comments
First Night fireworks against the Boston skyline

First Night fireworks against the Boston skyline

Good Morning and Happy New Year!!!

Sorry to be late with this post. I got so discouraged last night with our dysfunctional government that I went to bed completely disgusted. After a good night’s sleep, I’m feeling slightly more optimistic, if not truly hopeful. If I have any hope, it’s that perhaps the American people will rise up and let the president and Congress know what a horrible job they are doing.

So, what’s happening this morning? We officially went over the fiscal cliff at midnight even though the Senate approved a half-baked, crappy “deal.” Politico reports:

Congress lost a mad, New Year’s Eve dash to beat the fiscal cliff deadline, cinching a deal with President Barack Obama to raise taxes on the wealthy and temporarily freeze deep spending cuts but failing to get it through both chambers before midnight.
So over the cliff the country went — though perhaps for only a day or two and, assuming no snags, without incurring the double whammy of another recession and higher unemployment.

The measure, which would raise tax rates for families making more than $450,000 and delay deep across-the-board spending cuts for two months, cleared the Senate by an overwhelming 89-8 vote shortly after 2 a.m. The Republican-controlled House could take up the pact in a rare New Year’s Day session, though the timing of that chamber’s vote was not clear.

The $620 billion agreement was a major breakthrough in a partisan standoff that has dragged on for months, spooking Wall Street and threatening to hobble the economic recovery. It turned back the GOP’s two-decade-long refusal to raise tax rates, delivering a major win for the president.

The bill also canceled pay raises for members of Congress and averted an expected hike in the price of milk by extending expiring dairy policy.

Wow, they cancelled their own pay raises? That was big of them–not. They probably did that out of fear of an angry populace. And of course, we still have to watch the shameful spectacle of the tea party House wrangling over a deal that basically give them everything they wanted and more than they ever dreamed of.

From TPM, the Senators who voted against the deal:

The eight senators voting no were Michael Bennet (D-CO), Tom Carper (D-DE), Charles Grassley (R-IA), Tom Harkin (D-IA), Mike Lee (R-UT), Rand Paul (R-KY), Marco Rubio (R-FL), and Richard Shelby (R-AL).

Robert Reich calls it “A Lousy Deal on the Edge of the Fiscal Cliff.” I’m thinking that could be the new logo for this administration–“The Lousy Deal” as opposed to Roosevelt’s “New Deal.” Reich writes:

Details of the agreement reached by the president and congressional Republicans are still forthcoming, but from the look of it, Obama gave ground where he need not have.

What else is new?

Yes, the deal finally gets Republicans to accept a tax increase on the wealthy, but this is an inside-the-Beltway symbolic victory. If anyone believes this will make the GOP more amenable to future tax increases, they don’t know how rabidly extremist the GOP has become.

The deal also extends unemployment insurance for more than 2 million long-term unemployed. That’s important.

But I can’t help believe the president could have done better than this. After all, public opinion is overwhelmingly on his side. Republicans would have been blamed had no deal been achieved.

More importantly, the fiscal cliff is on the president’s side as well. If we go over it, he and the Democrats in the next Congress that starts later this week can quickly offer legislation that grants a middle-class tax cut and restores most military spending. Even rabid Republicans would be hard-pressed not to sign on.

I hate to say it, but it really looks like Obama pushed for this so he could give more away that he would have had to if we had just gone over the cliff without all the fake deal making.

Noam Scheiber writes at The New Republic: Democrats’ Cliff Compromise Is Bad; But the Strategic Consequences Are Disastrous.

I think the president made a huge mistake by negotiating over what he’d previously said was non-negotiable (namely, the expiration of the Bush tax cuts on income over $250,000). Then the White House compounded that mistake by sending Biden to “close” the deal when Harry Reid appeared to give up on it. As a practical matter, this signaled to Republicans that the White House wouldn’t walk away from the bargaining table, allowing the GOP to keep extracting concessions into the absolute final hours before the deadline….

I think a reasonable person can defend the bill on its own terms. The fact is that nudging up the tax threshold to $450,000 only sacrifices $100-200 billion in revenue over the next decade (against the $700-800 billion the administration would have secured with its original threshold), while allowing unemployment benefits to lapse would cause real pain to both the 2 million people directly affected and, indirectly, to the economy. Yes, Obama could have gotten the latter without giving up the former had he just waited another few days—at which point what the GOP considers a tax increase suddenly becomes a tax cut. But these things are always easier to pull the trigger on when you, er, don’t actually have to pull the trigger. I can’t begrudge Obama his wanting to avoid some downside risk for only a marginally better deal.

My far bigger gripe with the whole fiscal-cliff exercise has always been the strategic dimension—how it affects the next showdown with the GOP, and the one after that. Coming into the negotiation, Obama had two big problems: First, no matter how tough he talked, Republicans always assumed he’d blink in the end, for the simple reason that he pretty much always had. (This is one of the major themes of my book about his first term.) Second, despite the results of the most recent election, in which Obama won a fairly commanding victory on a platform of raising taxes on wealthy people, the GOP continued to believe that public opinion was mostly on its side. House Republicans cited the preservation of their majority—never mind that their own candidates received fewer total votes than House Democratic candidates—and polls showing most Americans still think government is too big.

No kidding. And I disagree that we shouldn’t begrudge Obama for not sticking to his promise to hold the line at $250,000. As I’ve written previously, Obama should not be involved in negotiations, because he either wants to lose to the Republicans or his need to please the people who hate him is just too strong. I don’t know which is the real problem, and it really doesn’t matter for practical purposes. He’s just a horrible negotiator, period. Now we have to watch another repulsive display of childish squabbling in a couple of months. Is this going to be the extent of what happens in Obama’s second term? With this incompetent, useless Congress, it’s entirely possible.

And of course we still have to wait and see what Boehner and his gang do.

In a joint statement late Monday, House GOP leaders promised to keep their commitment to act on the measure if it passes the Senate. But they say they won’t decide whether to accept the measure or to amend it and send it back to the Senate until lawmakers and their constituents have a chance to review the legislation.

Give me a frickin’ break! I’m going to end here, because there doesn’t seem to be much other news. What are you reading today. I look forward to clicking on your links.

Whatever else happens, I hope everyone has a great day today and a very happy new year in spite of the idiocy in Washington DC!!

35 Comments on “New Year’s Day Reads: The Lousy Deal”

  1. bostonboomer says:
    January 1, 2013 at 9:05 am

    Sorry to be such a downer this morning….anything anyone can do to cheer me up will be gratefully appreciated.

    • Pat Johnson says:
      January 1, 2013 at 9:10 am

      Welcome to the Pat Johnson world of “Debbie Downer”.

      I am going to put on my “Adele” cd and drown out the DC Clown Posse as a means of coping with the disappointment.

      • bostonboomer says:
        January 1, 2013 at 9:11 am

        I’m going to wrap up in a blanket and watch movies.

      • Delphyne says:
        January 1, 2013 at 10:13 am

        JJ – those doctors are horrible, but this little bit about Dr. Ishii is chilling. Why oh why would the US government want this information enough to not prosecute this monster?

        His experiments included bio-weapons exposure, vivisections, forced abortions, simulated strokes, heart attacks, frostbites and hypothermia.
        Dr. Shiro Ishii has never been prosecuted for his crimes; he negotiated to trade the information obtained during his experiments to the United States in return for his freedom.

      • bostonboomer says:
        January 1, 2013 at 11:35 am

        They didn’t even include all the doctors who worked for the CIA MKULTRA program.

    • Fannie says:
      January 1, 2013 at 11:08 am

      Wow, the only Doctor I have read about was Josef Mengele, angel of death………..hell of a read.

      I feel your pain too BB…………..according to media, we are suppose to satisfied, and I guess Obama thinks we’ll get over it. I’ve crossed paths so many times with these politicians, they are a disgrace to our society. I agree, tell the truth, and get in their face.

  2. Pat Johnson says:
    January 1, 2013 at 9:08 am

    Denying themselves a “raise” is no big deal: most of these jerks are already in the 2% class to begin with. Some of their earnings either meet or exceed 400 thousand anyway.

    Prepare yourselves for another bit of “breathless” reporting all day while we wait for the House to weigh in and the only other topic of note is Kim Kardashian’s pregnancy so we will be subjected to endless speculation, sour grapes, and more calls to cut entitlements in a few months to fill broadcast hours.

    I’m done trying to find reasons to excuse Obama. He is pathetic when it comes to standing tall for the American people he claims to defend. Perhaps “going over the cliff” would have made more sense if we did not have to sit here while the wealthiest among us are laughing their heads off.

    Though I am not discounting what would have happened to the unemployed with their benefits shut off we may have at least plumbed some of that “leverage” Obama claimed to have had since the election and shut those fools up entirely.

    Come February we will be sitting here watching Obama “negotiate” Social Security, Medicaid and Medicare then coming back to us with “I had no other choice” as benefits are lost for the most vulnerable amongst us. The retirement age will be used as another “tool” as he bobs and weaves his way through another 4 year term of “compromise”.

    I give up. This year will be another repeat of the last 4.

    We Dems are left looking to the past as a means of progress while this DINO and others like him in congress bargain away any advances we made over the past 70 years.

    • bostonboomer says:
      January 1, 2013 at 9:16 am

      Technically we did go over the cliff, so unemployment benefits are dependent on what Boehner and the tea party gang decide to do. I fully expect cuts in Social Security in two months. It’s going to happen.

      I predicted this back in September, 2007 when I was hanging at dailykos. I was pushed out along with lots of others and now those who pushed us out are griping. If only they had bothered to read “The Audacity of Hope” back then instead of drinking to koolaid.

      I admit, I really wanted to believe that Obama had grown in office, but it appears I was wrong. We will have to fight him tooth and nail for the next four years. I can’t say I’m surprised, just very disappointed.

      • ANonOMouse says:
        January 1, 2013 at 9:45 am

        I expect the House to amend the bill because I don’t think Boehner has any control of the TP faction of his caucus. He’s even more ineffective than Obama at negotiating and likely incapable of facilitating anything more complicated than a game of Beer Pong. If the House amends the bill and sends it back to the Senate I am hoping that the Dems can collectively find one ball among their majority numbers, and refuse another compromise.

        And Happy New Year to all.

      • Fannie says:
        January 1, 2013 at 11:10 am

        I am not going to become anybody’s bag lady………….

  3. mjames says:
    January 1, 2013 at 9:53 am

    I do not understand Obama. He’s supposed to be some great intellect. But, really, he’s anything but. First off, if he was always out to screw us peasants (and his constituency really is the bankers and the health insurers), couldn’t he have done a better job of hiding it? Come on, it’s so transparent.

    Second, what’s with this need to be some great uniter? It’s absurd. Of course, negotiating a settlement is better than fighting, BUT, when the other side has proven itself over and over again to be absolutely incapable of compromise, then negotiation is out of the question. Basic Negotiating 101: you do not give away MORE when the other side budges not a whit. Also, when public opinion is on your side, you up your demands; you don’t show that you will ALWAYS fold.

    Third, Obama has this weird mindset that a deal, ANY deal, no matter how terrible for those who voted for a Democrat, makes him look like a great leader. We have a DEAL. Who could ask for more? Just like Obamacare – which is rapidly becoming a nightmare in actuality.

    The other point I want to make is this: the country is really terribly bad off economically. The unemployment and underemployment figures, the true figures, are disastrous. The banks are ready to collapse, as is all of Wall Street, if the wind blows too hard, or if one tiny thread starts to come loose. Our government simply does not want to pay back all the money it “borrowed” from the Social Security lock box. And it will do everything it can to assure that it does not. Sure, Social Security and Medicare are out this round, but they will be front and center next bout.

    Here’s to a Tea Party rejection of this horrible sell-out!

  4. bostonboomer says:
    January 1, 2013 at 11:38 am

    From Firedoglake:

    Two months? He sold out his chief campaign promise for a two month delay? How could someone this bad at negotiating get such great deals in the Chicago real estate market?

    The deal plays perfectly into Republican hands. Senator Graham admitted on the Senate floor that he considered this deal “Round 1″ and the Debt Ceiling agreement “Round 2.” In other words, get ready for another shakedown to protect the rich at the expense of everyone else. And if it was not clear before, Obama has every intention of screwing those relying on social programs – in fact, he already did so by moving the needle from 250,000 to 450,000. That is a lot of lost revenue to make up for in cuts.

    While the Senate passed the bill 89-8 the House adjourned meaning America went over the “fiscal cliff.” Yet, we’re still here. America continues to exist even after falling off this “cliff.” But how? Is this real life?

    The House will reconvene at noon today and hopefully kill this monstrosity. It is past time for the people themselves to force action in Congress because apparently even if they elect politicians (twice) who run explicitly on doing something – like raising taxes on those with incomes over $250,000 – that is not enough. Kill the bill, initiate the cuts, and let’s see if the American people can awaken from their slumber to pressure a real solution.

  5. bostonboomer says:
    January 1, 2013 at 11:44 am

    Campaign for America’s Future: An Ugly Deal

    1. Setting Up the Next Extortion

    The most ominous part of the deal is what was left out. The deal makes no provision for lifting the debt ceiling. It postpones the sequester (automatic cuts in domestic and military spending) for only two months. It is a smaller deficit reduction package than that originally sought by the president. It therefore sets up the right-wing House zealots to hold the economy hostage once more, while demanding deep cuts in public services (known as cuts in domestic spending), backed by a media frenzy about deficits. And while Social Security, Medicare and Medicaid escaped unscathed in this deal, they will be the prime targets in the coming debate.

    2. Hiking Taxes for Working Americans; A Million Jobs Lost

    By allowing the payroll tax cut to expire, every working American gets a tax hike of 2% of their income (up to about $113,000 in income). A worker making $50,000 a year will pay an extra $1,000 in taxes. Payroll checks will be cut. Belts will have to be tightened even more. That will lower demand, producing job loss totaling up to an estimated million jobs. (Taxes on the wealthy go up also, but those have only marginal effects on jobs).

    • bostonboomer says:
      January 1, 2013 at 11:45 am

      The next extortion – the debt ceiling, automatic sequester – in the next eight weeks makes this a big deal. The President says sensibly that he will not negotiate over lifting the debt ceiling. Period. And now there is even less reason for the Republicans to believe him than before. This encourages extreme demands rather than discouraging them. This was the time to draw the line.

  6. bostonboomer says:
    January 1, 2013 at 11:54 am

    Check this out. While the Republicans are all over TV exulting in their overwhelming victory, the White House thinks they won by making Republicans raise taxes on a few people who are so rich they won’t even notice.

    GOPers are touting permanent extension of many of the Bush-era tax cuts as a victory in its own right. They also believe the resolution of the tax revenue debate will allow for greater focus on spending cuts and entitlement overhaul, essentially resetting the national dialogue.

    “Frankly, we’ve denied [Obama], I think, his most important piece of leverage in any negotiation going forward,” Rep. Tom Cole, R-Okla., who sits on the House Budget Committee, said on MSNBC. “So I particularly like that part.

    “The sequester is in front of us. The continuing resolution runs out the end of March and, obviously, the debt ceiling. All of those things honestly are Republican leverage, not Democratic,” he said.

    “So I think there will be opportunities to deal with the spending issue next year.”

    • bostonboomer says:
      January 1, 2013 at 11:58 am

      The way it will work is that Republicans will be nervous about actually cutting Social Security and Medicare, but Obama will engineer the cuts by pretending to oppose them until the last minute and then caving. Democrats will get the blame and will go down in history as that party that went extinct like the Whigs. Obama will get millions for sitting on Wall Street boards doing nothing.

  7. bostonboomer says:
    January 1, 2013 at 12:01 pm

    Krugman:

    There are two ways progressives can lose this fight. One is direct defeat on the question of social insurance, with Congress actually voting to privatize and eventually phase out key programs — or with Democratic politicians themselves giving away their political birthright in the name of a mess of pottage Grand Bargain. The other is for conservatives to successfully starve the beast — to drive revenue so low through tax cuts that the social insurance programs can’t be sustained.

    The good news for progressives is that danger #1 has been averted, at least so far — and not without a lot of anxiety first. Romney lost, so nothing like the Ryan plan is on the table until President Santorum takes office, or something. Meanwhile, in 2011 Obama was willing to raise the Medicare age, in 2012 to cut Social Security benefits; but luckily the extremists of the right scuttled both deals. There are no cuts in benefits in this deal…..

    So why the bad taste in progressives’ mouths? It has less to do with where Obama ended up than with how he got there. He kept drawing lines in the sand, then erasing them and retreating to a new position. And his evident desire to have a deal before hitting the essentially innocuous fiscal cliff bodes very badly for the confrontation looming in a few weeks over the debt ceiling.

    If Obama stands his ground in that confrontation, this deal won’t look bad in retrospect. If he doesn’t, yesterday will be seen as the day he began throwing away his presidency and the hopes of everyone who supported him.

    Hahahahahahahhahahahahahahaha!!!!!!!!!!!!!!!! Obama? Stand his ground? What is Krugman smoking?

  8. Beata says:
    January 1, 2013 at 12:09 pm

    Hey, I’ve been informed that three people “unfriended” me today and I’m not even on Facebook!

    Have a Happy New Year, Sky Dancers!

  9. RalphB says:
    January 1, 2013 at 1:13 pm

    This lousy deal and the beatings to come make for a depressing New Year. Thanks for being here. Obama is a pathetic coward in negotiations.

  10. RalphB says:
    January 1, 2013 at 1:19 pm

    The Congressional Budget Office has issued its score on the Senate-passed fiscal cliff agreement. This should cause some squealing from the deficit scolds.

    The net effect of the tax and budgetary provisions will be to increase the deficit by $3.97 trillion between 2013 and 2022 relative to current law.

    • bostonboomer says:
      January 1, 2013 at 1:24 pm

      Hey Ralph, I’ve been getting some different perspectives on the deal. Maybe it’s not quite as bad as we think. I’m working on a post.

      And I couldn’t care less about the deficit. LOL

      • dakinikat says:
        January 1, 2013 at 1:31 pm

        — Two limits on tax exemptions and deductions for higher-income Americans will be reimposed: Personal Exemption Phaseout (PEP) will be set at $250,000 and the itemized deduction limitation (Pease) kicks in at $300,000.

        Ari Fleischer is on twitter saying if this part passes he won’t give as much … poor greedy little bastard!!!

        @AriFleischer I increased donations to charity in 2012.This deal limits my deductions so I will likely donate less in 2013.

      • RalphB says:
        January 1, 2013 at 1:45 pm

        BB, I don’t care about the current deficit either. Not one bit.

        Dak, What else would we expect from a Bush flack like Ari. Chances are his giving was phonied up anyway, like Rmoneys.

      • RalphB says:
        January 1, 2013 at 1:55 pm

        I hope the deal doesn’t suck as much as I think. But it’s not this deal so much as the confrontations it sets up for later that worry me.

  11. Eric Pleim says:
    January 1, 2013 at 2:18 pm

    Naming the current administration “The Lousy Deal” is the best line I’ve heard all day.

  12. RalphB says:
    January 1, 2013 at 2:31 pm

    Brad DeLong doesn’t understand the Obama admin and, obviously, neither do I.

    The big reason to make a deal before January 1, 2013 was that detonating the “austerity bomb” would impose 3.5% of fiscal contraction on the U.S. economy in 2013, and send the U.S. into renewed recession. It was worth making a good-enough deal–sensible long-run revenue increases and tax cuts to close the long-run fiscal gap plus enough short-term fiscal stimulus to make the net fiscal impetus +1.0% of GDP–in order to avoid renewed recession.

    But by my back-of-the-envelope count, the deal the Obama administration has agreed to still leaves a net fiscal impetus of -1.75% of GDP to hit the U.S. economy in 2013. That is only 40% of the way back from the “austerity bomb” to where we want to be.

  13. bostonboomer says:
    January 1, 2013 at 2:42 pm

    New post up top! Come up and discuss!!

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