Opening Positions on the Cliff Deal: Deja Vu All Over Again

Posted on Nov 29, 2012

White House / Pete Souza

By Robert Reich

This post originally ran on Robert Reich’s Web page, www.robertreich.org.

So the bidding has begun.

According to the Wall Street Journal (which got the information from GOP leaders), the President’s opening bid to Republicans is:

— $1.6 trillion in additional tax revenues over the next decade, from limiting tax deductions on the wealthy and raising tax rates on incomes over $250,000 (although those rates don’t have to rise as high as the top marginal rates under Bill Clinton)

— $50 billion in added economic stimulus next year

— A one-year postponement of pending spending cuts in defense and domestic programs

— $400 billion in savings over the decade from Medicare and other entitlement programs (the same number contained in the President’s 2013 budget proposal, submitted before the election).

— Authority to raise the debt limit without congressional approval.

The $50 billion in added stimulus is welcome. We need more spending in the short term in order to keep the recovery going, particularly in light of economic contractions in Europe and Japan, and slowdowns in China and India.

But by signaling its willingness not to raise top rates as high as they were under Clinton and to cut some $400 billion from projected increases in Medicare and other entitlement spending, the White House has ceded important ground.

Republicans obviously want much, much more.

The administration has taken a “step backward, moving away from consensus and significantly closer to the cliff, delaying again the real, balanced solution that this crisis requires,” said Senate Minority Leader Mitch McConnell (R., Ky.) in a written statement. “No substantive progress has been made” added House Speaker John Boehner (R., Ohio).

No surprise. The GOP doesn’t want to show any flexibility. Boehner and McConnell will hang tough until the end. Boehner will blame his right flank for not giving him any leeway, as he’s done before.

It’s also clear Republicans will seek whatever bargaining leverage they can get from threatening to block an increase in the debt limit – which will have to rise early next year if the nation’s full faith and credit is to remain intact.

Meanwhile, the White House has started the bidding with substantial concessions on tax increases and spending cuts.

Haven’t we been here before? It’s as if the election never occurred – as if the Republicans hadn’t lost six or seven seats in the House and three in the Senate, as if Obama hadn’t won reelection by a greater number of votes than George W. Bush in 2004.

And as if the fiscal cliff that automatically terminates the Bush tax cuts weren’t just weeks away. 

Déjà vu all over again.

But if it’s really going to be a repeat of the last round, we might still be in luck. Remember, the last round resulted in no agreement. And no agreement now may be better than a bad agreement that doesn’t raise taxes on the wealthy nearly enough while cutting far too much from safety nets most Americans depend on.

If Republicans won’t budge and we head over the fiscal cliff, the Clinton tax rates become effective January 1 – thereby empowering the White House and Democrats in the next congress to get a far better deal. 

Robert B. Reich, chancellor’s professor of public policy at UC Berkeley, was secretary of labor in the Clinton administration. Time magazine named him one of the 10 most effective Cabinet secretaries of the last century. He has written 13 books, including the best-sellers “Aftershock” and “The Work of Nations.” His latest, “Beyond Outrage,” is now out in paperback. He is also a founding editor of The American Prospect magazine and chairman of Common Cause.

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