The Campaign Spot

The State of the Fiscal Cliff Negotiations

I discussed the Republicans’ options for the fiscal cliff negotiations on MSNBC’s “Morning Joe” this morning.

1. President Obama is convinced he will walk out of this crisis with an extremely sweet deal. His opening offer:

President Obama offered Republicans a detailed plan Thursday for averting the year-end “fiscal cliff” that calls for $1.6 trillion in new taxes, $50 billion in fresh spending on the economy and an effective end to congressional control over the size of the national debt.

The proposal, delivered to the Capitol by Treasury Secretary Timothy F. Geithner, mirrors previous White House deficit-reduction plans and satisfies Democrats’ demands that negotiations begin on terms dictated by the newly-reelected president.

The offer lacks any concessions to Republicans, most notably on the core issue of where to set tax rates for the wealthiest Americans. After two weeks of talks between the White House and aides to House Speaker John A. Boehner (R-Ohio), it seemed to take Republicans by surprise.

What is fascinating about the way the Democrats and the media discuss the tax-hike option is that these forces believe not only that Republicans should break their word on their explicit, oft-repeated pledge to oppose tax increases, but that they shouldn’t even act like it is a big deal. It’s bad enough to break a promise in exchange for some otherwise unthinkable policy concession from the opposition, but the Democrats and media believe the GOP should break their promise in exchange for really nothing.

I asked folks on the Right yesterday on Twitter whether there was any policy concession that Obama could offer that would make a tax hike worthwhile; some said no, some offered some extremely unlikely options (“repeal Obamacare!”). Probably the most realistic option would be some sort of significant cut to an entitlement program that Democrats once deemed sacrosanct and untouchable, something that infuriated their base as much as a tax hike would infuriate Grover Norquist and the GOP’s anti-tax-hike base. At least then Republican lawmakers could say to their base, “We broke our promise, but that concession got Democrats to accept cuts to entitlements they swore they would never accept, as well. We both had to accept things we didn’t want to save the country from a fiscal disaster.”

But for now, and for the foreseeable future, there is no indication that Obama thinks he’ll have to make a major concession to reach a deal.

2. Democrats are completely convinced that enough Republicans in Congress will cave and acquiesce to almost everything they want as the cliff approaches. They have some recent historical examples to provide encouragement in this belief.

3. Democrats are completely convinced that if no deal is reached, the Bush tax cuts expire, and sequestration takes effect, Republicans will get most of the blame. This is probably largely correct, but I think they’re whistling past the graveyard on the consequences to an Obama presidency if 2013 dawns with tax hikes, defense-spending cuts, and another recession.

This morning, MSNBC’s Richard Wolffe said that I am saying Obama wants to go over the fiscal cliff — either I was unclear in my wording or he’s reading something into my comments that isn’t there. I think Obama doesn’t really want to go over the cliff, but he’s convinced that if we do, his opponents will suffer the consequences worse than he does.

4. For the GOP, a deal on Obama’s terms is probably worse than sequestration. The middle will not suddenly like the GOP a lot more because they embraced tax increases for the rich. Even if they did, it’s unlikely they would gain enough ground to offset the damage such a move will do among a betrayed and enraged party grassroots. As I said this morning, “Once the Republicans become the party of tax increases, why do we need them? They become indistinguishable from the Democrats.”

The media is speaking increasingly loudly about the president’s mandate; what they fail to realize is that every member of the House GOP thinks he was reelected (or in the case of the new members being seated in January, elected) with a mandate to oppose all tax increases because they’re economically destructive.

The biggest obstacle to all of the options for real deficit reduction and real entitlement reform is that the public doesn’t really think they’re necessary; they think a few tax hikes on the rich will do the trick. Perhaps it’s best to let taxes go up for everyone, from the highest earners to the lowest earners, and let the public see how little that changes the numbers.

If the Bush tax cuts expire, the House GOP must introduce and pass one across-the-board tax cut bill after another, watching Harry Reid bottle them up in the Senate or Obama veto them. Obama will insist that he wants middle-class tax cuts, and the House GOP is holding them hostage . . . a very familiar argument. The voters had the chance to change this dynamic; they chose to keep everyone in place.

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