I hate to burst the balloon of a New Year's celebration for an
apparently bipartisan deal to avoid the badly misnamed "fiscal cliff,"
but far from affirming a progressive victory in the 2012 elections,
which should have protected the legacy of the New Deal for future
generations, the deal permanently bakes in Republican "starve the beast"
tax levels that enshrine massive economic inequality and will quickly
force President Obama and Congressional Democrats to agree to cuts in
benefits for Social Security, Medicare, Medicaid, student loans,
veterans benefits and other social programs that protect the middle
class.
Flush with his election victory, President Obama started the
negotiations asking for $1.6 trillion in tax increases over the next
decade and promising he would never negotiate over threats to hold the
global economy hostage to increasing the debt ceiling. He quickly caved
and agreed to $600 billion in tax increases while enshrining a large
part of George W. Bush's tax and estate tax cuts permanently into law.
At the same time, he agreed that the sequester of $1 trillion in
spending cuts would be postponed to coincide with the deadline for
raising the debt ceiling, transferring his negotiating leverage to
Republicans who, despite Obama's protestations to the contrary, will use
it to force significant cuts to "entitlements" and social programs for
the poor and middle class while protecting the wealth of the top 0.5
percent.
Obama either proved that he the world's worst poker player, or just
as likely, that his campaign promises to protect the poor and middle
class were not very serious and he really wants his legacy to be a not
very grand bargain that exchanges small increases in taxes on the
richest Americans for large cuts to social programs for the poor and
middle class.
This deal to make George W. Bush's "temporary" tax cuts permanent for
everyone making less than $450,000 and protecting low taxes on
inherited wealth just wasn't necessary. Obama had all the negotiating
leverage and he gave it away. If there were no deal now and all the
Bush Tax cut automatically expired on all Americans, financial markets
would have tanked, and within a week or two, Obama would have forced
Congress to fulfill his campaign pledge to raise taxes to Clinton-era
levels on everyone making over $250,000 a year.
By agreeing to move the tax increases only to those making over
$250,000 Obama gave away about $200 billion in revenues that could have
helped to pay for social programs. In a political vacuum, an argument
can be made that's a viable political compromise, particularly since he
got temporary extensions to unemployment benefits and tax breaks for the
poor in exchange for permanent tax breaks for the rich.
But by easily compromising on his central campaign promise that he
claimed was a line in the sand, Obama signaled to Republicans that
there's nothing he won't compromise on. He may say now that he won't
negotiate cuts in entitlements and social programs for an increase in
the debt ceiling, but there's not a single Republican who will believe
him. This January 1 fiscal cliff never posed a long-term danger. But
when Republicans took it hostage, Obama caved in on taxes with barely a
fight.
Failing to raise the debt ceiling does pose a long-term danger to the global economy.
Republicans learned again that when dealing with President Obama,
hostage taking works. It will only embolden them to take the debt
ceiling hostage again, knowing full well that Obama will cave on his
promises to defend Social Security, Medicare, Medicaid and other social
programs that protect the middle class and the poor.
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