Will Obama cave to Republican demands on fiscal deal?

By Michael J.W. Stickings

The other day, National Journal ran an article entitled "Republicans, White House in Talks Toward Big Fiscal Deal":

At least a dozen Republican senators are regularly meeting with President Obama's top aides in an attempt to plot a way forward on the looming fiscal challenges facing leaders this fall, senators involved in the meetings tell National Journal.

The meetings, which began after Obama hosted GOP senators for dinner earlier this year, are the first sign that Democrats and Republicans are in talks to strike a deal that would reduce the deficit and reform entitlements and taxes.

Now, let's not get ahead of ourselves. There's no deal in sight: "The talks are, as McCain put it, still in the 'embryonic stage' and so far have consisted of identifying the dividing lines between the two sides." Furthermore, "[t]he differences between the two sides... remain vast."

Suffice it to say, though, this is all rather concerning.

First, there are no Democrats to be seen, at least in this piece. It's the White House and Congressional Republicans doing the talking.

Second, if the point is to establish the dividing lines and to find agreement in between the White House on one side and Republicans on the other, the result will be a deal that is somewhere on the center-right: tax revenue the Republicans agree to along with entitlement and tax "reform" (with Obama having put entitlements on the table, and any such deal securing Republicans an historic victory in their quest to dismantle the social safety net) the Republicans demand.

Meanwhile, we see yet again what the president thinks of progressives, and of the vast majority of his own party -- he wants to cut a deal with Republicans, moving to the right in the process, everything to the left of his establishment centrism be damned.

Of course, the House likely won't agree to any of this. So there's that, for better and for worse.

(By the way, the answer to the title of this post is: Yes, probably.)

Inside Obama's budget

By Frank Moraes 

In his "Happy Hour Roundup" at The Plum Line the other night, Jonathan Bernstein provided links to three articles that argue in different ways that there is much to like in Obama's new budget. I've never argued otherwise, but I have been too focused on the entitlement cuts. Let's be clear though: Obama's offer of these cuts is very bad. Even if nothing happens in the next four years, Republicans will go on to accuse Democrats of intransigence: "Even that socialist Obama thought we needed to cut entitlements!"

Annie Lowrey over at the Economix blog argues that Obama's entire focus, not just his budgets, have been about reducing income inequality. She rightly notes that the ACA (Obamacare) will help the issue. Just on the face, giving people healthcare who didn't have it before makes them richer; it doesn't matter that you aren't giving them cash. But perhaps as important, it will make medical bankruptcies far less common. (Remember the big push by the feds to make bankruptcy harder because all of these spendthrifts were abusing the poor bankers? It was mostly bankruptcies because of our broken health-care system.)

She goes on to mention a number of good things that are in the new budget. It includes a rise in the minimum wage, universal preschool, and of course, slightly higher taxes for rich people. One thing that is in there really surprised me: the earned income tax credit (EITC). The budget would make it permanent. I thought it already was, especially since traditionally, that is one form of welfare conservatives agree with. Well, it is only in effect until 2017. That's a big deal. The idea that President Paul Ryan would end the program is very troubling.

In the great Wonkblog fashion, Brad Plumer presents the "Winners and Losers in the White House Budget." The winners (at least in terms of programs) are primarily the poor. As Lowrey points out, there is the EITC and the minimum wage. But in addition, although Medicare is cut, Medicaid is not. To some extent, this defines Obama's economic policies. I can see that he truly does care about the poor. It is when you move up the income ladder to the middle class, that he thinks things are fine. But they aren't fine. And helping the middle class thrive is really important to all of the classes.

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David Axelrod doesn't call us fucking retarded

By Frank Moraes

On the other night's Rachel Maddow Show, David Axelrod explained that everything Obama has ever done or ever will again do is just right. We actual liberals just don't get it. We don't understand the bigger issues that Serious Democrats understand. We don't understand that "free" trade agreements are great because they make rich people even more rich, even though they don't help the poor and middle class anywhere. We don't understand that the loss of manufacturing jobs is just a sign of globalization and there is nothing we can do so we ought to be happy with those minimum wage service jobs. We don't understand that what is good for GE, Exxon, and GM is good for America.

In other words: we don't understand that the Republicans are right about all the economic issues.

Axelrod patiently explained that we just have to do something about Social Security because Medicare is in trouble. He also explains that, sure, he would be for raising the payroll tax cap. That ought to be part of the mix. That was his word: part. Because, you know, we have to be reasonable about this. For every dollar that a rich man pays, we need to take a dollar away from a poor man. Not doing that might, I don't know, hurt the feelings of the Republicans. Of course, Axelrod was quick to note that a payroll tax increase will never happen. Rachel Maddow pushed back on him pretty hard; it was nice to see. And it even made Axelrod backpedal a bit.

And maybe that's why he never got around to saying that liberals are fucking retarded. Maybe that's why he's not mayor of Chicago.

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(Cross-posted at Frankly Curious.)

Louisiana crawfish: The demise of Bobby Jindal

By Mustang Bobby 

Gov. Bobby Jindal (R-LA) proposed a new state sales tax to replace income and corporate taxes, and it went over like a lead po'boy. In a speech on Monday, he backpedaled and withdrew the plan.

On Monday, Jindal scrapped his own proposal to eliminate the state's income and corporate taxes and replace them with a statewide tax on sales and business services. His retreat was a concession to the reality that the proposal was headed towards a humiliating defeat — and taking Jindal down with it along the way. Jindal said in a speech to lawmakers that the backlash against his plan "certainly wasn't the reaction I was hoping to hear," but that he would respect the public's wishes and start again.

And it may have sealed his fate as a rising figure in the GOP:

Grover Norquist, the intellectual leader of the anti-tax crowd in Washington, had praised Jindal's plan as "the boldest, most pro-growth state tax reform in U.S. history." He noted that it was particularly significant, because with Obama positioned to veto anything resembling the House GOP's budget for the next several years, Louisiana might be Republicans' best chance to show off their tax ideas on the state level.

"The national media and Acela-corridor crowd continue to focus on the bickering Washington, but they can learn what real tax reform looks like by looking to Louisiana," Norquist said.

It didn't turn out that way. Only 27 percent of Louisiana voters supported the plan in the latest SMOR poll versus a whopping 63 percent opposed. The idea didn't even garner majority support among Republicans.

According to SMOR pollster Bernie Pinsonat, Jindal's true approval is likely even lower than their mid-March poll indicated.

Here's why I think his fifteen minutes are up: he proposed a plan that was right out of the GOP playbook to screw the poor while saying he was for fiscal responsibility. But he so overplayed his hand that even people in his own party hated it. Then, under mounting public pressure, he crawfished on it, taking it back and promising to listen to the public. That is anathema in the modern GOP, who have lived long and hard by the rule that you never, ever give in to the majority of public opinion (see universal background checks).

But he's young yet. He'll learn. Give him a couple of decades and he'll become as much of a hard-shelled crustacean as Mitch McConnell.

(Cross-posted at Bark Bark Woof Woof.)

There is no long-term budget problem

By Frank Moraes 

Alan Blinder is a economics and public affairs professor at Princeton. Recently, he got placed in the middle of the argument between Paul Krugman and Joe Scarborough when Scarborough claimed that Blinder was on his side. Blinder didn't like that much. Yesterday, he wrote a short article at Politico, "Morning Joe's Accuracy Deficit." He says that he and Krugman only disagree about some very minor details.

Blinder claims there are three issues regarding the budget. In the short term, we are already doing too much deficit reduction. In the medium term (ten years), we have already done about what we should do. And in the long term, things are going to be very bad indeed. He is right about all this. The problem is that, like most people (including Krugman at times), when it comes to the long term, he is being deceptive.

In his new book, After the Music Stopped, Blinder claims:

The government can cover no more than a small fraction of the projected deficits by raising taxes. Sorry, Democrats, but the Republicans are right on this one. Americans are used to federal taxes running about 18.5 percent of GDP; they will not allow them to rise to 32 percent of GDP. Never mind that a number of European countries do so; we won't.

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Major media have sequestration all wrong

By Frank Moraes

I'm going to explain the Sequester to you and why most of the media have it all wrong. Back in 2011 when it was invented, the idea was to make something so horrible that neither side would accept it. Instead they would replace it with some bipartisan plan that the two sides disliked less and everyone would sing "Kumbaya." But even when pushed to come up with an "unthinkable" plan, the Republicans wouldn't go for any revenue increases. So instead, half the Sequester became military cuts.

Skip ahead a year and a half. Now everyone is standing around asking, "Will the Republicans really be willing to cut their beloved military?" My reaction to these people is: where in the hell have you been for the last 30 years?! We could be talking about the complete elimination of the military. Hell, we could be talking about the very destruction of the United States and Republicans would be against taxing rich people even a dollar more -- so long as those rich people would be able to keep their wealth after America was destroyed. The one overriding policy issue for Republicans is to keep the taxes of rich people down. (Note: when it came to the payroll take that is highly regressive, they had no problem letting it go back up.) The fact that major figures in the media think that isn't the case is a big part of the problem with politics in America.

Ezra Klein was surprised last week that Republicans didn't seem to understand what their own economists tell them: deductions are in fact government spending, just done in an unusual way. Think of the mortgage interest deduction. This allows homeowners to pay less in taxes. It would have exactly the same effect if instead the government had a program that gave homeowners money for owning a home. So what's the big deal with eliminating tax loopholes? They too are just government spending in another form. Ezra Klein thinks the Republicans just don't understand this.

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There is no fucking spending problem

By Michael J.W. Stickings

Appearing on Fox News today, House Minority Leader Nancy Pelosi said the following:

It is almost a false argument to say we have a spending problem. We have a budget deficit problem that we have to address.

She's almost right.

It's an entirely false argument to say the U.S. has a spending problem, and to the extent there's a deficit problem it's a problem of revenue, specifically not enough of it, not expenditures.

But if you really do want to cut spending, the place to look is defense, where a bloated military sucks up an extraordinary amount of the overall budget. It isn't discretionary spending, which is government spending in a whole range of areas, which is at an historic low thanks in large part to recent cuts that President Obama himself supported alongside Republicans and a good number of Democrats.

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Cantor's big speech

By Frank Moraes 

Eric Cantor gave a speech and I think it sucked. What are the odds?

Ezra Klein provides a nice rundown of all of Cantor's policy proposals. He isn't too impressed either, but I think he gives Cantor far too much credit.

There is one big way that the Republicans could signal that are changing: they could talk seriously about the jobs crisis in America. But they won't do that. To some extent, they must believe that the public wouldn't really buy it. After all, for the last few years (and especially the last couple of months) the Republicans have been hammering on this issue. But it is always in a vague and negative way. John Boehner uses pretty much every opportunity to slam President Obama for not doing anything to create jobs.

The problem for the Republicans is that it has been all to clear that they are against any legislation that would actually help the jobs crisis. Instead, when they talk about jobs, everyone rightly hears, "Let's cut the taxes of rich people!" So it isn't surprising that Cantor didn't touch this issue. The truth is that the only Republican idea for creating jobs is to cut the taxes of rich people. Since they cannot think outside that paradigm, it is probably all for the best to say nothing.

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Out of control: The Republican myth of Obama's deficits

By Mustang Bobby

One of the many knee-jerk GOP memes is that President Obama has exploded the deficit and is spending our nation down the road to oblivion and it's getting worse with every passing moment.

Yeah, except it's not true:

The federal budget deficit in 2013 is projected to be $845 billion, the first time the non-partisan Congressional Budget Office has forecast a deficit below $1 trillion under President Obama.

The reduction in the budget deficit comes after Congress approved higher tax rates on households with annual income above $450,000. 

 
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Pity the rich

By Frank Moraes 

This image comes via Matt Yglesias. Apparently, The Wall Street Journal is highlighting the plight of those poor souls with six-figure incomes. Because of the Fiscal Cliff deal, they are paying more in taxes. Here is their infographic:

Note here that the single woman and the single mother ("a typical single mom trying to raise two kids on merely quintuple the median household income," writes Yglesias) are paying 1.3% extra in federal taxes. But people making $35,000 are paying 1.4% extra in federal taxes. But you have to put this information in the Wall Street Journal context: those with six-figure incomes matter.

Pity the rich, for in this world they have no voice. Except, you know, every fucking politician and media figure in America.

(Cross-posted at Frankly Curious.)

GOP presidential hopeful Bobby Jindal proposes elimination of income and corporate taxes in Louisiana

By Michael J.W. Stickings

The Times-Picayune reports:

Gov. Bobby Jindal is proposing to eliminate Louisiana's income and corporate taxes and pay for those cuts with increased sales taxes, the governor's office confirmed Thursday. The governor's office has not yet provided the details of the plan.

"The bottom line is that for too long, Louisiana's workers and small businesses have suffered from having a state tax structure that is too complex and that holds back economic prosperity," Jindal said in a statement released by his office. "It's time to change that so people can keep more of their own money and foster an environment where businesses want to invest and create good-paying jobs."

They've "suffered"? Really? And that's supposedly why the state economy has struggled? Bullshit. It's struggling, and will continue to struggle, for any number of reasons, but terrible education and health systems obviously have a lot to do with it.

He can spin it any way he wants, but all he's doing here is embracing the absolute anti-tax and pro-rich orthodoxy of the Republican Party, likely in anticipation of a run for president in 2016, shifting the tax burden down onto the lower and middle classes. Because higher sales taxes -- which would have to be really high -- would disproportionately impact those further down on the income scale.

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Government is not business

By Frank Moraes

Meet Greg Walden, the Republican representative from Oregon. He is an idiot. But he has lots of company. Like our "liberal" president. Do you remember when Obama said, "After all, small businesses and families are tightening their belts. Their government should, too." Well, Greg Walden is using the same flawed argument in his new bill to eliminate the "trillion dollar platinum coin" loophole.

He writes, "My wife and I have owned and operated a small business since 1986. When it came time to pay the bills, we couldn't just mint a coin to create more money out of thin air. We sat down and figured out how to balance the books. That’s what Washington needs to do as well."

That does sound reasonable, doesn't it? The problem is that it is totally wrong. People make the mistake of assuming a whole economy is like its pieces. But it isn't. Consider for a moment the paradox of thrift. In a family, you can balance your budget by spending less. This does not work in the economy as a whole. This is because my spending is your income. If everyone decides they are going to spend 10% less than they have been, then everyone will find that they are making 10% less than they have been. A family or business is not like the economy as a whole.

The same is true of the government. But it is a bit more complicated. If the government lays off an employee, they will save that money. But they will gain extra costs like unemployment insurance and other welfare programs. Plus, the employee will no longer being paying taxes to the government. And most of all, that person will not have as much money and so there will be less money in the economy to be earned and spent. Of course, this isn't the only or even the main reason that Walden's analogy is nonsensical.

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Prelude to a catastrophe

By Frank Moraes

(Ed. note: This post was written before the House vote last night. But the deal is still the deal, and it's not great. -- MJWS)

For the record, the Senate Fiscal Cliff deal is worse than indicated the day before yesterday. It doesn't raise capital gains tax rates as high as thought: only up to 20% and only on incomes above $450,000. It does not tax dividends as regular income. The estate tax was not raised as high as it should have been, thanks largely to fucktard Democrats. The sequester will only be delayed for two months; what's the point? Doctors get more money, but the payroll tax holiday is ended. As I wrote yesterday morning, this is very bad. And we get a 9-month farm bill. Nine months?!

It isn't horrible. But again: this is all we get when the Democrats hold all the cards. Just wait for a month or two when the Republicans hold all the cards. What are they going to demand? Burnt human sacrifice? Paul Krugman points out the real demon 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.

He goes on to say that if Obama does a good job managing the debt ceiling fight, then this deal will look pretty good in retrospect. But really: how likely is that?

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Senate passes bad "fiscal cliff" deal. So is it time to give up on President Obama?

By Michael J.W. Stickings

To begin, let me put it this way: There are good things and bad things about the fiscal cliff deal the Senate passed today, including:

The good: Tax rates for the wealthy go back to Clinton-era levels; federal unemployment insurance is extended for another year; and certain tax breaks for low-income Americans are extended for five years. (And, as Krugman notes: "no giveaway on Social Security, Medicare, or Medicaid. Basically, no spending cuts at all." That's huge.)

The bad: The threshold for the new/old tax rates is set at $450,000 for families and $400,000 for individuals, much higher than the $250,000 threshold Obama and the Democrats had initially sought; nothing is done about the debt ceiling, and so the Republicans can continue to use it to hold the political process and the economy hostage; the threshold for the 40 percent estate tax is set at the same level as that for income tax, which is very high, and it's also tied to inflation, which Republicans wanted, and sequestration is put off for just two months, meaning we'll be back in this whole fiscal mess sooner rather than later.

It seems like a bad deal to me, one that requires Obama and the Democrats to give up way too much to the Republicans just to get something, anything done. And it seems like they're willing to give it up without much of a fight.

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Don't fear the fiscal cliff!

By Frank Moraes 

Ryan Grim has written the best article I have yet read on the Fiscal Cliff, "Fiscal Fail: Government Agencies Plan Few Significant Changes For January, Despite Cliff Hype." He starts by explaining what readers of this site already know: nothing happens on 1 January. The stock market won't freak out. Tax collectors won't go door to door demanding money. And an asteroid will not collide with the earth. Instead, John Boehner's caucus will finally see that in fact they had no leverage all along and an agreement will be made to keep tax rates the same on the bottom 98% of tax payers.

I have been wondering how all of this would affect government agencies. In particular, the IRS has to tell businesses how to withhold taxes. And other government agencies need to know what to assume about their budgets. As Grim points out, they are all in agreement: they will proceed assuming that a deal will quickly be worked out: 

[T]he letter also holds clues to the agency's broader plans -- or lack thereof. The IRS told lawmakers it would not reprogram its system to account for the possibility the AMT would not be patched because "if Congress were to act at some point next year to enact a new AMT patch, the time and substantial expense necessary for the IRS to reprogram its systems... would ultimately be wasted."

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Cliff report

By Mustang Bobby

As we draw ever closer to January 1, the talks on the budget are beginning to sound less and less like serious fiscal management and more like a Roadrunner cartoon:

The clearest indication that House Speaker John Boehner's final fiscal cliff ploy backfired came late Wednesday when he began modifying his so-called Plan B.

Plan B, recall, is legislation to lock in the Bush tax cuts for all incomes up to $1 million — a fallback plan he hopes will strengthen his negotiating hand with President Obama.

But late Wednesday, faced with a daunting whip count, Republican leaders did two things. First, they began entertaining the notion of tacking spending cuts on to the bill — to entice skeptical House conservatives to provide badly needed votes. (Their skepticism is understandable: Why should they vote for legislation designed to strengthen Boehner's hand in deficit reduction negotiations they don’t support in the first place?)

Second, and crucially, they scotched a tandem plan to vote down legislation, supported by most Democrats, extending the Bush tax cuts for income up to $250,000.

That was the biggest tell of the day: Boehner can't deep-six that bill, because he may need to pass it -- with help from Democrats -- if fiscal cliff negotiations with Obama fall apart completely.

Meep, meep.

The president has already agreed to a deal I don't like

By Frank Moraes 

I saw a bit of The Ed Show last night as I was making dinner. Ed Schultz said something that shocked me. I don't have the exact quote, but it was more or less, "I know that the president isn't going to agree to any deal that we don't like." I could hardly believe it. Did he really just say that? After chained-CPI and $400,000 lower limit for tax increases? Maybe by "we" he meant "multi-millionaires on TV." Because the only liberals who expect Obama not to make a very bad deal are liberals who aren't paying attention. 

In the same segment, he talked about how Boehner's "Plan B" (That's the name of a birth control pill, right?) would raise taxes on the poor and middle classes because of other tax cuts that were part of the stimulus bill. Greg Sargent deals with this in detail in an article earlier today at The Plum Line blog, John Boehner, Scourge of the Wealthy, Ctd. ("Ctd." means "continued" because of a previous article.) He shows that half of the households in the top 1% would get a tax break. So this is not a serious plan.

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Weaker Boehner's morning after pill

By Carl 

The so-called "Republican Plan B" for avoiding the fiscal cliff will be brought up for a vote today. Like the real-life Plan B, it's pretty much going to be prophylactic in getting passed on into the uterus. I mean, Senate:

House Speaker John Boehner has proposed Plan B, which would extend Bush-era tax cuts on income of up to $1 million. He described it as a fallback option to prevent a sweeping tax hike while negotiations continue on a broader plan. 

GOP leaders also had planned to vote Thursday on President Barack Obama's long-standing proposal to return to the higher tax rates of the 1990s on income above $250,000 for families.

But Republicans decided to drop their plan to vote on extending tax breaks on incomes over $250,000. One GOP aide said that since the president has moved the threshold to $400,000, there is no point to that exercise. 

What's astounding about this plan, even this minimally effective plan, is that Boener is having trouble rounding up enough votes to get it through his House. He's had to hand out lollipops to the children in his caucus, even to the point where the sequestration that both parties in both houses of Congress agreed to two years ago are up for modification.

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Obama to sell out Social Security?

By Frank Moraes 

(Ed. note: Frank will have more on so-called "Chained CPI" later today. Stay tuned. -- MJWS)

Ezra Klein is again reporting that a Fiscal Cliff deal is almost done. And once again, I don't get this deal. He says that we will see the 39.6% tax bracket but only for incomes over a million dollars. There will be something less for incomes over $250,000 amount. In return for this, the president gets an extension of unemployment benefits and some unnamed stimulus spending. But the payroll tax cut will end. And the biggest thing of all: we will change the way that cost of living adjustments to Social Security are made.

People are calling this new Chained CPI a reduction in benefits. It is most definitely that! But it is also a backdoor way of destroying Social Security. The program will not keep up with inflation. Over the long term, the program will become more and more irrelevant. And that's why conservatives (and to a lesser extent "liberals") have been pushing this for decades. The truth is that the current COLA for Social Security is probably too low, because of what seniors actually buy. For example, they buy a lot of drugs that don't go down in price and they buy relatively few electronic devices that do.

The trick to Chained CPI is that it assumes that people will substitute. If flashlights get too expensive, people will switch to lanterns! Really. Although it is more along the lines of energy substitution. If heating oil gets too expensive, people will switch to gas. The problem is that this is very likely not an option. When was the last time you changed your water heating system because the price of energy changed? And how much did it cost? But again, the point is not to more accurately model how prices increase; it is to destroy Social Security; or at least to cut it without anyone noticing.

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The Obama-Boehner conspiracy

By Frank Moraes

There has been a lot of reporting on the fact that there isn't anything to report about the Fiscal Cliff negotiations. John Stanton makes a big deal of this in his almost fun article for BuzzFeed, "The Fiscal Cliff Is Boring Washington To Death." Everyone seems to agree that the lack of leaks indicates that the negotiations are at least going fairly well. I have a different theory. 

The two sides have decided that they can't get anything done until next year. The Republicans just can't allow a vote on supposedly raising taxes. And it's even worse than that. If they struck a deal on the income tax rates, they would either have to give on the extension of the payroll tax holiday, or they would also in effect be raising payroll taxes. So everything gets a lot easier for Boehner & Co. in 2013. 

But there is a wrinkle. The staffs of Obama and Boehner really are meeting all the time. What could they be doing? They could be working on a deal that they will make on January 2nd or 3rd. I really don't know. What I do know is that Obama gets a better deal in 2013. And I know that Boehner will have a much easier time selling a deal to the Republicans in 2013. (I would be embarrassed if I were a Republican and I had to take a worse deal just to satisfy the idiots in power in my party.) 

So I'm still inclined to think that we are going over the Fiscal Cliff. Or maybe I'm just optimistic. Or drunk.

(Cross-posted at Frankly Curious.)