The reality is that President Obama has made huge concessions. He has already cut spending sharply, and has now offered additional big spending cuts, including a cut in Social Security benefits, while signaling his willingness to retain many of the Bush tax cuts, even for people with very high incomes. Taken as a whole, the president’s proposals are arguably to the right of those made by Erskine Bowles and Alan Simpson, the co-chairmen of his deficit commission, in 2010.
In return, the Republicans have offered essentially nothing.
The deal emerging from the Senate is a lousy one. Let me count the ways:
1. Republicans haven’t conceded anything on the debt ceiling, so over the next two months – as the Treasury runs out of tricks to avoid a default – Republicans are likely to do exactly what they did before, which is to hold their votes on raising the ceiling hostage to major cuts in programs for the poor and in Medicare and Social Security.
2. The deal makes tax cuts for the rich permanent (extending the Bush tax cuts for incomes up to $400,000 if filing singly and $450,000 if jointly) while extending refundable tax credits for the poor (child tax credit, enlarged EITC, and tuition tax credit) for only five years. There’s absolutely no justification for this asymmetry.
3. It doesn’t get nearly enough revenue from the wealthiest 2 percent — only $600 billion over the next decade, which is half of what the President called for, and a small fraction of the White House’s goal of more than $4 trillion in deficit reduction. That means more of the burden of tax hikes and spending cuts in future years will fall on the middle class and the poor.
4. It continues to exempt the first $5 million of inherited wealth from the estate tax (the exemption used to be $1 million). This is a huge gift to the heirs of the wealthy, perpetuating family dynasties of the idle rich.
Yes, the deal finally gets Republicans to accept a tax increase on the wealthy, but this is an inside-the-Beltway symbolic victory. If anyone believes this will make the GOP more amenable to future tax increases, they don’t know how rabidly extremist the GOP has become.
The deal also extends unemployment insurance for more than 2 million long-term unemployed. That’s important.
But I can’t help believe the President could have done better than this. After all, public opinion is overwhelmingly on his side. Republicans would have been blamed had no deal been achieved.
More importantly, the fiscal cliff is on the President’s side as well. If we go over it, he and the Democrats in the next Congress that starts later this week can quickly offer legislation that grants a middle-class tax cut and restores most military spending. Even rabid Republicans would be hard-pressed not to sign on.
But the proposal is not a balance of taxes and spending cuts. It doesn’t involve a single hard decision. It does little to control spending. It abandons all of the entitlement reform ideas that have been thrown around. It locks in low tax rates on families making less than around $450,000; it is simply impossible to avert catastrophe unless tax increases go below that line.