If a deal appears to be elusive on the “fiscal cliff” as the January 1st deadline approaches, you’re going to be hearing more and more talk of possibly opting for a “temporary” extension of all the Bush tax cuts as part of a broader postponement of any fiscal resolution.
Today’s version of this: A new plan put forth by Dem Senator Michael Bennet and GOP Senator Lamar Alexander.
This plan offers what The Hill calls a “substantial down payment” on deficit reduction up front, followed by various debt reduction triggers that would kick in later, but the details of that “substantial down payment” have yet to be worked out. That aside, this quote from Senator Alexander describing the plan is the key:
“It simply pushes the pause button on all the elements of the fiscal cliff, extends everything for a year and then gives us six months in which to reform entitlements and reform taxes and reduce the debt.”
It “pushes the pause button.” That sounds so simple, doesn’t it? Can’t reach a deal? Just push a button, and everything will be okay!
As I noted the other day, if a deal remains out of reach, you’ll hear CNBC commentators and others going on and on about how Democrats are woefully irresponsible for refusing to back a temporary extension. Moderate Dems will likely panic and be tempted to agree.
So again: A temporary punt on the fiscal cliff may be one of the worst options of all for the economy. As economist Mark Zandi tells me, temporarily extending the tax cuts is a bad idea. “Business people and investors will not engage and hire more aggressively until policy makers provide a narrative with regard to how we’re going to address our problems,” Zandi said. “If we simply extend everything and kick the can, it will exacerbate all the uncertainty and we’ll be stuck going nowhere.”
What’s more, agreeing to a temporary extension essentially ignores the fact that Dems have the leverage here — because if they do nothing, all the Bush tax cuts will simply expire. Then Dems can come back in 2013 and move to renew just the tax cuts for those under $250,000 — and call them the Obama tax cuts for the middle class. The mere existence of this option puts more pressure on Republicans to reach a deal. Agreeing to a temporary fix squanders this leverage for nothing.
And guess what: Zandi also argues that as long as it results in a good agreement, going over the fiscal cliff isn’t a big deal — and that letting the tax cuts for the rich expire is the least painful option for the economy.
* Why tax rates on rich must go up: Annie Lowry runs the numbers and explains why it’s so hard to raise the revenue we need for deficit reduction by only getting rid of loopholes and deductions, as Republicans want, and not by raising rates. If the GOP only gives ground on loopholes, that isn’t a major concession — that’s essentially the Romney approach, and if memory serves, he lost the election.
* Next up — the battle over cutting spending:The battle over tax rates overshadows the fact that an equally contentious obstacle to a fiscal cliff deal will be the dispute over how to replace the sequester with agreed-upon spending cuts. As Glenn Kessler explains in a useful overview, the parties are already very far apart on the preliminary step to that — agreeing on what the baseline for those cuts should be.
* More obstacles to the implementation of Obamacare: Sarah Kliff reports on an important problem facing those implementing the health law: Many low income Americans simply aren’t aware that they are poised to benefit from subsidies enabling them to afford insurance. Low participation could create difficulties in making the law work properly.
The flip side of this is that if more people can be made aware of the law’s benefits, it could grow in popularity — complicating GOP efforts to undermine the law by actively trying to make it fail .
* Black Dems angry at GOP vilification of Susan Rice: Ed O’Keefe notes an undercovered aspect of the Republican attack on UN ambassador Susan Rice over her handling of Bengazi:
Black Democrats are especially upset that Republicans continue to use the word “incompetent” to describe Rice, a Rhodes scholar and veteran of the Bill Clinton administration.
The latest revelation here: The intelligence community altered the talking points given to officials to discuss the embassy attacks — not the state department or White House.
* Obama shifts approach to Mideast conflict: Anne Gearan notes that by sending Hillary Clinton to mediate the ongoing Israeli-Gaza conflict, it inevitably means Obama has involved himself much more deeply in the region. That could pay dividends if she helps negotiate an end to the conflict; the Obama administration apparently believes her presence will make it harder for Israel to launch a ground war.
However, Glenn Greenwald argues that we are already involved in the conflict: Whether you agree with it or not, the U.S.’s unstinting support for Israel’s actions itself helps enable the war’s continuation.
* Dems are the party of the center: Paul Krugman restates a point that can’t be reiterated enough: When it comes to the major economic issues of the day, the party roughly in the center of the spectrum is known as “the Democratic Party.” If the GOP really does moderate itself, it would have to move into space already inhabited by another major party — yet another reminder of how far to the right the GOP has moved (pulling Dems righward with it).
* What the right wing will focus on today: Everyone laughed at Marco Rubio for refusing to say how old the earth is, but conservatives are pointing to a 2008 quote in which Obama declined to say whether he agrees that God created the earth in six days. I’m not crazy about Obama’s answer, but the difference is that Obama went on to say he believes in evolution. Not to mention the fact that his policies are grounded in science.
* And the right isn’t learning from its mistakes: Steve Benen notes that those on the right who are still unable to accept the reality of the 2012 election — not to mention scientific and mathematical reality — are not just hurting themselves, but are making it harder to move the country forward.
My question: Are the folks who were misled by right wing media for literally months on end about who was winning the election the least bit ticked off about it?