Progressives: Washington's Fiscal Deal a Predictable, Terrible Mess
By Common Dreams staff / commondreams.org

Agreement was widely shared across the progressive community on Wednesday that the deal reached in Washington in the first twenty-four hours of 2013 fell well short of what might have been possible had President Obama simply held strong to the leverage provided to him by a Republican Party hell bent on preserving lower taxes for the nation's wealthiest while simultaneously clamoring for cuts to popular social programs.

Overall, most acknowledge, the whole process was a contrived distraction—one perpetuated by a pliant corporate media—designed to keep lawmakers from focusing on real solutions to the ongoing economic woes impacting the nation.

Accepting that some decent elements were contained in the bill—such as an extension of unemployment benefits, preservation of the earned income tax credit, and ongoing funding for certain key programs—the overall assessment is that all of those elements could have been achieved through separate legislation and, given that a large majority of Americans support those policies, Democrats could have achieved a series of political victories if Republicans in Congress had continued to obstruct their passage.

What follows is a sampling of these assessments.

Robert Borosage, Campaign for America's Future, An Ugly Deal:

[The entire deficit and debt] debate is wrong-headed. You can’t fix the debt without fixing the economy. And deficit reduction won’t fix the economy. The recovery is too slow and too skewed to put people back to work. Deficit reduction can only slow it further.

"We need to address inequality frontally. That requires much more than small marginal increases in taxes for millionaires. It includes raising the minimum wage, empowering workers to organize and bargain for a fair share of the profits they help to generate, limiting perverse CEO compensation schemes. It includes a financial transaction tax that might curb Wall Street gambling."

We need a big and bold debate about fundamental reforms needed to make this economy work for working people. That includes making big investments vital to our future at a time when we can borrow for virtually nothing – rebuilding and modernizing our decrepit infrastructure, funding R&D, doing at least the basics in education. We need to balance our trade, and revive manufacturing, beginning with capturing a leading role in the global move to clean energy.

We need to address inequality frontally. That requires much more than small marginal increases in taxes for millionaires. It includes raising the minimum wage, empowering workers to organize and bargain for a fair share of the profits they help to generate, limiting perverse CEO compensation schemes. It includes a financial transaction tax that might curb Wall Street gambling.

We need to continue health care reform, taking on the entrenched lobbies — the drug and insurance companies, the private hospital complexes — that drive up our medical costs. If we paid per capita what other industrial countries pay for health care, we’d project surpluses as far as the eye can see. We have to fix our broken health care system.

But Washington is talking about none of this. Instead the Congress and the President are going to continue to debate how much more to cut from public services as if that would fix the economy. That debate is likely to turn foul. Republicans use the debt ceiling to demand structural cuts in Social Security, Medicare and Medicaid. They’ll likely be willing to repeal or dilute the sequester as an incentive to focus on the core security programs. And they’ll be convinced that the president will fold once more.

Americans are struggling with mass unemployment, declining wages, increasing insecurity, Gilded Age inequality. Trimming the deficit addresses none of these, and is likely to slow growth, making things worse.

We’ve had an ugly debate leading to a wretched agreement. And that agreement only insures that the debate will get uglier.

Allison Kilkenny, The Nation, GOP Demands More Cuts in Wake of "Fiscal Cliff" Deal:

The House approved a deal that Democrats claim will stave off the harshest and most immediate consequences of the fiscal cliff, even though the Senate bill delays the onset of the “sequester”—those swift, automatic spending cuts—for only two months.

"While the White House and much of the media spun the hurried late-night [deal] as a victory for the middle class, it was a win paid for with hundreds of billions of dollars in new tax cuts for America’s wealthiest families."

Now is when the establishment media may turn their focus away from the real effects of the fiscal cliff negotiations, which would be a disservice, considering that House Speaker John Boehner, erroneously depicted by the left as hapless and bumbling during the talks, is now laying out the GOP’s vision for a post-fiscal cliff America.

“Now the focus turns to spending,” Boehner predictably said in a statement following the House vote, as though slashing programs likes Social Security and Medicare will, in any way, lead to a balanced America.

Boehner and Company didn’t surrender ground during the negotiations. The fiscal cliff deal leaves in lucrative loopholes enjoyed by hedge-fund and private-equity moguls, along with a whole host of other gifts to Midwestern ethanol producers and Puerto Rican rum merchants (seriously).

The research and lobbying organization Citizens for Tax Justice released a report showing that the tax deal approved by the Senate would save less than half as much revenue as President Obama’s original proposal.

Travis Waldron, ThinkProgress, Congress Raises Taxes On Middle Class Workers:

By passing legislation to avert at least part of the so-called “fiscal cliff,” the combination of tax increases and spending cuts that was set to take effect at the beginning of the year, Congress avoided income tax increases on households that make less than $450,000 a year. The deal still raises taxes on 77 percent of American households, though, because Congress did not include an extension of a temporary payroll tax cut meant to stimulate the economy.

Scott Klinger, Institute for Policy Studies, Millionaires' Money and the Fiscal Swindle:

While the White House and much of the media spun the hurried late-night [deal] as a victory for the middle class, it was a win paid for with hundreds of billions of dollars in new tax cuts for America’s wealthiest families.

At midnight on December 31, all of the Bush era tax cuts expired. So when the Senate voted a couple of hours after midnight, they technically voted on new tax cuts for everybody. The bill that the Senate passed raises $1 trillion less than President Barack Obama’s original budget proposal. And much of it flowed directly into the pockets of America’s richest 1 percent.

Obama not only failed in his promise to raise taxes on the top 2 percent of taxpayers, he couldn’t even raise taxes on all of the richest 1 percent. Only those with individual incomes above $400,000 ($450,000 for couples) will face higher tax rates. The threshold for the top 1 percent starts at $369,691. The tax cuts for the richest Americans are permanent, while the child tax credit, college tax credit, and earned income tax credits that benefit Americans of more modest means expire once again in five years. [...]

"The leadership of both parties has elevated the budget deficit to be the top and virtually only issue in national economic policy. This means ignoring the downturn that continues to cause enormous amount of unnecessary suffering for tens of millions of people."

Because the deal the White House brokered with Congress does little to reduce the debt, deficit hawks will soon be back at it, seeking to cut more from Social Security, Medicare, food stamps, and other programs that benefit millions of families.

Dean Baker, Center for Economic and Policy Research, Look Beyond the "Fiscal Cliff":

[The fiscal debate] has been part of a larger distraction -- the concern over budget deficits at a time when by far the country's most important problem remains the economic downturn caused by the collapse of the housing bubble. The obsession with budget deficits is especially absurd because the enormous deficits of recent years are entirely the result of the economic downturn.

In spite of this, the leadership of both parties has elevated the budget deficit to be the top and virtually only issue in national economic policy. This means ignoring the downturn that continues to cause enormous amount of unnecessary suffering for tens of millions of people.

Robert Kuttner, The American Prospect, Endless Cliff:

Beyond yesterday’s narrow escape from the dreaded fiscal cliff are … more cliffs. President Obama and Congress averted one fiscal calamity of tax-hikes-for-all only to face even steeper cliffs—the sequester, the debt ceiling, the Social Security shortfall, ad infinitum. It is a fiscal Wizard of Oz, an extended odyssey with perils on every side.

The question progressives are asking themselves this morning is whether President Obama settled for too little in the fiscal mini-deal, having traded away his best single piece of leverage—the automatic tax increase on all Americans scheduled to hit today unless Congress acted. [...]

[The deal] included no agreement to raise the debt ceiling. The impact of the automatic “sequester” of $120 billion in other spending cuts was postponed only 60 days. These issues will now have to be negotiated separately,

Republicans convinced themselves that they will get to press for deep budget cuts all over again by holding the debt ceiling hostage; the need to extend the debt ceiling is their equivalent of the expiration of the Bush tax cuts—leverage on President Obama. It was that rationale, plus the need to prevent a tax increase on the bottom 99 percent, that allowed most Senate Republicans and enough House Republicans to tear up the Grover Norquist no-tax-hikes-ever pledge and vote for this deal.

Mary Bottari, Center for Media & Democracy, Wall Street Gears Up for Austerity Battles of 2013:

[The deal] is not so much an ending as a beginning to the austerity battles of 2013.

As the economy continues to stagger, the search for a "grand bargain" on taxes and critical social programs is likely to roll from fiscal cliff to debt ceiling negotiations into the annual budget battles."

As the economy continues to stagger, the search for a "grand bargain" on taxes and critical social programs is likely to roll from fiscal cliff to debt ceiling negotiations into the annual budget battles. While some feel that a "grand bargain" is less likely than "death by 1,000 cuts," the ongoing debate will continue to pose serious risks for average Americans who will need to stay engaged.

Those who benefit the most from the status quo are gearing up for a battle royale and are hoping for a helping hand from President Obama's pick for U.S. Treasury Secretary.

Paul Waldman, American Prospect, The Republicans Won:

The great Republican triumph of the current negotiation—and whether it came from hard-nosed negotiating or simple capitulation on the White House's part, I'm not sure—is the fact that an end to the debt ceiling was not part of the deal worked out by Mitch McConnell and Joe Biden. Nor, for that matter, was the question of sequestration resolved; instead, it was simply put off for two months. That means we'll be facing not one but two more crises, when we get to do this all over again. And when we do, the conditions will be very different.

On the debt ceiling, President Obama has said that it isn't up for negotiation; it just has to be raised, and that's all there is to it. Republicans, on the other hand, are quite looking forward to the chance to once again threaten to bring about the collapse of the American economy unless they can squeeze some more cuts from the budget. But once we get to that confrontation, most of the leverage the Democrats now have will be gone. Remember that there are two main things Republicans want: They want to keep taxes low on the wealthy, and they want to cut domestic spending. Obama's leverage in the current negotiations came from the fact that if action wasn't taken, all the Bush tax cuts would expire—i.e., there would be a large tax increase, including on the wealthy. Because Republicans really didn't want that to happen, he could force them to accept some of his other priorities, like an extension of unemployment benefits.

"President Obama and Congress averted one fiscal calamity of tax-hikes-for-all only to face even steeper cliffs—the sequester, the debt ceiling, the Social Security shortfall, ad infinitum. It is a fiscal Wizard of Oz, an extended odyssey with perils on every side."

But now the tax issue is settled. So when the debt ceiling comes up in a couple of months, there will be nothing Republicans will be afraid of. They'll have no reason to give an inch. And they'll be emboldened by the fact that every time we've had one of these crises, Obama has drawn a bunch of lines in the sand that he eventually backtracked right over.

Katrina vanden Huevel, The Nation, Fixing the Economy, A New Focus for Congress:

The Perils of Pauline melodrama over the “fiscal cliff” will drag on as Washington heads toward another “debt ceiling” faceoff that will climax over the next eight weeks or so.

This farce captivates the media, but no one should be fooled. This is largely a debate about how much damage will be done to the economic recovery and who will bear the pain. There is bipartisan consensus that the tax hikes and spending cuts that Congress and the White House piled up to build the so-called fiscal cliff are too painful and will drive the economy into a recession. So the folderol is about what mix of taxes and spending cuts they can agree on that won’t be as harsh.

Largely missing is any discussion of how to fix the economy, to make it work for working people once more. Just sustaining the faltering recovery won’t get it done. We’re still struggling with mass unemployment, declining wages and worsening inequality. Corporate profits now capture an all-time record percentage of the economy; workers’ wages have hit an all-time low. A little constriction, or a lot, won’t do anything to change that reality.

The only thing that might save this situation is the fact that Obama has to be aware just how much is now riding on his willingness to finally stand up for his side; if he doesn’t, nobody will ever trust him again, and he will go down in history as the wimp who threw it all away.Paul Krugman, The New York Times, That Bad Ceiling Feeling:

So, why am I feeling so despondent, and why do so many other progressives, like Noam Scheiber, feel the same? Because of the way Obama negotiated. He gave every indication of being more or less desperate to cut a deal before the year ended — even though going over the fiscal cliff was not at all a drop-dead moment, since we could have gone weeks or months without much real economic damage.

Now, given his evident antsiness to cut a deal in this case, how credible is his promise to hang tough over the debt ceiling, which is a much brighter red line? He may say that he absolutely, positively won’t negotiate over the ceiling — but nothing in his past behavior makes that believable.

Maybe this time will be different. Maybe the Treasury is secretly preparing to invoke the 14th amendment, or issue a trillion-dollar platinum coin, or direct that the whole budget gap be taken out of spending dear to Republicans. But I have to say that I now expect Obama to cave on the ceiling; and so, of course, do the Republicans, which means that the crisis is going to happen.

The only thing that might save this situation is the fact that Obama has to be aware just how much is now riding on his willingness to finally stand up for his side; if he doesn’t, nobody will ever trust him again, and he will go down in history as the wimp who threw it all away.

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Progressives: Washington's Fiscal Deal a Predictable, Terrible Mess