Late last night,or technically early this morning in Washington, the Senate, after intense last minute negotiations between Vice President Joe Biden and Senate Minority Leader Mitch McConnell, emerged with a compromise that passed a reluctant Senate by an 89-8 margin.
The House remains problematic, but somehow, given the magnitude of the Senate vote, it seems likely something will pass and probably today – although some Republicans in the house balked at what they called the contentious language of President Obama’s announcement.
The Republicans in the House will likely reluctantly go along with the deal, in part because they know they have much better leverage on the debt crisis.
As Howard Fineman noted, we should get used to this situation, as we now “operate in a continuous ‘crisis’ of pending governmental collapse.”
“The cliff we rushed to avoid New Year’s Eve is just the first of many that we will face,” he writes.
In calling this the “new normal,” Mr. Fineman writes, “in a deeper sense, it is a gathering disaster that is sapping our economic energy, undermining our leadership role in the world, and disproportionately putting the screws to — you guessed it — the poor, the working stiff and the average American taxpayer. Money has always ruled Washington and always will. But that tends to be especially true when decisions are made in a hurry and behind closed doors in the name of paying the nation’s creditors.”
Former Labor Secretary and current Berkeley Professor Robert Reich argued that this is precisely why this is a lousy deal.
He argued, “Republicans haven’t conceded anything on the debt ceiling, so over the next two months — as the Treasury runs out of tricks to avoid a default — Republicans are likely to do exactly what they did before, which is to hold their votes on raising the ceiling hostage to major cuts in programs for the poor and in Medicare and Social Security.”
This time, they will have all of the leverage.
He argues that the deal makes tax cuts for the rich permanent, extending the Bush tax cuts for incomes up to $400,000. Liberals are up in arms over this compromise, but let us face it, people making between $250,000 and $400,000, while very well off, are not super rich.
Still, Mr. Reich argues, “It doesn’t get nearly enough revenue from the wealthiest 2 percent — only $600 billion over the next decade, which is half of what the president called for, and a small fraction of the White House’s goal of more than $4 trillion in deficit reduction.”
That is the bigger problem, because it means that eventually that money will come from the middle class and the poor in the form of spending cuts.
“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,” he adds.
He argues, “I can’t help believe the president could have done better than this. After all, public opinion is on his side. Republicans would have been blamed had no deal been achieved.
He adds, “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.”
The New York Times was also less than enthusiastic about the deal, calling it “a weak brew that remains far too generous to the rich and fails to bring in enough revenue to deal with the nation’s deep need for public investments.”
The editorial continued, “Given that the Bush-era tax cuts expire on Jan. 1, Republicans were forced to give ground on their philosophical opposition to higher taxes, but they made it impossible to reach a farsighted agreement that truly grappled with government’s role in fostering improvements to education, transportation and manufacturing.”
The bigger problem, however, is the debt ceiling. That is a real crisis and that is a crisis that the Republicans have all of the leverage on.
On Sunday, Senator Lindsey Graham said on Fox News’ Sunday morning talk show, “Why would I raise the debt ceiling again unless we address what put us in debt to begin with? I’m not going to raise the debt ceiling unless we get serious about keeping the country from becoming Greece, saving Social Security and Medicare.”
“President Obama has ruled out any negotiations over the debt ceiling, and, on Monday, he vowed that revenue increases must match any further spending cuts,” the New York Times wrote this morning. “But as this deal shows, he often compromises at the last minute, and, in this case, it was Senate Democrats who undercut him on both the estate tax and the income tax threshold, making it hard to remain adamant.”
If the President plays his hand right, he could gain some leverage on the debt ceiling, arguing that the Republicans want to play politics with the nation’s credit rating – risking fiscal crisis in order to get political policy goals passed, but it’s a dangerous gambit at best, and the public might not have the stomach to go along with it.
—David M. Greenwald reporting