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Mon Dec 31, 2012, 01:59 PM

The case for the Demsí negotiating strategy

The White House and Dems are taking heavy criticism this morning for giving more ground towards Republicans in the fiscal cliff talks. Dems have offered to raise the income threshold to $450,000 and to keep the estate tax threshold at $5 million, in exchange for an increase in unemployment benefits but no additional stimulus spending. This is being widely denounced on Twitter and elsewhere as squandering Dem leverage.

The view of the situation taken by White House and Dem negotiators, however, is at least worth thinking about.White House ally spells out an alternative interpretation. Dems donít necessarily believe going over the cliff will give them all that much more leverage in the talks next year. Itís been widely argued (by me and many others) that if we do go over the cliff, Dems can simply move to pass the Obama Tax Cuts For The Middle Class, forcing House Republicans to go along. But some Dems question whether House Republicans will feel the need to follow this script. Rather, the thinking goes, if Dems do that next year, the House GOP leadership can pass its own bill cutting taxes on all income up to, say, $500,000 or $600,000.If the idea is that itís easier for Republicans to support continuing tax cuts just on some income levels after theyíve all expired, such a bill (with $500,000 or $600,000 as the threshold) could pass the House. Whatís more, some Congressional Democrats may feel like they have to support such a bill, too. And the worry is that if this is then kicked over to the Senate, then some Senate Dems may feel tempted to support it or at least negotiate around it, which could divide Senate Dems. After all, some of them have already voiced support for putting the income threshold at $500,000 or $1 million.

And so, the idea is that itís better to lock in a deal on rates now, at, say, $450,000, extend unemployment benefits, and pocket those gains and continue the fight next year. Raising the income threshold is obviously not desirable, but Dems will have broken the decades-long GOP opposition to raising tax rates on the rich, pocketed hundreds of billions in revenues, made the tax code more progressive, and extended unemployment benefits ó all without agreeing to any spending cuts yet.

on balance, I lean marginally towards going over the cliff, partly because it will set a better precedent for that fight ó over the debt ceiling ó by signaling that hostage taking will not be rewarded.But itís worth at least entertaining the possibility that the current posture the White House and Dems have adopted may be guided by an actual overarching strategy and game plan, and represents more than just a feckless cave, as many are suggesting.


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Reply The case for the Demsí negotiating strategy (Original post)
octoberlib Dec 2012 OP
flamingdem Dec 2012 #1

Response to octoberlib (Original post)

Mon Dec 31, 2012, 02:25 PM

1. Obama doesn't want to play chicken

It's not worth it to him for many good reasons and he's taken the stress for us so many times. But we lose.

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