Tuesday, December 11, 2012

Let's Make A Deal

I always knew I had a customer right where I wanted them the moment they started talking price. All I had to do was find the right number and the deal was done. Going into the fiscal cliff negotiations, Barack Obama knows what John Boehner wants – what he needs – to get the upper-tier Bush tax cuts to go away. Boehner wants entitlement reform and spending cuts.

Regarding the latter, the sequestration is taking care of that. If Congress and the President don’t come up with a deal, the cuts go through anyway, all $1 trillion of them.  But the former is a bit stickier, primarily since the Left doesn’t want any change to Medicare that would affect the eligibility age – currently at 65.

So if Boehner wants the age raised to 67, and he has said as much, than Obama should do what every successful salesman does the moment the customer tips his hand: he should negotiate the best deal off of that demand.  In return for raising the age to 67, Obama should get the following in return:

Enough spending cuts to equal the automatic sequestration, but no more.  Forget that 3 for 1 bullshit that Republicans demanded last year.  And those cuts should be phased in gradually over the next ten years to avoid a double-dip recession. Oh and by the way, the Pentagon takes half the hit.  The idea that the United States needs to spend more money on defense than the next ten countries combined is absurd.

Factoring in the savings from the ending of the wars in Iraq and Afghanistan, that collectively adds up to about $200 billion a year in reduced spending, or $2 trillion over the next ten years.

No debt-ceiling fiasco. Boehner gets his caucus to sign off on raising it without last year’s nonsense. Also, he agrees that 2014 won’t be a repeat of 2011's circus; no holding a gun to the President's head during an election year.

Upper-tier Bush cuts sunset completely. Boehner allows the Senate bill to be voted on in the House. Republicans can shout all they want, but it will pass with more than enough votes if it goes to the floor.  If 39.6 percent is too steep, then settle for a number around 37 or 38 percent. But, one way or another, rates are going up. Period!

Social Security is off the table. The same is true for any talk of vouchers for Medicare and block grants for Medicaid. While both may have structural problems, they can be fixed without destroying them.

Why should Obama "cave" on Medicare?  After all, doesn't he have a mandate based on the election? Well, yes and no.

While Obama does have a mandate, it's clear the electorate wants solutions out of Washington.  Obama has an opportunity to bring about a rather significant one and he should do whatever he can to make it happen.  Yes, he has leverage, and he should use it, but he should also look ahead to the next four years. If he plans on accomplishing anything of substance, he must put this matter to bed before the end of the year.

Think about it.  Last year Obama was willing to put entitlements on the table to get roughly $800 billion in supposed revenue, which consisted of the elimination of certain deductions and loopholes.  If Boehner hadn't wet his pants when Obama "moved the goal posts" on him, the Speaker would've gotten one helluva deal.  Now Obama is going to get more revenue and most of it from increasing rates. Elections do have consequences.

But Obama needs to be cautious here. As I mentioned in my last piece, some Republicans have already gone on record as saying they would relent on the tax rates. The plan is to get even over the debt ceiling and budget battle, the real fiscal cliff, as I see it.  Let's assume that the deadline passes and all the tax cuts expire. Some progressives believe that would only strengthen Obama's hand. I respectfully disagree.

While it is certainly true that most Americans would blame the GOP for a failure to compromise, the longer we go past January 1st without a deal, the more public opinion will start to turn against the President. If this drags on into February and we default on the debt ceiling, this becomes the cluster fuck of all time.  Like it or not, Obama is the commander in chief. He will get the blame if the nation's credit gets downgraded again, fair or not.

Every president wants to leave a legacy behind them. Bill Clinton's was balancing the budget for the first time since 1957, quite an accomplishment. Obama has a chance to one up that considerably, but not if he presides over a fiscal meltdown.


Peter Fegan said...

Daily Kos is reporting that, according to Dick Durbin, majority Whip, the eligibility age is "off the table" so far as the deficit talks are concerned.

I'm guessing that progressives got through to Obama that that was a non-starter in both chambers for them.

Bonnie McDaniel said...

Sorry, I can't go along with that. Raising the Medicare eligibility age (or adopting the chained CPI) would harm far more people than it would be worth.

I think the President should go nuclear on this one. Use the expiring Bush tax cuts, the sequestration, and public opinion to force the Republicans to agree to what he wants.