12 Dec “Fiscal Cliff” update, acknowledging incremental progress… with caveats
[First, if you’re still basically confused about the whole “Fiscal Cliff” thing, I recommend former Labor Secretary Robert Reich’s 2.5 minute video primer on the subject.]
A third of the way into December, the “Fiscal Cliff” negotiations have progressed to the point where both sides have made their opening offers, making it possible to get into specifics (where specificity exists, that is):
1. AARP and others have apparently convinced the compromise-minded Democratic leadership that now is not the time to cut Social Security benefits — so they’re going to save that betrayal for the next manufactured crisis (appallingly, President Obama has signaled his openness to chaining the program’s annual cost of living increases to the Consumer Price Index, which would reduce individual benefits considerably over time).
2. The Democratic leadership is telegraphing, however, that cuts to Medicare and Medicaid will likely be a big part of any final “Fiscal Cliff” deal. Cuts to Medicaid will have the effect of undoing some of the more sensible and humane provisions of the Affordable Care Act, undercutting, at least over the next few years, Obama’s signature achievement. Cuts to the former — well, that’s where there’s some uncertainty. On the negative side of the ledger, President Obama has reiterated his willingness to raise the eligibility age for Medicare to 67, an idea which pleases Republicans but will likely reap very little savings for the federal government ($10 billion/year) — while making healthcare MORE expensive for millions of Americans. On the plus side, however (albeit on the highly unlikely side), part of the president’s opening offer to Republicans is his proposal that the federal government obtain the bulk of $400 billion in Medicare savings by allowing the program to negotiate drug prices with PhRMA! Although I suspect this bid represents nothing more than the president’s incrementally improved negotiating skills, it would be truly earth-shattering news (and a game-changer, in terms of my esteem for Mr. Obama’s domestic accomplishments) if he turned out to be serious about giving Medicare this power. Not only are REAL savings possible under such a change, but the savings would come not from Medicare beneficiaries but, rather, from the highly profitable industry that’s been gouging them.
3. Republicans have again failed to identify which tax loopholes they’re inclined to close (making up their proposed $800 billion in new revenue), but experts, including Nobel Economics laureate Paul Krugman, have noted that there is no way that this approach will not end up increasing taxes for the bottom 98% of Americans (including those who will see their payroll taxes go up, if Republicans get their way). Besides, the barely-chastened post-election GOP is still demanding a bunch of nonsense, everything from repealing ObamaCare outright (which would add $2 trillion to the deficit over the next two decades, per the nonpartisan Congressional Budget Office) to adopting a territorial tax system for corporations (which would cost Uncle Sam at least $130 billion over the next decade, per most estimates) — NOT TOO FISCALLY SERIOUS, THESE FOLKS! And neither party is genuinely suggesting that we curtail corporate welfare or military spending (I mean it’s a “fiscal cliff,” not the apocalypse! Let’s stop slashing once we get to the entitlements people have worked their entire lives earning!).
4. President Obama has self-corrected (somewhat) after beginning the talks with some self-negotiation in the wrong direction (almost talking himself out of the core promise he’s repeatedly made to Americans: that the income tax rate for the top 2% needs to return to the Clinton-era rate; someone apparently reminded him that this is the bone that he needs to throw the left after he slashes Medicare and Medicaid). Obama’s offer to leave Bush’s estate tax cuts intact is disappointing, but considerably more so are his failures to propose a tiny (but potentially lucrative, at $35 billion/year) financial transaction tax (FTT) aimed at Wall Street and a return to taxing capital gains as income. These sensible, progressive (or hell, just fair) reforms are long overdue. One final disappointment: ignoring the strong constitutional argument in his favor, the president has foolishly ceded his authority to raise the debt ceiling. What could have been an assertion of the Chief Executive’s ability to execute the laws passed by Congress, has instead been turned into yet another bargaining chip for the Republicans, guaranteeing many future hostage-takings (with the Tea Party Republicans holding America’s economy for ransom again and again).
Summary and caveats: Although these negotiations could certainly be going better, they’re not going terribly, for what that’s worth (not a ton, considering the infrastructure/jobs-based conversation we should be having). President Obama seems to appreciate that Democrats won the election, and he’s bargaining a bit more aggressively than he has in the past (huzzah). The problem is he’s still inclined to argue completely on Republican turf — from a traditionally Republican position (promoting austerity rather than investment, slashing entitlements needlessly as his opening bid) — and at a time when the economy can ill afford it (and when a few weeks’ inaction would simply hand him all of the “concessions” from the GOP for which he is about to slash entitlements; as usual, Obama is preparing to fold cards while holding a royal flush).
“Protect entitlements” just won HUGE at the ballot box, but the politicians apparently didn’t hear us. Whom have they heard? A billionaire by the name of Peter J. Peterson, who has spent a billion dollars purchasing this moment. The American austerity conversation has come to dominate our discourse thanks largely to one plutocrat’s determined efforts — not that an establishment as corrupt as ours needs much encouragement when it comes to serving Wall Street’s interests. The politicians and MSM have been telling us for years that “America is broke,” and the only solutions to our fiscal peril lie in massive deregulation and privatization, tax cutting for “job creators,” union-busting, trade pacts, and entitlement-slashing. In short, everything they’ve been telling us for the past few decades about what’s good for the economy is unadulterated crap (consider the example of trade pacts alone, which have cost Americans millions of jobs).
And now they’ve got us chasing the European austerity train(wreck) when we desperately need to invest in the country’s future. It’s pathetic, but for these “Democrats” there has also been some progress (but that, too, has been pathetic). One day, I hope, we’ll be celebrating them getting something right, instead of praising them for not screwing us over as badly as their counterparts would have…
“Meanwhile, we will have wasted nearly two years in an unnecessary argument about how to hurt the economy the least, rather than how to help it.” — Mark Gongloff at HuffingtonPost.com