While everyone is fixated on how terrible this debt-ceiling deal is for Democrats, If one pauses long enough to really analyze the details and all of their implications, one finds that, in the long term, this deal is actually wildly in favor of the President’s position.
The truth is — there actually is revenue included in this deal, and here I will briefly defer to Ezra Klein:
In a presentation to his members, Boehner says (pdf) that the rules governing the committee “effectively [make] it impossible for Joint Committee to increase taxes.” Specifically, he’s arguing that using the Congressional Budget Office’s “current-law baseline” makes tax increases impossible, as that baseline assumes the expiration of the Bush tax cuts, and so, if you touched taxes at all, you’d have to raise taxes by more than $3.6 trillion or the CBO would say you were cutting taxes and increasing the deficit.
Confused? That seems to be the point. Boehner is misleading his members to make them think taxes are impossible under this deal. But make no mistake: The Joint Committee could raise taxes in any number of ways. It could close loopholes and cap tax expenditures. It could impose a value-added tax, or even a tax on carbon. The Congressional Budget Office would score all of this as reducing the deficit under a current-law baseline. The only thing that wouldn’t reduce the deficit is going after part of the Bush tax cuts. That means they’re likely to go untouched in this deal.
In case you don’t understand — allow me to elaborate.
John Boehner is selling the current CBO baseline to his caucus to pass this bill, and the current baseline includes an expiration of the Bush Tax Cuts. The only way for the Bush Cuts to be extended is if the “super congress” committee offsets it with tax hikes or tax reform in other areas. Going after the Bush Tax Cuts in the committee would not count as reducing the deficit, because the baseline already assumes they will expire.
John Boehner knows this, but most members of his caucus and, admittedly, many members of the Democratic caucus don’t realize it. I didn’t put two and two together myself until late last night.
If you view this deal from the perspective that there is a guarantee the Bush Tax Cuts will expire, then suddenly the deal swings wildly in favor of President Obama.
The president offered John Boehner a 4:1, cuts:revenue deal, but what he ended up getting instead is a 1:2, cuts:revenue deal.
The Bush Tax Cuts account for roughly $3.7 trillion dollars in additional revenue over 10 years. The spending-cuts tentatively agreed to in the deal account for only $2.7 trillion dollars over 10 years. This means there is $1 trillion more dollars in revenue contained inside the deal over 10 years than there are spending cuts.
Furthermore, the spending cuts contained inside the bill do not come into effect until 2013, after the Bush Tax Cuts expire, meaning the revenue and cuts come into effect at roughly the same time.
If the rabid members of John Boehner’s caucus realized this, they would probably be calling for his head.
It’s no coincidence that President Obama came out last night and bluntly said this is not the deal he wanted. It’s no coincidence that John Boehner and Eric Cantor both told their caucus that President Obama “caved.” They have to say this, because if it appears that President Obama got anything in the deal, then suddenly it can’t pass the House of Representatives. There is nothing they hate more than giving the president a victory, so it has to appear as if he got nothing, and they have been pretty convincing.
President Obama knew this would look bad for his administration in the short term, but he took that risk in exchange for winning further along down the road. As I mentioned above, none of this policy actually comes into effect until 2013. Not even the spending cuts. Only 1% of the spending cuts will be felt in 2012.
This deal masterfully accomplishes the task of kicking the can down the road for the Republicans without actually appearing so unless you really dig deep into it, and it leaves most of the details up to the next session of Congress beginning in January of 2013.
We all owe the president a great deal of respect for being willing to take the political hit in the short term to save us in the long term.
Note: opinions expressed here are my own.