No Deal, Continued
Update: And now I hear whispers suggesting that there may be more movement than that. I guess we’ll see.
So Boehner and McConnell have conceded the principle of higher tax rates on the wealthy. But we’re nowhere close to a deal, for two reasons.
First, you can only have a bargain, even potentially, if each side is willing to offer something better than the other side’s “threat point” — what it could get without a deal. For Obama, the threat point is letting all the Bush tax cuts expire, then proposing a middle-class tax cut that Republicans almost surely would not be able to block. The trouble with this proposal, from Obama’s point of view, is that it still doesn’t raise as much revenue as he wants, and that it also doesn’t provide stimulus via payroll taxes and extended unemployment benefits. But that’s what he can get at minimum.
So what are Republicans proposing? A “deal” that offers even less revenue, no stimulus, and comes at the price of big social insurance cuts. Why should Obama be interested?
OK, there might be something here if Rs were willing to take the debt ceiling off the table. But they aren’t; they’re only willing to extend things for a year. And here again, this is worse than Obama’s threat point: if there’s going to be a debt ceiling confrontation, he wants it early in his term, when he knows public opinion is on his side and there isn’t another election looming.
Oh, and my second point: Republicans are still demanding big spending cuts, but aren’t willing to specify any cuts in particular. Obama is supposed to do all the work. This from a party that ran against him for cutting Medicare in both 2010 and 2012, and will surely do the same in 2014 if given a chance. There’s just no way Obama can support Medicare cuts now unless the Republicans explicitly commit themselves to specific cuts in advance.
The Boehner-McConnell position, then, is still a joke, just marginally less funny than the previous joke.
The preceding article originally appeared here at Paul Krugman’s New York Times blog.