Are we going to go over the fiscal cliff? Of course!
Because it’s a massive fiscal-trajectory reset that solves a lot of very difficult political problems for everyone. Obviously they’ll claim they’re not actually going over the cliff — they’ll pretend to have some kind of deal (Ezra Klein outlines one possible arrangement), but it will really be a deal to have a deal later. It’ll be a Potemkin Grand Bargain. The cornerstone will still be — oh God I’m in metaphor hell — the cliff. (Splat! Writer down!)
Why am I skeptical that they’ll agree on a truly historic and epic and grandiose Grand Bargain before the end of the year? Because these folks can barely agree on what to name a new post office.
These days, Rule 1 in Washington is to assume the worst about everything and everyone at all times. That way you’re rarely stunned by gridlock, compulsive filibustering, Machiavellian shenanigans and various other types of militant do-nothingism and radical torpor.
Let’s talk about “political capital.” There’s no such thing. That’s a Sunday talk show fantasy.
Yes, Obama won a lot of this alleged political capital on Nov. 6, but the people who opposed him are not suddenly going to say, jeepers, we better bow to the will of the people! Check out those exit polls saying most people favor Clinton-era tax rates on the wealthy! No, that’s not how the world works. The Republicans do not care — at all — not a jot — that the president won the election and the Democrats actually gained seats in the House and Senate.
And they don’t care that Obama won after repeatedly declaring that he’d raise taxes on income above $250k a year by restoring Clinton-era marginal tax rates. (By the way, if Obama gets his way and extends the Bush tax cuts for income under $250k a year, even the rich will get that tax break. The tax hike Obama favors is only on income beyond $250k a year — which may seem like a technical distinction until you read Dave Weigel’s post this morning at Slate.)
The GOP will not budge on marginal tax rates. If the Republicans were to compromise on the marginal rate they’d not only give Grover a seizure but would cease to have any reason for existing and would go poof! and vanish entirely from the Earth. (Perhaps this is an overstatement; I had a lot of coffee.) And Obama’s not going to budge, either — because why should he? He said the rates on top earners would go back to the Clinton-era levels of 39.6 percent for income above $250k. Would he compromise at, say, 38 percent? No, because the law of the land says the rate goes to 39.6 at the end of the year — it’s already baked in the cake — and because there’s a lot of money in a single percentage point, like a couple of hundred billion over a decade or so. It’s a Willie Sutton situation. That’s where the money is.
So some form of going-over-the-cliff will be necessary to get the tax rates reset to where Obama wants them — perhaps with a pre-cliff-diving binding agreement ensuring extension of Bush tax cuts for income under $250k combined with comprehensive tax reform that would actually lower marginal rates down the road. [I understand what I just wrote, so that’s one reader, let’s build from that.]
That leaves the spending cuts question still to be resolved, and that’s a much tougher problem, as I will explain in my next crack at this topic, which will be titled something like “Who Speaks For Ducks?”unless I can come up with something more obscure and incomprehensible.