Yesterday I suggested that if the Budget Control Act passed in early August was Obama's punt, it may be shaping up as a 60-yarder. To sketch that out a bit further, consider Obama's short-term and long-term goals: a) to scratch out some immediate stimulus/employment improvement and so increase his chances of re-election; and b) to strike a deal for approximately $4 trillion in long-term deficit reduction, "balanced" by his lights. Some thoughts on his progress:
a) Obama does want to cut $2-3 trillion in spending over ten years, including by controlling growth in Medicare and Medicaid spending. Approximately $2 trillion in cuts are now current law, or about to be. If and when new revenue is put on the table, the sequestered cuts may be reduced and/or restructured, but they are there as a baseline.
b) He would be content with $1.2 -- $1.5 trillion in additional revenue over ten years, compared to what we'd have if all the Bush tax cuts were extended. That is roughly $2 trillion less than would result from letting all the Bush cuts expire.
c) He is seeking to get a (hopefully improved) version of his busted grand bargain with Boehner passed piecemeal by Dec. 31, 2012 -- to be built on thereafter if the election goes well and the economy recovers.
d) He is now the one holding "hostages" -- the Bush tax cut expiration and the $600 billion in sequestered defense spending cuts.
e) In marked contrast to the debt ceiling debacle, he is now in a position to say to the GOP: here is what I propose (see September deficit reduction plan); call me when you've got an offer approaching it.
f) He has brought the GOP's refusal to accept any new tax revenue, particularly in tax hikes on the wealthy, into progressively sharper relief. His remarks now repeatedly reference the overwhelming popular support for "balanced" deficit reduction on his terms. And the days when he lambasted "Congress" instead of "Republicans" are long gone -- see especially his statement yesterday.
g) He is now also able to contrast the GOP's refusal to raise taxes on the wealthy with their apparent reluctance to extend the payroll tax cut, which mainly benefits the middle and working classes.
h) The pointedness with which he's demanding the payroll tax cut extension reminds me a bit of his full-court press last Nov-Dec to get New START ratified. When people lament Obama's apparent failures to stand up to the GOP, they tend to forget that one. Now, as then, there seems to be no rational basis for opposition, hence the pressure may work. I think there's a decent chance that he will get his payroll tax cut extension and hopefully the unemployment benefit extension with it -- enough at least to let a fragile recovery limp along, if Euro-implosion or some other shock doesn't crush it.
The wild card is whether Obama is ready to shoot his hostages -- the Bush tax cuts and the defense budget -- rather than sign off on a really weak deal. But there's reason at least to hope that he'll do well in the endgame.
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