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What We Learned from Obama’s Presser Today: We Don’t Have a Deal

By Scott Galupo • November 14, 2012, 2:48 PM

For those keeping score at home, today was not an auspicious day for the potential of an easy fix to the “fiscal cliff” crisis: curb tax deductions for the wealthy. Keep rates where they are. Declare victory. Merry Christmas.

In his first press conference since being reelected last week, President Obama made it clear that he wants more revenue ($1.6 trillion vs. $800 billion, to be precise) than such a solution realistically could yield. “The math tends not to work,” he said. Obama dismissed the notion of cushioning revenue projections with “dynamic scoring,” that is, the anticipation of future growth as a result of tax reform. He would not settle, he said, for “sorta-kinda” raising revenue.

Put simply: he wants the Clinton-era tax rates and he wants to limit deductions.

It’s important to remember, though, that in any kind of high-stakes negotiation, you begin with your ideal and work your way toward some less optimal muddle. It’s possible we could still end up with a deal before hurtling over the cliff. But let’s not mince words: Obama sure sounded like he’s prepared to do that. With a swagger that no doubt startled the equity markets, he spoke of the “rude shock” that Americans would experience if “too much stubbornness in Congress” causes “everyone’s taxes go up.”

If my political antenna is working correctly, it sounds to me that, in calling for an immediate extension of current tax rates on the nonwealthy, Obama is signaling to Congress that we can partially go over the fiscal cliff — that is, we can mitigate the most extreme effects of an austerity shock and buy enough time to work out something comprehensive over the course of the next several months. Obama seemed to me to be suggesting that the likelihood of agreeing broadly on reforms to the tax code and the entitlement system between now and Jan. 1 is roughly nil.

To sum up: Obama today 1) indicated that he’s ready to take the plunge, and blame Congress for the carnage; and 2) opened the door to a partial fix so that the White House and lawmakers aren’t negotiating in a foxhole.

It was a bold play — and, we can hope, not a foolhardy one.

Posted in Congress, Economics, Politics. Tagged fiscal cliff.

9 Responses to What We Learned from Obama’s Presser Today: We Don’t Have a Deal

Brian says:

November 14, 2012 at 3:07 pm

Is there any reason at all to doubt that the House GOP will get 100% of the blame in the media to a deal not being reached? I don’t see any chance, so why would the Dems make any concessions at all? In fact, if you’re a Dem and you think the economy is going to slow next year anyway, deliberately sandbagging negotiations seems like a golden opportunity to milk the old reliable “It’s Not Our Fault!” strategy and pin blame on The Stupid Party.

Seems to me the “easy” solution on tax rates is to renew all but the top rates (allegedly both parties agree on this) and then raise the top rates by 2%–halfway between the 0% and 4% the two sides want. There. Done. Easy peasy. How moderate and consensus-like! Hooray!

Would this come close to dealing with the real problems? Nope. But we’re not going to solve those problems anyway, until the system implodes in a few years.

““The math tends not to work,” he said.”

By his own admission, his math skills topped out before junior high. Yeah, we’re all completely hosed…
Jim says:

November 14, 2012 at 3:12 pm

That’s just sign post number one on the route through Obama’s second term, when he is freed from need to run for election, that will expose for all that pay attention that he is truly the leftist, redistributionist, statist apparatchik that many on the right have warned that he is, to the derision of the elites here and elsewhere.

For all the apocalyptic talk about the end of the Republican Party, the Democrats have much danger here as well, if leaving Obama to his devices means much higher taxes at a time when the economy is still weak. For better or worse, by all rights Obama and the Democrats will own the economy over the next four years.

There is an argument out there that it might be best politically in the long run for Republicans to begrudgingly capitulate to the Democrats’ whims. I suspect if left to their own vices, the Democrats would tank the economy so bad that 2008 will look like a speed bump in comparison. I don’t agree with that argument, but I understand it.
icarusr says:

November 14, 2012 at 3:16 pm

“we can mitigate the most extreme effects of an austerity shock”

So fiscal stimulus works, after all?

Here where I think the negotiations will lead. The House cannot agree on tax increases of any sort, so there will be no vote on a Bill that includes anything that might look like an actual increase. But they can vote on a tax cut – after January – and I suspect it will be another two year holiday for under $250 K, back to Clinton rates for the above $250 K crowd, increase in age for social security – Canada has already done that – and Medicare, starting in 2016, and closing of tax loopholes in return for rebalanced military cuts. The Afghan wind-down will be recorded for Budget purposes and both sides will pretend that the reduction in expenditure will not be a “cut” to Pentagon’s budget. I guesstimate the tax revenue increase at just over $1.1 trillion, and the cuts or adjustments at around $2 trillion. The deficit will be down, in 2013-14, to $900 bn.

Oh, and by the way, to avoid another debacle in February, the grand bargain will include a “deemed” provivion in respect of the debt ceiling: “The United States is hereby authorized to borrow funds necessary to spend the funds allocated by Congress, and the debt ceiling is deemed to be set at the level required by Congress to fund programs.” Or some such language.

You read it here first …
MBunge says:

November 14, 2012 at 4:00 pm

I don’t know what Obama’s going to do or what his plan is, but our political establishment basically said and did nothing over the last two years as the GOP adopted an absolutist approach that vilified the very idea of compromise on policy. The ultimate and unavoidable result of such an approach, however, was that eventually the Democrats would take just as hard a line themselves.

Mike
cka2nd says:

November 14, 2012 at 5:06 pm

Jim says: “That’s just sign post number one on the route through Obama’s second term, when he is freed from need to run for election, that will expose for all that pay attention that he is truly the leftist, redistributionist, statist apparatchik that many on the right have warned that he is…”

I’m sure I will be disappointed that millions of liberals and progressives share your delusions about Obama. You know, the same people who kept on saying “Let Clinton be Clinton” in the mistaken belief that Bill Clinton wanted to govern like a liberal. Obama is the natural successor to Bill Clinton in most areas and George Bush in most of the rest. In four years’ time – actually, probably much sooner – any honest labor unionist, environmentalist, civil libertarian or anti-imperialist will recognize what a waste, what a complete tool of the ruling class, this administration has been.
Linda says:

November 14, 2012 at 9:37 pm

Brian said, ““It’s Not Our Fault!” strategy and pin blame on The Stupid Party.”

Every Republican candidate stood on the debate stage and said they would not compromise on tax cuts.

Does the House have a Republican majority will to raise taxes? I don’t think so. How is that compromising?

Let the Republicans vote against raising any taxes and see the House turn Democrat in the next election.
Dakarian says:

November 14, 2012 at 9:42 pm

normally, I try to take the moderate approach when deciding how people will act. It’s hard sometimes but I try. I DO suddenly have a rather hostile ideal in my head here.

“Is there any reason at all to doubt that the House GOP will get 100% of the blame in the media to a deal not being reached? I don’t see any chance, so why would the Dems make any concessions at all?”

Here’s the ideal… perhaps the issue is that we’re talking about ‘the Dems’. Yes, Democrats would be burnt from this. Obama, though, I think will not. Not just the idea of him not having to face reelection, though that’s in there. I’m thinking that if we fall off the cliff, the American Public will blame congress. It’s an easy sell once you stop thinking Dem/Rep and start thinking Pres/Congress. Debt Ceiling came up. Instead of just raising it as normal, Congress fussed, causing a risk of default. President and congress come in and strike a deal: Raise now, Congress crafts a deal, and a punishment if they don’t act right.

Congress tries to make deal, throws its own idea out then just sits on its heels. Obama had proposed budgets..which congress threw out and..then sat still.

December comes, Obama offers idea he not only proposed but was elected under. Congress throws it out and..does nothing. Cliff occurs, thanks to Congress. “le sigh.. if only they would work with the president.”

Note that this could be mitigated IF congress brought bills that the president vetoed. However, if NOTHING comes up, it’s ‘do nothing congress’.

I’ll be honest, I’m already wishing we could’ve dumped all of congress, Dem and Rep. That’s just me solving a Blue Screen with a hammer to the keyboard, though.

The more moderate of me wants to say that it’s what the article says: traditional barganing, which means you start insanely high, then go down to the point you wanted to get anyway. Still, I’ll admit it’s interesting to see the Tinfoil Hat version once in a while.

1
Cliff says:

November 15, 2012 at 6:14 am

This is interesting, as Obama’s pattern in his first term has been to cave before any negotiations begin. If he’d been this bold on health care, I might have voted for him last week.
MBunge says:

November 15, 2012 at 9:47 am

“If he’d been this bold on health care, I might have voted for him last week.”

I know health care has become the new liberal binky, but it’s still important to point out that Barack Obama reformed America’s health care system after two generations of Democrats failed to do so. Ted Kennedy failed. The Clintons failed in a spectacular fashion. Obamacare is the single greatest progressive advance in the area of health care since 1965. That means if you’re under 47, it’s the greatest progressive advance in health care in your entire life.

If Obama had tried it his way and failed, it would be entirely appropriate for lefties to rip him a new one. That some continue to hold a grudge over his success, especially given the fact there’s no evidence that he would have succeeded doing it any other way, is amazing.

Mike