Sunday, November 11, 2012

Krugman: Time to Drive Over Fiscal Cliff

     If need be anyway. Patty Murray is another Democrat who gets it:

     "Appearing Sunday on ABC's "This Week" Sen. Patty Murray (D-WA), a member of the Democratic leadership, telegraphed her party's intentions if Republicans refuse to accept a tax increase on the wealthy."

     "[T]o solve this problem, the wealthiest Americans have to pay their fair share too," she said. "If the Republicans will not agree with that, we will reach a point at the end of this year where all the tax cuts expire and we'll start over next year, and whatever we do will be a tax cut for whatever package we put together. That may be the way to get past this."

      Oh Patty! You're getting me all hot and bothered. But here we are with all these Democrats talking a tough game. Krugman made the interesting observation that it's the Democrats who are now the disciplined, organized party while the GOP has come to resemble the keystone cops:

     "James Fallows says something I’ve been thinking, too:
For the first time in my conscious life, the Democratic party is now more organized and coherent, and less fractious and back-biting, than the Republicans. It is almost stupefying to imagine that.
      "Indeed. It actually started during primary season, when — as too many have forgotten — the GOP field seemed (and was) dominated by ridiculous figures. Obama almost rehabilitated the thing with his bobble in the first debate, but he and his party pulled it back together; the Democratic campaign seemed professional, while the Republicans seemed like the Keystone Kops. Karl Rove’s image has gone from terrifying master of politics to overpaid crybaby."

      "But I’d go even further: the Democrats now look like the natural party of government. Bush had already established a reputation for being unable to get anything right in the actual business of governing; all that was supposedly left was political prowess, and now that’s gone too. And even the news media have, I think, begun to notice that we aren’t the “center-right” country of fantasy, we’re a diverse nation, ethnically and otherwise, in which a lot of liberal ideas have become perfectly mainstream."

       However, Krugman does think the Dems can squander it if Obama buys into a bad Grand Bargain:

       "Still, hubris and all that: this newly effective coalition could be shattered if taken for granted. And you know what could really produce the kind of dispirited base that was supposed to doom Obama in 2012? A sellout on key Democratic values as part of a Grand Bargain. If, say, Obama raises the retirement age in return for vague promises on revenue (promises that would be betrayed at the first opportunity); if he appoints a deficit scold to a major economic post; it could all fall apart."

         I'm somewhat more sanguine about it. I've been listening to all this scare talk about Obama selling out Medicare since the Summer of 2011 and still think it's overdone. In retrospect Obama played that whole debt ceiling game of chicken masterfully. It's what gives us Democrats leverage today. It makes strong statements like Patty Murray's possible.

        Obama has also agreed with both Schumer and Reid in their sharp criticism of Simpson-Bowles. I think the Dems understand they won a mandate and won't mess it up this time. In many ways they are stronger than in 2009-in the Senate at least. Though technically they had a filibuster proof majority for a little while many of those Democratic seats were only nominal occupied with the bluest of Blue Dog Democrats.
        On the fiscal cliff Krugman like Patty Murray think the Democrats have to be willing to jump. Again, that we have such leverage is thanks to Obama's victory in the debt ceiling fiasco. Regarding the fiscal cliff Krugman says:

        "So President Obama has to make a decision, almost immediately, about how to deal with continuing Republican obstruction. How far should he go in accommodating the G.O.P.’s demands?
My answer is, not far at all. Mr. Obama should hang tough, declaring himself willing, if necessary, to hold his ground even at the cost of letting his opponents inflict damage on a still-shaky economy. And this is definitely no time to negotiate a “grand bargain” on the budget that snatches defeat from the jaws of victory."      
          "In saying this, I don’t mean to minimize the very real economic dangers posed by the so-called fiscal cliff that is looming at the end of this year if the two parties can’t reach a deal. Both the Bush-era tax cuts and the Obama administration’s payroll tax cut are set to expire, even as automatic spending cuts in defense and elsewhere kick in thanks to the deal struck after the 2011 confrontation over the debt ceiling. And the looming combination of tax increases and spending cuts looks easily large enough to push America back into recession."      
        "Nobody wants to see that happen. Yet it may happen all the same, and Mr. Obama has to be willing to let it happen if necessary."      
        "Why? Because Republicans are trying, for the third time since he took office, to use economic blackmail to achieve a goal they lack the votes to achieve through the normal legislative process. In particular, they want to extend the Bush tax cuts for the wealthy, even though the nation can’t afford to make those tax cuts permanent and the public believes that taxes on the rich should go up — and they’re threatening to block any deal on anything else unless they get their way. So they are, in effect, threatening to tank the economy unless their demands are met."
       "So what should he do? Just say no, and go over the cliff if necessary."      
       "It’s worth pointing out that the fiscal cliff isn’t really a cliff. It’s not like the debt-ceiling confrontation, where terrible things might well have happened right away if the deadline had been missed. This time, nothing very bad will happen to the economy if agreement isn’t reached until a few weeks or even a few months into 2013. So there’s time to bargain."      
       "More important, however, is the point that a stalemate would hurt Republican backers, corporate donors in particular, every bit as much as it hurt the rest of the country. As the risk of severe economic damage grew, Republicans would face intense pressure to cut a deal after all."      
       "Meanwhile, the president is in a far stronger position than in previous confrontations. I don’t place much stock in talk of “mandates,” but Mr. Obama did win re-election with a populist campaign, so he can plausibly claim that Republicans are defying the will of the American people."
      "And he just won his big election and is, therefore, far better placed than before to weather any political blowback from economic troubles — especially when it would be so obvious that these troubles were being deliberately inflicted by the G.O.P. in a last-ditch attempt to defend the privileges of the 1 percent."      
      "Most of all, standing up to hostage-taking is the right thing to do for the health of America’s political system."      
      "So stand your ground, Mr. President, and don’t give in to threats. No deal is better than a bad deal."

     It's clear by their vote that the American people want these taxes on the rich to go up. Obama does have a "mandate" or whatever you want to call it to do this. If no compromise is reached the GOP will pay the price.


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