The Grand Bargain, Revisited

Before describing himself as “agonizing” over whether to support it or not, Paul Krugman tries to distill the pro/con of the latest potential Grand Bargain:

So is what Obama gets out of this — basically unemployment benefits and infrastructure — worth it? The hardship of the unemployed is important; on the other hand, the numbers here are only about half a percent of GDP. As I said, right now I’m not feeling positive.

I understand that Obama prefers not to go over the cliff and face the political and economic uncertainty that this opens up; maybe my assumption that he can still get the middle-class tax cuts is wrong. On the other hand, cutting Social Security, even modestly, is a very big concession, especially because, as I said, it’s cruel and stupid viewed purely as policy.

One thing is for sure: any further concession on Obama’s part would make this a total non-starter. And I’m waiting for clarification on capital gains and dividends. But even as it stands, it’s not a deal to be happy about.

Krugman isn’t usually being fed behind-the-scenes information as he is here, which, to me, is a sign that someone at the White House (Gene Sterling?) hopes to neutralize or co-opt the Nobel Prize winner in advance. It’s flattering, after all, to be an insider; and if Paul Krugman isn’t apoplectic over the deal, that’ll mean a healthy portion of the left will either temper their criticism, fall in line, or recede into ambivalence. It’s the kind of move the White House would make only if they’re very serious about getting this deal through with as much left-of-center support as possible.

Beyond angst, Krugman also has some further (sketchy) details on the deal which weren’t included in Ezra Klein’s original report and which potentially go some way to making the deal more bearable for Democrats. Go ahead and read the Krugman piece if you want to get more in the weeds than I will here; the short version is that the White House believes it’ll get a bunch of less-high-profile tax hikes on the wealthy and will also be able to shield the most vulnerable from the Social Security cuts. My first instinct is to be skeptical of the Social Security promise. It sounds too good to be true.

But as I was thinking s’more about the deal last night, trying to game-out the likely future if the deal is made as well as if it isn’t made, I realized where the point of divergence between Obama and his left resides. It’s the same as it ever was. Obama doesn’t want a fight.

I’m not a big fan of the whole uncertainty worldview, but I do think it’s worth acknowledging just how ugly and momentous a post-cliff fight will be. Democrats by and large feel that they won in 2012 and are thus in a good position to bend the GOP, through public opinion if necessary, to their will. Maybe that’s true. But keep in mind what we’re looking at if over the cliff is the route we go: not only would Republicans have to be forced into delaying the sequester cuts as well as reestablishing tax cuts for the “bottom” 98 percent, but they’d also have to be forced to surrender on the debt limit, too.

With GOP congressional power located in the House, where nearly every representative is guaranteed reelection as long as they don’t lose to an insurgent in the primary, it’s highly debatable whether Republicans can be made to give a shit about the consequences of letting the sequester cuts happen in total and not raising the debt ceiling. The sentiment that both issues are Obama’s problem — not theirs — will no doubt hold sway for many representatives; and if Obama unilaterally raises the debt-ceiling himself that’s all the better for those interested in impeachment.

All of this is to say, things will get really messy really quickly. And any prospect of other significant initiatives from DC — be it on immigration reform, tax reform, climate change, what-have-you — will be utterly annihilated. A total non-starter.

Is avoiding a slugfest, as well as gaining the revenue in a deal they’d otherwise never wring from House Republicans, worth it? Is it worth making a real cut to Social Security? Worth endorsing Boehner’s “rule” that every bit of stimulus must be off-set by an equal amount of cuts? (The deal is supposedly 1:1 in terms of spending-to-cuts.) Is it worth implicitly granting that the administration will negotiate over the debt-limit… just not yet?

I’m still leaning towards No. But it’s not as easy a call as it was yesterday.