Yesterday, Republicans reacted with outrage when the White House offered an opening bid loaded with Democratic priorities — $1.6 trillion in new tax revenues, an extension of unemployment insurance, and more stimulus spending. Though Dems offered $400 billion in Medicare cuts, what angered Republicans was that Dems didn’t suggest greater spending cuts — they didn’t volunteer big concessions up front — leading Republicans to dismiss the offer as “unserious.”
The basic problem for Republicans here is that Democrats don’t have to offer big concessions up front. This is true because of basic common sense — if Republicans say no deal is possible without “serious” spending cuts, they need to tell us what spending cuts they consider “serious,” or the talks can’t go anywhere. (It’s striking that some pundits are ignoring this basic reality and playing along with GOP claims.) But it’s also true because of the uniqueness of this set of negotiations — specifically, if we do nothing, Democrats will get their way. All the tax cuts will expire, and Dems can come back and push a new tax cut just for the middle class — a circumstance that will only increase the Dems’ leverage further.
This has created a fundamentally unbalanced situation. If we do nothing, the fate of the tax rates for the middle class will automatically become “decoupled” from the fate of tax rates for the rich. Dems want that to happen. Republicans, by contrast, want the fate of the two sets of tax rates to remain bound together as one. This has created an awkward situation that some conservatives will cop to and others won’t. Some, like GOP Rep. Tom Cole and a growing number of Republicans, willingly admit that the current situation is lost and that Dems have much of the leverage here. Others are in denial about this — as Matt Lewis writes, conservatives who think Republicans have the leverage are guilty of “the same kind of happy thinking that led some to boldly predict a Romney victory.”
Worse for Republicans, Obama has a simple way to exacerbate the fundamental imbalance of the situation. He can continue to call on Republicans to extend just the middle class tax cuts, since everyone agrees on extending those — and claim we can resolve the point of disagreement over the tax rates on the rich later. This forces Republicans to say No to this (because they need the two to remain tied together), further unmasking just how a high priority they place on keeping taxes low on the rich — they are willing to create uncertainty for millions of middle class families to achieve it.
In his remarks today at a toy factory in Pennsylvania, Obama hit just these points:
“Both parties agree we should extend the middle class tax cuts. We’ve got some disagreements about the high end tax cuts … But we already all agree, we say, on making sure middle class tax cuts don’t go up. So let’s get that done … the Senate has already passed a bill to keep income taxes from going up on middle class families … if we can get a few House Republicans on board, we can pass the bill in the House. It will land on my desk. And I am ready. I’ve got a bunch of pens ready to sign this bill…
“It’s not acceptable to me, and I don’t think it’s acceptable to you, for just a handful of Republicans in Congress to hold middle class tax cuts hostage, simply because they don’t want tax rates on upper income folks to go up.”
The big remaining unknown in this situation is how willing the White House is to go over the cliff. If it genuinely is willing to let that happen, the fundamental imbalance of the situation remains. If not, as Digby points out, we can’t know yet what Dems are truly willing to give up to reach a deal. But the White House opening bid is certainly grounds for optimism. Its basic message is: We don’t need to play on your turf; you need to play on ours. And in truth, that is the situation in a nutshell.
Mitch McConnell reportedly laughed when he saw the Dem opening bid yesterday. If Republicans want to tell us what spending cuts they need to consider the Democratic offer “serious,” by all means, they should do that. And Dems should give it serious consideration. But Democrats do not need to offer a “compromise” up front that Republicans can then denounce as insufficient, dragging the debate further and further in their direction. This isn’t 2011 anymore.