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What Obama's Willingness to Deal with the Right Means for Progressive Politics

Obama was willing to make substantial cuts to the crown jewels of liberalism--Social Security, Medicare and Medicaid--in order to get a deficit-reduction deal with Republicans.
 
 
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Recently, three articles have been published analyzing President Obama’s negotiations with Republicans about a deficit reduction deal (Peter Wallsten, et al., “ Obama’s evolution: Behind the failed ‘grand bargain’ on the debt,” Washington Post; Jonathan Chait, “ How Obama Tried to Sell Out Liberalism in 2011,” New York Magazine; Matt Bai, “ Obama vs. Boehner:  Who Killed the Debt Deal?New York Times Magazine).  

All three articles come to essentially the same conclusion: Obama was willing to make substantial cuts to the crown jewels of liberalism---Social Security, Medicare and Medicaid---and get little in return, in order to get a deficit-reduction deal with Republicans.

The details of the proposed deal should be very disturbing to anyone who believes in Democratic core values and protecting the American Dream. In addition to substantial cuts to Social Security, Medicare, Medicaid and the domestic budget, Obama was willing to reduce top-end tax rates, maintain current tax rates on investment income (the reason millionaires like Mitt Romney pay such low tax rates) and prevent the expiration of the Bush tax cuts in return for increasing tax revenues by $800 billion.  

That amount is less than half the amount of new revenues recommended by the co-chairs of the Bowles-Simpson Deficit Reduction Commission, but, as it turns out, the $800 billion in “new revenues” was mostly a mirage. The $800 billion mentioned by the Republican Speaker of the House, John Boehner, would not have come from increasing taxes on anyone, especially not the rich, who would have had their taxes cut even below the Bush tax cut levels, but from nebulous plans to “overhaul the tax code,” which may or may not have ever gotten through Congress, and from projecting new revenues based on the largely disproven assumption that lower tax rates would boost the economy and produce more revenues (the laughable Laffer Curve). As one of the authors, Jonathan Chait, characterized it, “The Republican position was that its higher revenue, in other words, had to be imaginary, theoretical revenue.”  

Obama did not reject this proposal. In fact, according to the Washington Post article, “[W]hen Boehner brought up economic growth, arguing that his caucus would not accept tax increases under any other terms,” Treasury Secretary Tim Geithner said, “Yes, we accept that” and Obama’s Chief of Staff, Bill Daley, is quoted in the Washington Post article saying, “We walked away feeling that we were 80 percent there” [to achieving a deal].  Events intervened, including a proposal by a bipartisan group of senators for $2 trillion in higher revenues---real revenue increases, not the imaginary increases Obama apparently was willing to accept in a deal with Boehner.

In fact, the Gang of Six proposal, which was supported by some very conservative Republicans, including Senator Lamar Alexander, then the third-ranking member of the Republican Senate leadership team and senators Tom Coburn and Saxby Chambliss, contained $2 trillion in real revenue increases, including higher taxes and stronger protections for the poor than the deal Obama was negotiating. This caused Bill Daley to say, “We’d be beat up miserably by Democrats who thought we got out-negotiated” if Obama took the $800 billion of phony revenue projections, and no deal was concluded.  

Nevertheless, with the prospects of a deal dimming and even with the embarrassment of the much better Gang of Six proposal in the background, two days later, according to the Post, “Working late into the evening, Obama asked someone to get Boehner on the phone. His message: I’ll take your last offer.” At this point. Boehner refused to reopen negotiations and Obama was left at the altar without a mate. But, the Post article reports that, “White House officials said this week [March 17] that the offer is still on the table.”

 
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