Faustian Bargains and other deals

There’s been a series of signals today–in the form of pressers–on what will be the grand bargaining and scheming of partisan politics for the souls and future of  American citizens.  The Grand Bargain is obviously foremost on the minds of any one looking social security and medicare in the face.  But, another set of bargains appears to be characterizing the Republicans desire to be relevant to Hispanic voters. The lame duck congress just might turn into the immigration reform congress. Republicans just signaled they’re ready for immigration reform.  Wow, that was fast.  There’s already some blowback on from the extraordinary bloviating right which basically wants to police state its way to white supremacy.  But, they’ve all looked at the demographics now.  Whither thou goest Speaker Boehner?

Fresh off an election in which Hispanic voters largely sided with Democrats, Speaker John A. Boehner said Thursday that he was “confident” Congress and the White House could come up with a comprehensive immigration solution.

Immigration reform is “an important issue that I think ought to be dealt with,” Mr. Boehner, an Ohio Republican, said in an interview with Diane Sawyer on “ABC World News.”

“This issue has been around far too long,” he said, “and while I believe it’s important for us to secure our borders and to enforce our laws, I think a comprehensive approach is long overdue, and I’m confident that the president, myself, others, can find the common ground to take care of this issue once and for all.”

The words conveyed a new sense of urgency from Mr. Boehner, who said earlier this year that he thought it would be politically impossible to tackle a Republican proposal on the Dream Act, which sought to open a path to citizenship for some students in the United States illegally.

According to exit polls by Edison Research, President Obama won 71 percent of the Hispanic vote compared with Mitt Romney’s 27 percent, a gap greater than Mr. Obama’s 36-point advantage with those voters over John McCain in 2008.

Republicans were also on the losing on the issues of marijuana decriminalization, gay marriage, and women’s reproductive health.  Obviously, they’re going to try to shore up the Hispanics before they give any ground to any one else.  There’s an entire list of right wing blogs–including The Daily Caller–on memorandum where you can just go drown yourself in seething xenophobia, if you so desire.  Frankly, I’ve had enough racism for awhile so I’m just going to drop that discussion.

Back to the fiscal cliff and the Grand Bargain where the MSM has been laying bets all day.  Boehner just offered up more Republican trickle down crap and the Romney/Ryan/Norquist budget plan this morning.  Never say die!!

Boehner expressed hope that “2013 is finally the year” the government can agree on a grand bargain on spending and debt. “When the President and I have been able to come to an agreement,” he said, “there’s been no problem getting it passed in House.”

Regarding a tax deal specifically, the Speaker argued that “raising tax rates will slow down our ability to create the jobs that everyone says they want.” Reinforcing an often-cited Republican argument, Boehner said the problem with raising taxes on the wealthiest “is that more than half are small business owners.”

What part of raise the damn taxes didn’t Boehner get from the election results on Tuesday?  The President appears to have gotten the message.  He retorted  “Americans agree with my approach”.

President Barack Obama, laying down his marker for grueling “fiscal cliff” negotiations, said Friday he won’t accept any approach to federal deficit reduction that doesn’t ask the wealthy to pay more in taxes.

“This was a central question during the election,” Obama said in his first postelection comments on the economy. “The majority of Americans agree with my approach.”

During the question-and-answer portion, Boehner was also asked about immigration. Noting he was “not going to get any details,” he said, “on an issue this big, the president has to lead.”

Speaking more broadly about the Republican party itself, Boehner said the principles of the party are sound, but: “It’s clear that as a political party we have some work to do.”

Following up, Obama’s spokesman said later that the president would veto any legislation extending tax cuts for families making $250,000 or more.

The president, speaking in the White House East Room, said he wasn’t wedded to every detail of the plans he outlined during the election, adding, “I’m open to compromise.” But he offered no indication that he was willing to back down.

Republicans stood their ground. At the Capitol, Republican House Speaker John Boehner said he remains unwilling to raise tax rates on upper-income earners. But he left open the possibility of balancing spending cuts with new revenue that could be achieved by revising the tax code to lower rates but also eliminate some tax breaks.

Again, Boehner went straight for the heart of Medicare and Social Security.  He’s made it clear that he expects cuts to programs that the American people support. The key is not to panic about goes on down in January. There’s quite a few months after that for things to work themselves out. The only thing that is likely to happen is incredible variance in stock market returns which has been fairly typical of the market recently anyway.

Republicans say raising tax rates on the wealthiest Americans is a non-starter. Boehner said it would hurt small businesses while they are still struggling to recover from the recession.

“I’m proposing that we avert the fiscal cliff together in a manner that ensures that 2013 is finally the year that our government comes to grips with the major problems that are facing us,” Boehner said Friday. He said cuts to Medicare, Medicaid and food stamps, known as entitlement programs, have to be part of the equation.

Boehner also indicated that raising the debt limit, which the government will reach sometime in the spring, should be part of any negotiations. Pressed for details beyond that framework, he said he didn’t want to limit ideas to address the problem. He said the burden is on Obama.

“This is an opportunity for the president to lead,” Boehner said. He repeated a version of that phrase four times during the 11 minutes he spoke. “This is his moment to engage the Congress and work toward a solution that can pass both chambers.”

Some analysts believe that the “cliff” is more like a fiscal slope, that the economy could weather a short-term expiration of the Bush-era tax cuts and the government could manage a wave of automatic spending cuts for a few weeks. But at a minimum, failure to reach some resolution would mean delays in filing taxes and obtaining refunds and would rattle financial markets as the economy struggles to recover.

My guess is that all the tax cuts will be allowed to expire.  Then, the president will return to the table to ask for cuts for the middle classes.  This will allow the Republicans to say that they didn’t increase taxes although I’d say that Norquist and a lot of wealthy Republican donors will consider doing nothing akin to treason.  That should be an interesting moment.  Then, the return to the issue of the coming need to increase the debt ceiling and do a budget will go back on the table.  This is the time to watch what spending cuts will be offered up by the President and what will be agreed to by the Democrats in congress.  I just hope the President doesn’t start the negotiations by offering a centrist proposal straight off the bat.  He hasn’t got much to lose at this point by holding firm.

The basic deal is this.  The press and many pols are selling the fiscal cliff as a way to drive an austerity agenda. Economists are aware of the potential disaster that lays ahead should this occur.  We have a worse chance of going the way of the UK with its flailing economy than going the way of Greece that really has no taxable assets to speak of.

In fact, the problem with the fiscal cliff is precisely the opposite: The tax hikes and automatic spending cuts that would kick in after Dec 31 would sharply curb our federal deficit through enacting major, sudden austerity measures that would save the U.S. government about $720 billion in 2013 alone, according to the Bank of America’s estimates, which would be about 5.1 percent of GDP.

“If we let all of those changes [happen], there would be a sharp reduction in the budget deficit—in decline in debt to GDP, falling deficits as a share of GDP,” says Chad Stone, chief economist at the Center for Budget and Policy Priorities. “It’s all a dream for people who want really sharp austerity.”

So the reason that the fiscal cliff could push us into another recession in 2013 is because it enacts too much deficit reduction upfront, not too little. By contrast, the reason that Europe became mired in a fiscal crisis in the first place is because profligate nations haven’t done enough to curb their spending and raise revenue to their more fiscally responsible neighbors’ satisfaction.

The folks who want to avoid the fiscal cliff for fear of its impact on a still-faltering economy are effectively arguing that now isn’t the time to enact austerity measures: Instead of taking money out of government programs and people’s paychecks, the government should be putting that money into the economy. And certain parts of the fiscal cliff bring more bang for the buck than others, CBBP’s Stone points out: Payroll tax cuts and unemployment benefits are more effective way to boost economic growth in the short-term than the Bush tax cuts for upper-income Americans, according to a new report from the Congressional Budget Office.

So if it’s immediate austerity that we want to avoid, and stimulus that should take its place, why is there so much talk about the need for major deficit reduction as a solution to the fiscal cliff? It’s because lawmakers decided months and years ago that they wanted this austerity crisis to happen as a way of creating leverage for more sensible, long-term deficit reduction measures.

I still think this means the president will go for the expiration of the tax cuts and then ask to return tax cuts to the middle class. We’ll see who will take that bargain.  Then, the give-and-take on the longer term issues will start.   The question to me is who will be Faust and who is the Devil?

The shrill one offers up some advice to Democrats: Let’s not Make a Deal.

In saying this, I don’t mean to minimize the very real economic dangers posed by the so-called fiscal cliff that is looming at the end of this year if the two parties can’t reach a deal. Both the Bush-era tax cuts and the Obama administration’s payroll tax cut are set to expire, even as automatic spending cuts in defense and elsewhere kick in thanks to the deal struck after the 2011 confrontation over the debt ceiling. And the looming combination of tax increases and spending cuts looks easily large enough to push America back into recession.

Nobody wants to see that happen. Yet it may happen all the same, and Obama has to be willing to let it happen if necessary.

Why? Because Republicans are trying, for the third time since he took office, to use economic blackmail to achieve a goal they lack the votes to achieve through the normal legislative process. In particular, they want to extend the Bush tax cuts for the wealthy, even though the nation can’t afford to make those tax cuts permanent and the public believes that taxes on the rich should go up — and they’re threatening to block any deal on anything else unless they get their way. So they are, in effect, threatening to tank the economy unless their demands are met.

Obama essentially surrendered in the face of similar tactics at the end of 2010, extending low taxes on the rich for two more years. He made significant concessions again in 2011, when Republicans threatened to create financial chaos by refusing to raise the debt ceiling. And the current potential crisis is the legacy of those past concessions.

Well, this has to stop — unless we want hostage-taking, the threat of making the nation ungovernable, to become a standard part of our political process.

So what should he do? Just say no and go over the cliff if necessary.

I’d say that’s what will happen.