Josh Barro knows what's up on the fiscal cliff
1: Republicans won't budge on top marginal tax rates, and they don't have to―at least not yet.
Judging from the Republicans' past behavior, minimizing top-marginal tax rates is their number-one priority. Judging from Obama's past behavior, his number one priority in these negotiations has been to maximize economic stimulus and to maintain leverage over the Republicans.
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| I can't type the word "leverage" without thinking about this movie. |
If that's correct, then I think the most likely scenario is a short-term extension of the Bush tax cuts, as well as an extension of the payroll tax cut, and an increase in the debt ceiling.
2 Republicans get their low taxes on the rich, and Obama avoids a recession and maintains the option of raising taxes later. The self-appointed democratic base will lose their shit, but Obama was perfectly happy to to ignore them in 2010, so why would it matter now?
But that still leaves some issues up in the air for the negotiations around the fiscal cliff. Namely:
-Stimulus in the form of infrastructure spending, aid to the needy, or aid to the states.
-Defense cuts
-Domestic discretionary spending
-Tax reform
I have no idea what will happen with regard to any of the above. But I fear that Obama won't make an effort to save domestic discretionary spending. And a lot of important stuff falls under that category: public health, scientific research, disaster response, infrastructure, et cetera.
Obama has said in the past that he thinks that long-term debt reduction will give Democrats room to spend money on those priorities, but I hope he doesn't really believe that. The Republican party is currently dedicated to low taxes combined with high spending on the military and the elderly. If they come to power, any "long-term" deal on the deficit is out the window, and so is domestic discretionary spending.
And this stuff is important. Would anyone seriously argue that the United States―or the world―needs less funding for the NIH?
Activists need to make this a priority. We're talking about a comparatively small amount of money, but there needs to be a vocal constituency within the Democratic Party, and within the electorate, to hold onto that funding. We can't just deal with the deficit and hope it takes care of itself
1 I think the media has done a pretty lousy job explaining the fiscal cliff, so I'll try to summarize the details, and the potential consequences.
On January 2nd, the Bush tax cuts will expire, Medicare will cut physician reimbursements by more than a quarter, there will be steep cuts to defense spending and domestic discretionary spending. The tax cuts and the increases in unemployment benefits and food stamps from Obama's stimulus will also expire.
If those changes are not
eventually reversed, the United States' economy will fall into a recession, and the deficit will vanish. Think of it as a gigantic anti-stimulus package, or think of it as the United States implementing the kind of austerity that has helped to ruin lives and economies throughout Europe.
It's worth noting that the risk from the fiscal cliff is that the deficit will go
down, i.e.:the United States will have
less debt.
Any change will require the assent of the Republican-controlled House of Representatives, the Democratic-controlled Senate, and the Islamofascist-controlled President.
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2 I don't want to waste people's time with unfounded, unreliable, and pointless political predictions. So I'll follow up on this prediction on April 15th, or whenever a deal is reached, and write a mea culpa if I'm wrong.
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