January 1, 2013

Chip Somodevilla, Getty Images

One way to understand the fiscal cliff compromise which passed the Senate this morning is through the prism of the larger question at the heart of this whole fight: What should the safety net of the 21st century look like, and who should pay for it?

Presuming the Senate deal passes the House, what happened yesterday is that Democrats scored a victory on part two of that question — albeit only a partial one — while successfully deferring the epic, looming battle over the first part of it. Meanwhile, Republicans retained their leverage heading into round two, and thanks to the way things unfolded, they will likely walk into it more confident of winning major future concessions.

The good news is that for now, the basic social contract underlying the progressive reforms of the last century remains intact. Neither the rise in the Medicare eligibility age nor the Chained CPI for Social Security happened; Democrats have temporarily held off the GOP drive to cut the safety net. Meanwhile, Democrats finally broke the GOP’s opposition to the rich paying more in taxes — the party’s organizing principle for years now — successfully making the tax code somewhat more progressive. The short term big picture is that Dems won on two major fronts — no entitlements cuts, and tax hikes for the rich — which helps explain conservative rage over the deal.

So why are liberals also angry? Partly because this was only a partial Dem victory, since Dems agreed to a higher income threshold ($400,000 for individuals and $450,000) and made concessions on the estate tax. That didn’t have to happen, since doing nothing — and allowing the Bush tax cuts to expire — would have meant even more in revenues from the rich.

As Paul Krugman’s calculations show, this may not really have cost Dems all that much in new revenues. The more serious problem for liberals is what the outcome says about what comes next. Obama had repeatedly insisted he would not budge off his demand that taxes go up on all income over $250,000. That obviously didn’t happen. The risk is that this will set a bad precedent for the next round in this fight, in which Republicans will hold the debt ceiling hostage to extract the deep cuts to entitlements they want. It’s reasonable to worry that today’s outcome, by signaling Obama’s over-emphasis on getting a deal for its own sake, will set the stage for a cave later.

It’s on Obama to prove those worries unfounded.  Obama has pledged to win more in new revenues from the rich via tax reform, has vowed not to agree to any deficit reduction that relies only on spending cuts, and continues to insist on a “balanced” approach. Only Obama, however, can ultimately define what he means by “balanced.” Liberals must continue to insist that this mean that the sacrifice necessary to reducing the deficit will not borne by the poor or seniors who can’t afford it.

All of which is to say that the major fight at the heart of this whole mess — over the proper scope and role of the safety net of the 21st century, and who will pay for it — remains unresolved. Only the outcome of that battle can settle the question of whether today’s compromise was a good one for liberals. Obama’s legacy on the future of the welfare state — which will help define his presidency and settle fundamental questions about our approach to governing that will define American life for years to come — remains yet to be determined.

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UPDATE: It has now passed the House, meaning this drama is over — but only for now.

Greg Sargent writes The Plum Line blog, a reported opinion blog with a liberal slant -- what you might call “opinionated reporting” from the left.