So the fiscal cliff talks have hit a major snag, according to multiple reports, because Senate Republicans have now demanded that cuts to Social Security benefits — i.e., Chained CPI — be part of a temporary, short term solution, whereas the White House had only put them on the table as part of a long term one.
At the same time, Republicans are not willing to raise the debt ceiling. They want to retain the leverage the debt ceiling gives them when the longer term “fiscal cliff” talks resume next year.
And so the current Republican demand, as I understand it, is that Dems must agree to Social Security cuts and a higher income threshold for the lower tax rates (either $400,000 or $500,000, depending on the source), in exchange for an extension of middle class tax cuts (which Republicans also want) and an extension of unemployment benefits. If Dems don’t give up those things, while allowing Republicans to retain their debt ceiling leverage, taxes go up on everybody and unemployment benefits expire for over two million Americans.
Why would Democrats agree to Social Security cuts and lower tax rates on many wealthy households even as Republicans hold on to their leverage to extract still more in spending cuts later? No wonder a Dem aide described this as a “serious setback.”
It needs to be reiterated, again, that in threatening to hold the debt ceiling hostage next year, Republicans are not making a conventional negotiating demand, in which each side withholds concessions in order to extract more from the other side. The eventual GOP agreement to raise the debt ceiling will not constitute a concession on Republicans’ part. Republican leaders know they will have to raise the debt ceiling, because (as they also know) not doing so will lead to default and damage the economy. If and when they do agree to do so, that will simply constitute an agreement on their part not to hurt the country, yet they will ask that it be treated as a concession for which they should receive something in return. And Republicans not only want to retain this tactic as a way to increase their leverage later, they want to do so even as they ask Dems to give ground right now on cuts to Social Security and on allowing more wealthy households to pay lower tax rates.
Oh well. As Jonathan Cohn argues, there’s a case to be made for waiting until next week and striking a better deal.
One thing I haven’t seen clearly spelled out: If the talks now fail, and Harry Reid goes forward with the Dem plan to put on the floor an extension of the tax cuts up to $250,000, will Republicans filibuster it? As far as I know, it has not been established that they will, and it has not been established that the House GOP leadership won’t allow it to come to a vote. So there’s still that endgame.
UPDATE: According to the Twitters, multiple Senate Republicans are claiming Chained CPI is not on the table in the short term talks, which appears to constitute them running from the Senate GOP leadership’s demand.