Repeal the "fiscal cliff"

[cos]

[I also posted this on Blue Mass Group]

We hear a lot about Congress and Obama working to find some elusive deal that could stave off the "fiscal cliff", and occasionally we also hear about why we should to avoid it: According to the Congressional Budget Office, allowing the "cliff" to happen is likely to send the economy back into recession in 2013, and sharply increase unemployment.

What we don't hear much about is that Congress can simply repeal the fiscal cliff, without any complicated deals.

"Sequestration" - the automatic spending cuts that start to take effect in January - is just a law passed by Congress in 2011. Congress can repeal it, and that alone would be enough to prevent a recession in 2013 according to the CBO report - even if all the Bush tax cuts expire.

Extending the payroll tax cut and unemployment benefits would double the impact. Extending the Bush tax cuts on income below $250,000 would do even more (In contrast, extending the Bush tax cuts on higher income would, according to the CBO, have very little impact). But even if we did neither of those sensible things, just repealing sequestration would be much better than doing nothing. Neither Congressional Democrats nor Republicans actually like sequestration or want it to happen. So why do we hear so little in the news about that option?

I started a petition on change.org: Congress: Repeal the "fiscal cliff".
Please sign, re-post it, and send it on to others.

Comments

[plymouth.livejournal.com]

I think you've got it exactly backwards - it's the less informed people who are more likely to say "why can't they just pass simple things and move forward?" and that the more informed people are the more patience they would have for deal-making and wanting to have input into that process. As someone who pays a moderate amount of attention to politics and is married to someone who pays a lot of attention I do not want my party to give up something that gives them potential leverage. I think revoking sequestration without extracting a deal on taxes is a bad idea for Democrats so I am not in favor of this. I intentionally didn't name specific parties in my example so I'm not sure where "you're right that Republicans *want* to extract a deal" came from. BOTH parties want to extract a deal. And a lot of their constituents want them to.

[auros]

The Dems can get a lot of what they want simply by "going over the cliff" -- temporarily letting the spending cuts, and more importantly, Clinton tax rates, go into effect. Then they introduce the simple bill that rolls back the spending cuts, and offers a new temporary tax cut to the middle class.

Of course, you could pass this simple bill now, but the GOP refuses to ever vote for something that represents a "tax hike". (And never mind that they already passed the laws, in '01 and '03, that said taxes would go back up after a while -- they were using that "sunset" provision to try to make their tax cuts for rich people look less budget-busting than they actually intended them to be, once they got a chance to make them permanent.)

The other sticking point is that the Dems do not want to give up the leverage they currently have (b/c of taxes already being scheduled to rise) without resolving the debt ceiling. Unlike the fiscal cliff, where spending a week or two "over" it is basically harmless, failing to raise the debt ceiling actually WOULD be a crisis. We could avoid defaulting on liabilities if the President manned up and either invoked the 14th Amendment to say that the existing debt ceiling rules are unconstitutional (because they call the validity of other duly passed tax, spending, and debt laws into question), or uses the coin seignorage solution (which has a more clearly established legal basis, but is politically kind of ugly). But in any event, even if we didn't outright default, bond markets would get very freaked out, in a way that could lead to a market run akin to the crash in '08. Even if we recovered from it, it wouldn't be pretty, and a whole bunch of people would lose a large chunk of their retirement savings.

So the Dems, quite rightly, are insisting that any deal include disarming the debt ceiling as a negotiating tool, at least for the entire next presidential term (e.g. by raising the debt ceiling exactly as much as would be required to fund the Ryan budget -- about six trillion dollars), or, better, forever (by simply saying that the executive has the right to raise the debt ceiling to cover the spending laws Congress has passed, unless Congress actively decides to pass a law saying it wants to default -- which, mind you, would be batshit insane, though no more-so than threatening to refuse to raise the debt limit under current law). Everybody has always grand-standed about it in the past, but until last year, nobody ever actually tried to play chicken with it -- "give us what we want, or we blow up the whole world economy." We need to end that pattern before it gets established, because if we keep playing that game, sooner or later somebody will screw up and actually blow up the economy.

[cos]

On the debt ceiling, I think even the Republicans realize how badly they lost by trying that brinkmanship, and the tea party is significantly weakened when the new Congress comes in January. If it came to an up or down vote today on sequestration only, I highly doubt many Democrats would consider voting not to repeal it simply to pressure the Republicans on the debt ceiling. Besides, they already know the Republicans are crazier, so any sort of "we'll play chicken on this awful economy-damaging thing just to get you to give up playing chicken on that other even more awful economy-damaging thing" is simply not a game that makes any sense whatsoever for Democrats.

[auros]

"On the debt ceiling, I think even the Republicans realize how badly they lost by trying that brinkmanship"

Then you're not paying attention. Boehner has been very clear that he wants to extract "a price" for raising the debt ceiling. McConnell has said a variety of ridiculous things about the debt ceiling as well. Tea Party members of the House have been even loopier about this. And when you add to that the fact that Democrats have learned that they can't even trust Republicans to keep their end of any bargain, the idea of being forced into bargaining over the debt ceiling again is utterly anathema.

As far as what "makes sense for Democrats": On what basis are you making that assessment? I have served in an elected office of the Democratic Party. An admittedly minor one, sure, but enough that I've discussed policy issues (mostly aroung green business, since that's my core expertise, but also general macro stuff) at length with Reps. Anna Eshoo, Jerry McNerney, Gabby Giffords, even once with Nancy Pelosi; as well as Assemblymen and State Senators (Ira Ruskin, Joe Simitian, Rich Gordon, Jerry Hill, Sally Lieber, Paul Fong). I may be missing names, those are just the folks I know best (in most cases, I worked on their campaign at some point, though in Rich's case, I actually worked for his opponent in a primary, but came to respect him and I still think he's an excellent Assemblyman). I used to run into Sally in the grocery store and chat on a fairly regular basis.

The Dems are, by and large, more inclined to compromise and more risk averse than Republicans, both at the level of the rank-and-file, and the high electeds. But the activist base and mid-level electeds are raising hell about the possibility of the Dems caving to unreasonable demands again (especially cuts to Medicare, where the Dems remember that in 2010, the Republicans campaigned against Democrats for "cutting Medicare" in the structure of Obamacare), and Obama has been clear that he wants the debt ceiling taken off the table as a negotiating tool, permanently.

[cos]

Huh, I'm not sure where you got this being about "more informed" vs. "less informed" people - the problem I'm pointing to is that this element of "why not just repeal it?" is missing from the public discourse among *informed* people. Informed doesn't mean they're focusing on the right things or noticing all the possibilities. Many informed people tend to mostly notice whatever the media and political leaders focus on, and "just repeal it" is pretty much missing from the national debate.

However, you're also giving a very good example of how informed people, such as yourself, can misunderstand and be mistaken. As, I believe, is the case with a majority of informed people today regarding this issue. You're totally mistaken about taxes vs. sequestration. Democrats do not need to extract a tax deal to repeal sequestration - repealing it is pure win for Democrats, nothing lost whatsoever. If Republicans won't do a deal on taxes, then all the Bush tax cuts expire at the end of the month, at which point Democrats can again propose legislation to re-cut taxes on income below $250K, exactly what they're proposing now. Republicans would be in an even worse position then, because they'd be trying to oppose a tax cut for everyone, simply in order to try to extract a bigger tax cut just for high income people. But the basic point here is that all of the pressure for a tax deal comes from the fact that if nothing is done, all the Bush tax cuts automatically expire at the end of this month. Repealing or not repealing sequestration has no effect on that one way or the other.

Republicans are the only ones who gain any leverage from not repealing sequestration, because even though they don't want sequestration to happen, they know the Democrats don't want it either, and they hope to hold it hostage to get Democrats to agree to high income tax cuts or social security cuts or something. There's no reason whatsoever for Democrats to use sequestration as a hostage maneuver.

However, as I noted, Republicans can't credibly use this maneuver either if it's widely exposed, and widely exposed that there's such a simple solution: repeal it, and have your argument about taxes separately. That's why it'd be extremely politically valuable to push "just repeal it" into the public debate.

[plymouth.livejournal.com]

However, you're also giving a very good example of how informed people, such as yourself, can misunderstand and be mistaken.

You seem to be operating under the "if people knew what I know they'd all agree with me" assumption. It doesn't work like that. There's nothing in your following paragraph that is new information to me - I simply disagree with you.

[pseydtonne.livejournal.com]

Upvoted.

...and I hate having to point this out to cos, a man that has worked on really important political campaigns in Cambridge.

[auros]

You know what, I've just realized that part of the problem here is that you think the Republicans want to repeal the sequester. You're wrong about that. They only want to repeal the defense part of the sequester -- and transfer those cuts to the discretionary non-defense part of the budget. (How do I know? It doesn't require mind-reading. They passed legislation in the House doing exactly that!)

And your point that Democratic leverage becomes stronger after the Bush tax cuts are expired is, um, kind of making our side of the argument. Democrats are in a much better position to insist that Republicans roll back the NDD part of the sequester, replace the defense part with smarter cuts, kill the debt ceiling, etc. The Dems simply propose a bill that offers a middle-class tax cut, with appropriate riders, and dare the Repubs to vote against it. The fact that Democratic leverage improves after Jan 1 is why I have been calling and emailing my House and Senate representation and asking them to stop trying to get the Republicans to give in on an extension of the middle class tax rates now. (Which is the version of the idea of "simply repealing the cliff" that is, unfortunately, in wide circulation.)

Going over the "cliff" will do minimal harm to the economy if it's resolved even within a month (especially if the ultimate resolution retroactively credits back the extra middle class taxes collected during that time), and doing so will mean we end up with a deal that's better both politically (and while in normal times I'd consider that a minor point, given that the modern GOP has made itself a threat to democratic governance, I consider it a key goal for the good of the country to politically discredit them so utterly that either a moderate faction can take back over the party, or a new party can rise to take their place) and substantively (in terms of the macroeconomic policy that would be best for the country).

You also seem to be suggesting that "repealing the fiscal cliff" means only repealing the sequester, when in fact the common understanding of "the fiscal cliff" is the combination of the spending cuts and tax hikes. So a repeal of just the sequester would not be a repeal of the fiscal cliff (or curb, or speed bump, or whatever).

In any case, I would expect there would not be more than two or three House Republicans willing to vote for a full repeal of the sequester with no replacement spending cuts, right now, even if Dems felt like taking the bargaining chip of the defense cuts off their side of the table in exchange for the NDD cuts. Which they don't.

PS: Here's John Boehner, today, saying that he wants to hold the debt ceiling hostage again.