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Evaluating The Coming Deal

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A lot of Republicans will conclude -- indeed have already concluded -- that Boehner should have cut his losses, passed a bill extending the Bush tax cuts for 98 percent of taxpayers, and lived to fight another day on the debt ceiling. Instead Boehner has agreed to pony up even more revenue, and a couple extra goodies for President Obama, in exchange for a real up front Social Security cut and a promise of major social insurance savings next year.

It's hard to imagine Boehner getting Obama to give much more than this, so the question for conservatives is really whether the emerging deal is worse than minimizing Obama's revenue haul and hoping to force his hand in a debt limit fight this February or March. It's a subjective call, but I think Republicans who reject Boehner's deal are underestimating the depth of Obama's resolve not to deal on the debt limit outside of the current negotiations.

I don't think it's quite so black and white for Democrats. Everyone (including Republicans) knows Obama could have netted nearly a $1 trillion in revenues without offering Boehner anything. On top of that, though, he's prepared to pony up chained CPI and about half a trillion in future, unspecified cuts to social programs, in exchange for $400 billion in extra revenue, an extension of emergency unemployment benefits, perhaps $50 billion in additional stimulus (though the payroll tax cut is a casualty in this offer), the elimination of the sequester, and a two year reprieve on a new debt ceiling fight.

The question then is whether the concessions Obama might win outweigh the ones he offered up, above and beyond the first trillion in revenue.

That's a hard one to answer. For starters, we just don't know where Congress will find all those cuts. Some will no doubt come from policies Democrats hate. But, for instance, finding $400 billion in health care cuts will be hard without tossing in some savings Democrats like, because they essentially require strengthening Medicare.

Assuming Boehner agrees to it, a two year debt limit reprieve sounds good. But it's actually a very risky idea. In part, it effectively amounts to negotiating over the debt limit, which Obama has vowed never to do again. Second, it tees up a debt limit fight for right after the 2014 midterms. That'd invest Obama in the outcome of the election. But if Dems once again fail to turn out and they lose the Senate, he'll be facing down both Boehner and Mtich McConnell, right after a defeat at the polls.

And then there's chained CPI. Right now the administration is insisting that any payment cuts be paired with rebates for low-income seniors, which helps preserve progressivity. But even though it's not as onerous as an increase in the Medicare eligibility age -- and even though the Obama administration has never really had a problem with this particular reform -- it's still a benefit cut, a real one, up front, with Obama's fingerprints all over it.

Maybe Obama could walk away with most of the upside and none of the downside by going over the fiscal cliff. A lot of Democrats want to test that theory. But it's a big unknown. The view downward over the edge of the cliff is hazy. And if Obama shakes hands with Boehner over a deal along the lines of this latest offer, his allies will be doing a lot of soul searching over whether or not it was the best he could have done.