Monday, July 18, 2011

Call my bluff, Eric

Last week, fundraising emails from the DNC trumpeted Obama's alleged warning to Cantor, "Eric, don't call my bluff" as evidence that "the president and Democrats are holding strong against [GOP] obstinacy."

The President's alleged line in the sand, however, was not "no deficit reduction deal without tax hikes" -- it was "no deal that doesn't raise the debt ceiling by $2.4 trillion" -- that is, high enough to get through the 2012 election without further raises.

Incredibly, if the McConnell plan that's reportedly gathering momentum does pass in the form reported, neither condition will be fully met.  A "mere" $1.5-odd trillion will be hacked out of the budget over ten years without tax hikes, and the debt ceiling will be raised in three votes, before each of which the House can vote a resolution of disapproval. All Obama and the Dems get is a guarantee that they can't be effectively stuck up for further cuts under debt ceiling deadlines before the 2012 election. 

The cuts to some degree represent what Democrats can bear. According to Keith Hennessey, they consist mainly of payment squeezes on health care service providers, an array of fees charged to beneficiaries of federal programs, e.g., federal workers' pensions and telecom spectrum use, and a  trillion saved by keeping discretionary domestic spending growth to two-thirds the rate of inflation (though 2012 spending is to be 2% less than 2011-- i.e., a steeper cut in front-loaded as the economy struggles to recover). And then there's allegedly to be a deficit reduction commission, which is supposed to get an up-or-down vote on a comprehensive deal by year's end. Just how are we to imagine Democrats wringing some tax hikes out of Republicans on that one, given the GOP's success, if this deal goes through, in avoiding a tax hike in the debt ceiling negotiations?

In short, this looks awfully like Obama getting rolled  -- notwithstanding overwhelming public support for including tax hikes in any deficit reduction deal.  Of course, it may not go through in the shape now presented.  Mr. President, how can you come out of this standoff with no revenue increases?

P.S. What about other Dem agenda items, e.g., stimuli for our ailing economy such as extensions of the payroll tax cut and unemployment benefits?  And could maybe an up-or-down confirmation vote on Obama's second-best nominee for the Consumer Financial Protection Bureau be thrown in?

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