In case you were wondering why his phone call with O yesterday was reportedly so “curt,” here’s why. Now, a request: Paint me a picture in which the GOP’s leverage not only increases if we go over the cliff, but increases so much that it’s worth assuming the considerable political risk, and economic damage, involved in doing so. A final deal here will involve three basic parts — tax hikes on the rich, extending the Bush tax rates for the middle class, and entitlement reform. The public seems to be aligned with O on all three, i.e. they like the first two a bunch and they’re, shall we say, conflicted about the third. (In reality, Obama doesn’t “like” the idea of lower tax rates on the middle class because he knows he’ll need more from them to pay for the welfare state long-term. But that’s his current position.) Math is math, though, and the House does have some leverage, so there’ll have to be entitlement cuts of some form. Per Politico, Democratic Senate aides claim that they realize this:
There is only way to make the medicine of tax hikes go down easier for Republicans: specific cuts to entitlement spending. Democrats involved in the process said the chest-pounding by liberals is just that – they know they will ultimately cave and trim entitlements to get a deal done.
A top Democratic official said talks have stalled on this question since Obama and congressional leaders had their friendly looking post-election session at the White House. “Republicans want the president to own the whole offer upfront, on both the entitlement and the revenue side, and that’s not going to happen because the president is not going to negotiate with himself,” the official said. “There’s a standoff, and the staff hasn’t gotten anywhere. Rob Nabors [the White House negotiator], has been saying: ‘This is what we want on revenues on the down payment. What’s you guys’ ask on the entitlement side?’ And they keep looking back at us and saying: ‘We want you to come up with that and pitch us.’ That’s not going to happen.”
Sen. Dick Durbin (D-Ill.) told “Morning Joe” on Tuesday that he could see $400 billion in entitlement cuts. That’s the floor, according to Democratic aides, and it could go higher in the final give and take. The vast majority of the savings, and perhaps all of it, will come from Medicare, through a combination of means-testing, raising the retirement age and other “efficiencies” to be named later.
If we go over the cliff, do we get more or less in entitlement cuts than we would if we made a deal now? That’s the key question, it seems to me. The idea that O will buckle and extend the Bush tax rates for the rich is implausible given how much political capital he’s invested in tax hikes over the past six months; if he yanked the football away from the left when they’re this close to squeezing the dreaded one percent, they’d go berserk. He won’t budge on that. He might budge on entitlements, but will he budge more in December or in January? My hunch is that he’s more likely to budge next month, in the name of avoiding the recessionary shocks that would come with going over the cliff, than he is in January, when those shocks will have already hit. Once we’re over the cliff, chatter about a “grand bargain” will deteriorate into a clamor about the middle class suffering under a new, heavier tax burden. Entitlements will be shunted aside. O will point to the polls showing support for tax hikes on the rich, fold his arms, and demand that the House pass a bill extending the Bush rates for the middle class only. Under that sort of pressure, and given the general unpopularity of entitlement cuts, how likely is it that Boehner would be able to wring broader Medicare reforms from O rather than narrower ones?
We’re holding a bad hand here any way you look at it, but I’m thinking the best possible play might be to offer to pass a bill now that would extend the Bush rates for the middle and lower class in exchange for immediate reform to entitlements. No “promises” of future reform this time; Obama needs to sign something that’ll start to bite next year. The advantage of doing it that way is that it would essentially push the tax issue off the table and put entitlements at the center of the “fiscal cliff” debate. Let’s make the next month a referendum on how serious O is about controlling the sort of long-term expenditures that will swallow any future tax hikes.