Grand Bargain Expectations

There were several interesting stories that caught my eye today, having to do with the prospects of a deal to avert the fiscal cliff and a possible grand bargain. One is from Matt Bai of the New York Times, who has written extensively about negotiations between House Leader John Boehner and President Obama during the summer of 2011.

He writes today in his piece, “Will Obama Agree to Entitlement Cuts? He Already Has”:

Labor unions and other liberal groups [. . .] message to the president, beginning with a meeting at the White House on Tuesday, is that he won a mandate to raise taxes on the wealthy while resisting cuts to Medicare and Social Security, and that they intend to stand firm with him on that position.

The problem here is that urging Mr. Obama not to join House Republicans in reducing entitlement spending is like pleading with John Travolta and Olivia Newton-John not to reunite for a Christmas album. It’s just too late.

[. . .]

So while it may be good strategy for progressive groups to pressure the White House on entitlement spending, no one should harbor the illusion that the president won’t sign off on reductions. The simple fact is, he already has.

This is a downbeat assessment of what may be coming. I think Matt Bai is correct in that Obama signed off on a deal with significant entitlement reductions in 2011, and that Boehner may feel that it would be an appropriate place to return to in the upcoming discussions. And if Obama was willing to make those entitlement cuts in 2011, why wouldn’t he be willing to in 2012? Furthermore, Matt Bai says that it wasn’t just Obama, but the liberal leaders of the House and Senate who were willing to sign off on his proposal in 2011. That upsets and surprises me.

However, I do think re-election can act as a reset. Obama certainly has greater leverage, and the subdued voices of his first term may not be so subdued in this second term. They did not elect Obama twice to get Republican tax and budget policies. We can see this in play on Obama’s insistence that the upper-income levels must have a higher tax rate. This was not in Obama’s memo during the summer of 2011; to the contrary, Obama seemed to have been willing to actually lower tax rates on the rich. This now seems to be a non-starter for current negotiations.

The Huffington Post spoke to several of the people who were in the meetings with the White House today:

Following the meeting, a handful of attendees spoke briefly to the press, praising Obama for vowing to firmly oppose an extension of the tax cuts for the wealthy.

“It was a very, very positive meeting,” said AFL-CIO President Richard Trumka.

Additionally, Obama’s current offer on the table would have vastly more revenue than what was on the table in 2011. That is, $1.6 trillion, twice what was originally being discussed in 2011. How far he moves from this number is still up in the air. In the past Obama has proven a not-so-great negotiator, but there’s also evidence that he has significantly improved his skills and position since the summer of 2011.

From the Washington Post:

Senior Democrats, meanwhile, threw cold water on a competing proposal to scale back deductions that disproportionately benefit upper-income taxpayers while keeping the top tax rates at their present level.

On Tuesday, former Clinton administration Treasury secretary Robert Rubin wrote in the New York Times that closing loopholes and deductions would not be an acceptable solution to the nation’s fiscal challenges. And Sen. Patty Murray (D-Wash.), who is set to become chairman of the Senate Budget Committee, said she “has not seen how the math works to let you come up with the additional revenue.”

And the New York Times says that Obama will take his message directly to the public, if needed:

As he prepares to meet with Congressional leaders at the White House on Friday, aides say, Mr. Obama will not simply hunker down there for weeks of closed-door negotiations as he did in mid-2011, when partisan brinkmanship over raising the nation’s debt limit damaged the economy and his political standing. He will travel beyond the Beltway at times to rally public support for a deficit-cutting accord that mixes tax increases on the wealthy with spending cuts.

Also in Obama’s plan is 340 billion in entitlement savings. I have no details on what these exactly entail. I may lose sleep over what happens in the next several weeks.

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