Tuesday, November 20, 2012

A reminder of how President Obama negotiated with the Republicans in the 2011 debt-ceiling fight

The current "fiscal cliff" fight is a direct repeat of the debt-limit battle in 2011, resulting from the compromise that essentially postponed the next round until now.

What Elizabeth Drew wrote about the 2011 deal in What Were They Thinking? New York Review of Boooks 07/19/2011 is true of the fiscal cliff round, as well:

Someday people will look back and wonder, What were they thinking? Why, in the midst of a stalled recovery, with the economy fragile and job creation slowing to a trickle, did the nation’s leaders decide that the thing to do—in order to raise the debt limit, normally a routine matter—was to spend less money, making job creation all the more difficult? Many experts on the economy believe that the President has it backward: that focusing on growth and jobs is more urgent in the near term than cutting the deficit, even if such expenditures require borrowing. But that would go against Obama’s new self-portrait as a fiscally responsible centrist.
Obama is on board with the turn to austerity, if a less radical version than the Republican wrecker party is advocating. It's bad, bad policy for an economy like the US economy right now slowly working its way out of the depression.

Drew, being a longtime Beltway pundit, pointed out that Obama in 2011 was adjusting "his fiscal image in time for the 2012 election." Which is true as far as it went. Obama really has seemed to believe that someone out there in the electorate besides David Brooks actually cares about the deficit.

But it also represents his essentially conservative, neoliberal approach to economics.

This part of Drew's report reminds us of Obama's negotiating style with the Republicans:

The politics of the debt ceiling were particularly tricky: Boehner—and the President—knew that perhaps all of the Tea Party members were, “on principle,” unlikely both to vote to raise the debt ceiling and to vote for any measure that had even a suggestion of an increase in revenues. The Speaker would therefore need a large number of Democrats to get a vote through the House. Boehner hadn’t realized at first that he’d have so many Republican defectors—fifty-four—who voted against the continuing resolution he’d negotiated with Obama in early April, on the ground that it didn’t cut spending enough, though Boehner had, in effect, taken Obama to the cleaners. This established in both Democrats’ and Republicans’ minds the thought that Obama was a weak negotiator—a "pushover." He was more widely seen among Democrats and other close observers as having a strategy of starting near where he thinks the Republicans are—at the fifty-yard line—and then moving closer to their position. [my emphasis]
It's worth remembering that when Obama was negotiating in 2009-10 with Democrats and labor over including a public option in the heath care insurance reform ("Obamacare"), he was not at all a pushover. In dealing with Republicans on domestic policy, particularly when he's pursuing his Grand Bargain to cut benefits on Social Security, Medicare and Medicaid, things are different.

What Drew doesn't specify, but which is also obvious from what she says, is that in 2011 enacting the Grand Bargain to cut benefits on Social Security, Medicare and Medicaid would have required the Democratic Party to take the heat for doing so. Awesome! A damaging deal enacting bad policy that the Democrats volunteer to take the blame for. Amazing.

The following part of Drew's report is also still very relevant:

In early July, when Obama suddenly injected Medicare, Social Security, and Medicaid into the deficit and debt negotiations, many, perhaps most, Democrats were dismayed. They believed that the President was offering up the poor and the needy as a negotiating gambit. (His position was that if the Republicans would give on taxes, he’d give on entitlements.) A bewildered Pelosi said after that meeting, “He calls this a Grand Bargain?”
As she puts it, Boehner and the Republicans "had lured the President so far onto their territory that any deal would represent a substantial victory for them."

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