The pending debt ceiling deal is shaping up as quite a Rorschach test. On the left, Michael Cohen crows that the GOP caved, while Noam Scheiber is convinced that Obama has finally and definitively destroyed his negotiating cred. Reception on the left was shaped this morning, as the deal came gradually into focus, by an uncharacteristic freakout from Jonathan Chait. Just returned from vacation, Chait seemed to be reacting more to Obama's offer several weeks ago to start income tax hikes at the $400k level than to overnight developments (though the overnight news did move that higher threshold to the realm of the more limited deal). Me, I wavered between "poles of hope and fear... Dec 2010 tax deal vs.crappy Jul 2011 deal Boehner did O favor of pulling out of. ' My hope: "Perhaps cliff deal postmortem will look like 12/2010 - jaw-dropping headline concession offset by lower profile plusses."
My sense at this point is that the pending deal does look something like the 2010 agreement: a steep headline price paid to preserve core Obama priorities, with judgment yet again to be deferred until another round of deficit reduction is negotiated in 2013. On that second point, Obama laid down a key marker in his press statement this afternoon: that all subsequent spending cuts would have to be offset by tax hikes of equal value. It's unclear how he would enforce that: his ability to do so depends both on how the sequester is handled and how he plans to make good his proclaimed refusal to negotiate under threat of a debt ceiling default. If he can make his own ground rules stick, then this is indeed a good deal.
The deal resembles the December 2010 agreement insofar as in both cases, the two sides found it easier to trade favored tax cuts than to either cut spending or raise revenue (surprise...). In exchange for holding households earning $250k--$450k nearly harmless (though they are subject to some deduction limitations), the Democrats will have secured (if the deal goes through) 5-year extensions of Obama's tax credits for low- and middle-income Americans (expansions of the Earned Income Tax Credit, the Child Tax Credit, and the credit for college tuition), alternative energy, and business investment, along with a one year unemployment benefit extension. Thus Obama continues to forego hardball to maximize future revenue in favor of easing financial pressure on the needy and nonwealthy, stimulating the economy, and advancing his energy policy. Long-term, I suspect he thinks that revenue can be squeezed out of the GOP in stages, but that the economy and Americans with stagnant incomes need help now. Those who insist that our chief challenge is to stimulate the economy rather than reduce the deficit ought to be pleased.
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