Was Fiscal Cliff Deal a Stinker, or Did Obama Win One?

According to Gallup, two-thirds of Democrats say they're "satisfied" with the deal Congress struck on January 2 to avert the "crisis" that it had itself created. Only 23 percent say they don't like it. Two-thirds of Republicans say they don't approve -- and Rush Limbaugh is typically furious -- but anti-tax zealot Grover Norquist says he is "happy" with the agreement

Did Obama get the better of Republicans, or did he get rolled? It's been a hot debate among progressives since details of the deal were announced. This week, on the AlterNet Radio Hour, Michael Tomasky of the Daily Beast joined Joshua Holland for a friendly debate. Below is a lightly edited transcript of the exchange (you can listen to a podcast of the whole show here).

Joshua Holland: Mike, did you find it kind of surreal to see Congress patting themselves on the back for dealing with a phony crisis they conjured out of thin air?

Michael Tomasky: I’m not so wild about the idea of Congress patting themselves on the back. But I actually think Obama deserves a little pat on the back.

JH: We’re going to have a disagreement here.

Now, I’ve had a number of criticisms of this administration but I think Barack Obama has done a pretty good job on balance, given the multiple crises he inherited and the craziness of opposition. That view has caused people to call me an Obamabot. I mention that as context, so you understand where I’m coming from.

You wrote a piece in the Beast this week that I would have agreed with right up until [last] Tuesday, but now I disagree. It’s titled, “Dear Liberals: Stop Complaining.”

In it, you write, "There’s a style of criticism that really bugs me. It’s that which reproves [Obama] for failing to be Captain Liberal while refusing to recognize that the guy has to be Mr. President." Can you unpack that a bit for us?

MT: Yes. Look, in my heart of hearts, I would like him to be able to assert his will over Congress. Raise the tax rate on dollars earned -- I say dollars earned, not on people, because that’s really what’s correct – on dollars earned to above $250,000. I don’t want to see that go up to 39.6 percent, I want to see that go up to 42 or 45 percent. I’d like to see more generous unemployment benefits then we have.

I’d like to see higher capital gains tax rates ... a whole lot of things. As a liberal, I believe that Barack Obama … I wish Barack Obama would push for those things. I think they’re good things for the country.

But I recognize, I’m sorry to say, that he’s president of a big country, only about a quarter of which at best, is liberal. He’s got to deal with people whom we don’t like but who are there – who were legitimately elected. We can’t deny it. They’re legitimately elected, they legitimately represent 47% of the United States and he has to be in a negotiation with them. There’s just no getting around these facts.

Given all those circumstances, he did pretty darn well in this negotiation.

JH: I am also sick of liberal hand-wringing about how Obama hasn’t used his magic Negro powers to make really crazy right-wingers in Congress more reasonable! I totally agree with that.

This deal however, is just a stinker and I think liberals have every reason to complain. I want our listeners to understand why I think that way in context. Bear with me for one minute here.

In 2008, Obama ran on letting the Bush tax cuts for higher earners expire while protecting the middle class and he won in a landslide over John McCain. Those rates for the top earners remained for the entirety of his first term, including the two years Democrats held both chambers of Congress. We get to 2012. He runs on the same things again – let the Bush tax cuts for the top 2 percent expire, prevent a tax hike from hitting the other 98 percent. Great, he beats Mitt Romney handily.

Two months later we hit this contrived fiscal slope. Here in your piece, Mike, you acknowledge the criticism that going over the slope would have given Obama more leverage. You acknowledge that.

And we did -- we did go over the slope, technically. No Republicans had to actually vote for a tax increase. Grover Norquist's pledge remains unbroken.

And the tax policy center has crunched the numbers on what are now the Obama tax cuts. This is really important for people to understand: they made the Bush tax cuts permanent for two-thirds of the taxpayers in the top 2 percent. Two-thirds of those who were going to see a raise, they’ve got those Bush tax cuts -- the temporary tax cuts -- permanently. Or that’s the new baseline--when I say “permanently,” they can obviously change.

Now, the cut-off for the estate tax moved permanently from $1 million to $5 million and it’s now indexed for inflation. For the very richest households their capital gains taxes got cut from 35 percent to 24 percent, and that’s now permanent.

Meawhile, they created another fiscal cliff in just two short months. Obama says he refuses to negotiate on the debt limit and that may be true, but that doesn’t mean anything. Because the deep automatic cuts known as the so-called sequester are coming. The budget resolution keeping the government afloat, it runs out at the end of March. So we’re going to have another one of these cliffs in a few months either way.

And this is the thing that really bugs me: along with the expiration of the Bush tax cuts at midnight on New Year’s Eve, the Obama payroll tax cut also expired, so most Americans who earn a living with their paychecks are going to see around a 40 percent increase in their payroll tax.

Now, we got unemployment benefits extended and a few sweeteners, the Earned Income Tax Credit -- these are all really good things -- but I don’t see how you can call this a good deal.

MT: Forty percent, as you know, is a slightly loaded way of putting it. I mean, it’s a third -- it’s 33 percent -- but it’s from 4.2 to 6.2 percent.

You are correct that that is a tax increase, but let’s take that as a case in point. There was no support for that among Democrats. This is an Obama initiative dating back to December 2010. A temporary reduction in the employer’s part of the payroll tax contribution. It was always designed to be temporary and Obama wanted to extend it in this negotiation, but there was no support even among Democrats for extending it.

Democrats are skittish about what effect extending this and prolonging it might have on the Social Security Trust Fund. Which I think is a reasonably fair concern on their part, even though this cut is supposed to be replaced from the general fund. Democrats I’ve talked to have said, "Well, you keep extending this and then pretty soon it’s going to become permanent and then you’re going to start playing around with the Social Security Trust Fund."

Which is also something that progressives don’t want to be done. Anyway, the long and short of it is that Democrats didn’t want this, so Obama had no leverage over these people to continue that. That’s just a good case in point. I think it’s representative of just how difficult this whole business is. It’s a negotiation with people who have horrible, horrible priorities for this country, but they’re there.

And you can’t pretend they're not there. There’s no “magic Negro” wand to wave, as you said. You have to take it as it comes. A lot of the prisms through which people view this deal have to do with their anxiety about the next negotiation. I think generally speaking -- I don’t want to oversimplify -- but I think generally speaking, people have no faith in Obama’s ability to carry out this next negotiation.

They think this deal stinks. People who think this deal is okay have a little more faith in Obama’s ability to carry out this next negotiation. I’m in that latter camp now and events might prove me wrong and if I’m wrong I’m wrong, I’ve been wrong before, but I think he can do it.

JH: First of all, you’re a bad pundit because you’re never supposed to admit that you’ve ever been wrong.

MT: That’s true.

JH: Let’s talk about this. I must say that I don't fall in either camp. I don’t think that this is a deal that we can evaluate on its own period until we see what happens in two months. Because again, it just kicked the can down the road. But I want to just give you a quote. This is something that Senate minority leader Mitch McConnell said this week.

The moment that he [Obama] and virtually every elected Democrat in Washington signed off on the terms of the current arrangement, it was the last word on taxes. That debate is over. Now the conversation turns to cutting spending on the government programs that are the real source of the nation’s fiscal imbalance. And the upcoming debate on the debt limit is the perfect time to have that discussion.”

Before we get into that, I want to point out to listeners that Mitch McConnell is full of it. We’ve collected the lowest share of our economic output in taxes over the last three years since 1960. I don’t want to advance that talking point without correcting it.

I want to get back to the fact that in your piece, you acknowledged that he would have had more leverage after the slope, after we had started down the slope.

What leverage does he have now for the next contrived showdown? There’s the defense cuts in the sequester, but other than that aren’t we just counting on the force of his personality?

MT: He has public opinion on his side. Public opinion doesn’t want steep cuts to domestic programs. It just doesn’t. Public opinion wants defense to take its share. In poll after poll after poll -- you know this as well as I do – public opinion doesn’t want to see steep cuts or arguably any cuts come out of Social Security or Medicare. Public opinion wants to see the wealthy pay their share.

I know what McConnell said. I know what the Republican position is going to be. But Obama has public opinion on his side, and public opinion ought to still count for something. I also suspect he will have -- when it comes to the question of holding the debt limit hostage to cuts -- I think this time, if he plays it right, he’ll have elite opinion on his side. Business leaders, corporate people, Wall Street people. I think if he rallies them to his side, I think that he’ll get them to say now that the Republicans can’t play this kind of game a second time.

In 2011, when, let’s face it, most of those people that I just mentioned would rather have a Republican president. In 2011, they were placing their bets on the hope that there might be a Republican president. They didn't want to be seen as biased against the Republicans in Congress.

Now, Barack Obama has won again. We’re three, four years away from another presidential election. I think Obama can persuade a lot of those people to pressure Republicans to act like rational human beings. Which is quite a sentence I just spoke, but I think he can persuade them to be more on his side. Public opinion and elite opinion will both be in Obama’s corner.

JH: I want to respond with just two quick points. Which is that public opinion was entirely in his corner on this last fight. The polls were extremely clear that everybody wanted to see the Bush tax cuts for the top 2 percent expire, and the middle class kept from facing tax increases. That did not happen.

Secondly, I completely agree with you about elite opinions. Especially Wall Street opinion about the debt limit. I don’t understand how – and this seems to be implied in your argument -- how we can have a separate fight over the debt limit and the continuing resolution – with a threat of a government shutdown – and the sequester. These are all happening at about the same time, so again, he can say, "I am not negotiating on the debt limit," and he can be right, technically. But he still’s going to have to face hostages. And are you going to get that elite opinion saying, "no, you can’t negotiate on a budget deal"?

MT: I’ll concede your point there. You won’t get that, but I do think you’ll still have public opinion on his side. Now, you’re also right that public opinion was with him here.

Look, these Republicans in Congress, you can’t really... they don’t respond to the same political incentive structure that we’re used to people responding to. We know that very well.

All you had to do was watch how Mitt Romney sucked up to the right-wing in his primary campaign to see that. They’re not afraid of general elections against Democrats, they’re afraid of primaries against people to their right. That’s what dictates their behavior. I think having said that, he did … I wouldn’t say broke their back, but he weakened their spine a bit this time. He won this round. He did win this round. If he plays it right, he can win another round.

Now there are going to be cuts, there are going to be budget cuts to domestic programs that we’re not going to like. If there are also cuts to Pentagon programs, and if there’s also a little bit more revenue, and if Social Security and Medicare are basically untouched -- I mean if the only real savings that come from those are rational Medicare savings and reimbursement rates to specialists and things like that, things that we all agree can basically be sources of savings. If a deal can meet those criteria, and I don’t think it’s unrealistic to meet those four criteria, then he wins again.

JH: Before I let you go, one final point that I kept thinking about and coming back to when I was reading your essay. You framed the piece as the left wishing that Obama would be a fierce liberal lion and the responsibility to the duties of office. You write that there’s “a responsibility that comes along with being the president. It may be unfair, but the leaders of the House and Senate can play all the silly games they want to. Half the country or more doesn’t even know who they are. But the president—he’s supposed to do stuff.”

Now I just want to read another quote. This is Brad Plumer writing in the Washington Post:

“The U.S. will have about $348 billion in austerity measures this year — roughly $200 billion from spending cuts, $125 billion from the end of the payroll tax cut, and $24 billion in taxes from Obamacare. That amounts to austerity totaling 2.1 percent of GDP, a bigger austerity package than Britain, Germany, or Spain has enacted.”

All of those countries have slipped – well, not Germany, but Britain and Spain have both slipped back into recession in recent years.

This idea that it’s … what is the responsibility of the president? The economic forecasters have cut GDP growth forecasts in half because of this deal and now we’re going to, as you say, we’re going to get more cuts -- we don’t know how deep they'll be -- in two months. This is horrible economic policy and frankly, I, as a liberal, I would love the president -- who I don’t expect to use his bully pulpit to call for free abortions -- I would like him to point out that this is really crappy economic policy instead of crowing over it.

MT: That’s a pretty good question and a pretty good argument, I have to confess. The question really is how much can a president change the terms of a debate in Washington? One that’s defined by certain perimeters and has been defined by certain perimeters for a long time. That’s something that I think, yeah, you’re right, Obama could probably do a little better job of that. He does tend to operate within the perimeters that the establishment sets.

Maybe that’s not entirely fair. I think he broke those perimeters on gay marriage; he broke those perimeters a bit. Not to the extent that everybody would like, but he broke those perimeters a bit on healthcare. On economic questions, though, he certainly is a cautious type. There’s no doubt about it. I can understand him looking at the situation and thinking, as I wrote, "I am the president. If we don't hit this deadline, people are going to hold me accountable for it and we have to hit it."

There are very, very few people, Joshua, who even understand what you just said. I don’t think more than 5 percent of Americans would understand the question you just asked me. That makes it kind of hard. Kind of hard for a president to explain all that stuff to people.

JH: I want an explainer-in-chief. Michael Tomasky, we're out of time. But this is one of those disagreements where I hope you’re right and I hope I’m wrong.

MT: I always hope I’m right.

JH: Well, I believe we agree on something!


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