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Thursday, January 10, 2013

The next debt showdown...I see it!

This snippet from this evening's Plum Line roundup gave me deja vu:

* Steve Kornacki on why Republicans may cave in the end:
Much attention is paid to the way-out-there true-believers who have gained to power to define what conservatism means in the Obama-era. But there are still many Republicans in Congress – and in influential positions outside of Congress – who recognize the catastrophe that would be unleashed by a default. And in the wake of the November election, they may be more assertive in reining in the crazies now than they were during the debt ceiling showdown in 2011.
The flavor of this deja vu might be classed as optimistic preview.  The sentiment: Obama has the leverage: when he stares the GOP down, they'll be forced to... [add consummation to be wished].  As, for example, when Reid and McConnell were negotiating on December 28, three days before the fiscal cliff's edge, and Sargent eagerly anticipated the failure of those talks:

Obama is demanding that Mitch McConnell allow a straight up-or-down vote on Harry Reid’s fallback proposal, if the two sides cannot reach a deal. If no deal is reached, Obama is daring McConnell to filibuster a continued tax cut for the middle class and daring Boehner not to hold a vote on it.

A senior Senate Dem aide tells me that the fallback proposal Reid is working on would extend tax cuts on income just up to $250,000, not up to $400,000, as Obama’s most recent compromise proposal did. What this means is that if Senate Republican leaders fail to agree with Senate Dems on a proposal, the fallback plan Reid will offer will essentially rescind Obama’s offer to raise the income threshold to $400,000.

It’s possible, as many commentators are speculating, that today’s machinations mean Reid and McConnell really may reach a deal. But if not, by daring Republicans one last time to refuse to allow simple majority votes on extending the middle class tax cuts, Obama is signaling that if we do go over the cliff, he intends to extract maximum political pain for it.
If Obama reverts to type, he will say some tough things that seem calibrated 'to extract maximum pain' as the debt ceiling looms close. Then we'll hear that Biden is negotiating...and the outlines of a deal that's very hard to swallow will come into focus. There will be some harakiri inducing headline concession...(chained-CPI! $600 billion in cuts/$200b in revenue!) then news will trickle out of several back-loaded Obama gets (half the cuts are illusory...they're weighted toward defense...IPAB is strengthened..cap on employer health insurance tax exemption is tightened). There will be lamentations on both sides. A new deadline will loom (sequester postponed/debt ceiling raised for three months). And we'll all man our posts (or crowd the bleachers) for the next showdown.

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