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January 03, 2013

Claim: Liberals Lost the Fiscal Cliff Negotiations?

This strikes me as an exercise in pure contrarianism but I suppose it's worth noting.

Those who think that opposing any deal would have somehow created the conditions for Republicans to insist on reinstating all the Bush tax rates after they expired have a far higher opinion of the backbone of Republican leaders than I do. But that’s a prudential debate about how, as the minority party in Washington focused on keeping taxes and spending down, to minimize the harm of a uniquely bad set of circumstances. Maybe Republicans did that, maybe they could have done a little better, but they probably couldn’t have done much better.

But the Democrats could have, and the story of their failure here has not yet gotten the notice it deserves. In the long run, when the dust has settled, I think that will be the real story of the fiscal cliff. For liberals, this was not a moment of danger to be minimized but by far their best opportunity in a generation for increasing tax rates (which is the only fiscal reform they seem to want) and for robbing Republicans of future leverage for spending and entitlement reforms. And it is likely the best one they will encounter for another generation. Many on the left have seemed convinced lately that the politics of taxes had changed dramatically in their favor, and that the opportunity presented by the cliff could result in the kind of surge in revenue that could put off the coming fiscal crunch for years (until, they seem to think, it will just magically go away at some point) and so could save our entitlement programs from the need for reform....

But that hasn’t happened here. This deal is projected to yield $620 billion in revenue over a decade — increasing projected federal revenue by about 1.7 percent over that time. And that’s about it. The Democrats have made the Bush tax rates permanent for 98 percent of the public, which Republicans couldn’t even do when they controlled both houses of Congress and the presidency. They did not get to pick and throw away the low-hanging fruit that could be used in future rate-reducing tax reform (in fact, they retained some “extenders” of tax credits and deductions that could better enable such reform, and the new and more honest CBO baseline that results from this deal eases the way for it), they did not get to claim that they have reformed Medicare without touching its structure, and they now have to move immediately into a debt ceiling fight. Right after a tax-only deal, and just as people start to notice higher payroll taxes, they’re not in a great position to demand more rate increases in that fight, or others to come.

If even under the conditions of the past month — with a very liberal president just re-elected, Republicans in disarray, public opinion on taxes seemingly friendlier to them than it has been in decades, and higher tax rates automatically taking effect — the Democrats can’t get more than a tiny pittance of revenue and no chips to use later, then their basic approach to fiscal issues just won’t work.

Apparently a Democratic priority was getting Republicans to sign on to sham Medicare reform -- "reform" which only consists of the government paying doctors and hospitals less, rather than changing it structurally. Yuval Levin suggests the Democrats wanted that to forestall genuine reform and also to get the Republicans to sign on to the Democrats' favorite sort of reform, which is to say, no reform at all.

Well, the Democrats didn't get that, but I'm not sure that was really the high priority Levin thinks it is.

Some suggest that the Democrats no longer have much leverage in the coming debates over the debt ceiling. They have less leverage, but that's mostly because they already got their top priority. And given that the Republicans surrendered on the debt ceiling last time, I don't see why they'd suddenly have the backbone for a fight now.


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posted by Ace at 02:08 PM

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