The Madmen Win Again?

Intelligent and reasonable persons can disagree on whether what appears to be the emerging fiscal cliff deal is a deal worth making. It certtainly is not a good deal, but it might be the least bad option.

However, it does confirm that Madman Political Bargaining works. Republicans are getting much more than they should have in this deal.

In my August 2011 post about the debt ceiling "end of the world" negotiations of 2011 (soon to be repeated apparently), I argued:

You want to negotiate a deal when your bargaining leverage is at its maximum, not at its minimum. This is basic bargaining. It amazes me how few people understand this point. In 1995, Bill Clinton searched for moments of maximum leverage to bargain with the Republicans. Luckily for Clinton, the GOP never played the debt ceiling card on him. But Obama should have known the GOP would with him. A good bargainer would have known not to give up his best chip (tax cuts) without making the other side take theirs (the debt ceiling) off the table.
My biggest concern with the details reported on the proposed fiscal cliff deal, other than the most basic - that we should be looking at policies to grow the economy, not worrying about the deficit (not Dem's fault, that simply was not in the cards with this GOP)- relates to the loss of the tax issue chip while getting nothing menaningful in return on the debt ceiling. I understand the concern about UI benefits. But I do not believe it is wise to let that concern overwhlem every other issue involved in this debate. Consider the issue of spending cuts on programs such as food stamps, Mediciad, Medicare and yes, Social Security, to name just a few. What will the President use for leverage to get good deals on these issues? The contra argument is that military spending is a big enough chip. I am skeptical, mostly because the constituency in the Congress for Defense spending is broad and bipartisan. Frankly, it is not a good "hostage" for Democrats. They will not threaten it and Republicans know they won't threaten it. The tax issue was the maximum leverage for Democrats. In August 2011, I argued:
Now is not the moment of maximum leverage for Dems on taxes. Frankly it won't come until after the 2012 election. Moreover, the maximum POLITICAL advantage comes for Dems who propose extending tax cuts for ordinary Americans and saving Social Security and Medicare by raising taxes on the wealthy.there will be no short term deal that will be advantageous politically to Dems. The political advantage comes from having the GOP defend the rich at the expense of everyone else. [Emphasis supplied.]
Giving up their maximum leverage while the GOP holds on to its maximum leverage points, the debt ceiling and the sequester down the road, is not a good bargain imo. In a vacuum, the reported deal is not terrible and can be defended in isolation. But in the larger context, it gives too much leverage to the GOP for the future, this year and beyond. I think the Madmen in the GOP will have won this round, not because the score in this round is lopsidedly bad, but because of what the set up is for future negotiations. Reasonable minds can disagree of course.
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    The WonkBlog at your link mixes in the (5.00 / 1) (#3)
    by ruffian on Mon Dec 31, 2012 at 03:30:59 PM EST
    expiration of the FICA tax holiday with the expiration if the income tax rates and concludes Obama is wrong, which will surely be called lying by harsher writers, when he says taxes won't go up on middle income Americans. If that meme is what comes out of this Dems won't get either a policy or a political win out of this thing.

    And it is technically correct. I always hated that FICA holiday.

    This debate has been a great example of ... (5.00 / 3) (#4)
    by Donald from Hawaii on Mon Dec 31, 2012 at 03:54:27 PM EST
    ... pursuing the deal, merely for the deal's sake. For all the senseless grandstanding and posturing, at the end of the day the can was merely kicked down the road, and we can now look forward to another round of bad political kabuki when Congress tackles the debt ceiling in a few months.

    Well, screw 'em. I'm going to watch some college football. Happy New Year.

    Kicking the can down the road (5.00 / 1) (#6)
    by Zorba on Mon Dec 31, 2012 at 04:03:36 PM EST
    seems to be what Congress does best.
    You have a Happy New Year, too, Donald.

    You, too, Mme. Zorba! (5.00 / 1) (#14)
    by Donald from Hawaii on Mon Dec 31, 2012 at 05:55:57 PM EST
    I went on political sensory overload when Sen. Inouye died, because I was on the committee that had to forward the names of three possible successors to Gov. Abercrombie.

    I can't tell you how many personal phone calls I received in a five-day period from the 12 prospects under consideration, but at least a half-dozen of them alone came from our newly appointed Sen. Schatz.

    Now that THAT'S over, I've downshifted for the rest of the holiday season, and am enjoying the company of family and friends. Both daughters return to college in a week, and I want to enjoy my time with them -- that is, whenever they're not hanging out with their own friends.

    Speaking for myself only (and not The Spouse), I've never been the proverbial "helicopter parent" who hovers relentlessly over his children. I've always been perfectly content to let the girls do their own thing socially, as long as it's within reason. I think they appreciate that sort of trust, and so when they hang out with the parents, it's because they want to and not out of any warped sense of filial obligation.



    Nobody wins. (5.00 / 1) (#5)
    by indy in sc on Mon Dec 31, 2012 at 04:01:17 PM EST
    No vote tonight on the Cliff from the House.  Maybe for the best.

    I hope the Dems are smart enough to point out (none / 0) (#11)
    by ruffian on Mon Dec 31, 2012 at 05:15:39 PM EST
    that all of the GOP House members that said raising taxes was something they "just would not put their name on"....will be putting their name on it by letting the tax cuts expire. Idiots.

    Not quite (none / 0) (#16)
    by MO Blue on Mon Dec 31, 2012 at 06:16:22 PM EST
    If the House votes sometime after midnight tonight or tomorrow after the taxes revert back to the Clinton levels, their vote will be for lowering taxes rather than raising them.

    Ah, I get it. Vote for the Obama tax cuts! (none / 0) (#20)
    by ruffian on Mon Dec 31, 2012 at 07:10:14 PM EST
    Senate looking (none / 0) (#15)
    by CoralGables on Mon Dec 31, 2012 at 06:03:12 PM EST
    to likely vote this evening.

    House members also on call to come back. Or in the words of Representative John Carter of Texas... "told us to stick around and stay sober".


    But shouldn't the Dems at least be talking more (none / 0) (#1)
    by ruffian on Mon Dec 31, 2012 at 03:22:02 PM EST
    about how it is more important to grow the economy than attack the deficit? I haven't heard that opinion expressed recently. Obama's opening position included a little bit of stimulus. It was probably the first thing dropped from the deal, with nary a whimper.

    I also think it is mainly the press's hype of the cliff that makes this bad deal the least bad option. They have created a self fulfilling prophesy of ruining a deal is not reached.

    And another thing... Big mistake to even first attempt a grand bargain that tried to link all these things. That was never going to happen. Should have made the best deal on taxes, period, right now.

    Ugh- auto correct fail. Should be (none / 0) (#2)
    by ruffian on Mon Dec 31, 2012 at 03:23:41 PM EST
    'ruin if a deal is not reached'

    It's a hoax. (none / 0) (#7)
    by MyLeftMind on Mon Dec 31, 2012 at 04:13:54 PM EST
    Neither side is willing to tax the rich. All this drama is just for show. Obama's not really on our side, but he and many Democrats ran on this Tax the Rich issue because, frankly, they had nothing better to get otherwise disgusted Americans willing to vote for them. Now they have to pretend they're following through with campaign promises, but lucky for them, the big bad Republicans just won't let them.

    I just lost it for the announcement (5.00 / 4) (#22)
    by Towanda on Mon Dec 31, 2012 at 08:41:41 PM EST
    that a major win for the middle class was preserving some break on bequeathing estates of more than $5 million.

    Yay for the middle-class multimillionaires.

    Here in Towandaland, we're just hoping that our house doesn't lose even more value, as that's about all that our heirs are gonna get.  Oh, yeh, and until the construction industry comes back, we're also hoping for a continuation of long-term unemployment benefits for our stepsons, so that they don't have to move back into the basement in their forties.


    No deal means the rich's tax rates go up (none / 0) (#10)
    by ruffian on Mon Dec 31, 2012 at 05:11:57 PM EST
    Fine with me. I guess the rest of us have to go along for the ride for a while.

     I wonder if the real kabuki is that they all agree ALL the taxes would go up, but are just pretending to think it should not happen to the middle class?


    The worry for (none / 0) (#8)
    by KeysDan on Mon Dec 31, 2012 at 04:46:26 PM EST
    this "petite bargain" is that it seems to seen as a discrete deal with discrete strategies, when, in fact, it is one of several inter-connected components to be resolved over a short period of time.   Maintaining Bush tax cuts ($400,000/$450,000) was the bargaining chip for Obama this round, and the debt ceiling will be the bargaining chip for the Republicans in the round that is  soon to come.

     However, the debt ceiling has been signaled by Obama as being negotiable (from  the stern will not play this game (again), demanding a permanent solution, and then a two-year increase in the debt.) as was a willingness to cut  Social Security.   Since the tax issue was "given up" by the Republicans for revenue, it will be the Democrats turn to "give up" cuts to Social Security, Medicare and Medicaid.

     Unless there is bipartisan agreement for political cover to cut social  safety nets, in keeping with Peter Peterson and his economic thugs, this is a bad strategy.  

    Obama is not done yet (5.00 / 4) (#9)
    by MO Blue on Mon Dec 31, 2012 at 05:10:47 PM EST
    He is eager to do more.

    It may be we can do it in stages. We're going to solve this problem instead in several steps.

    Last year, in 2011, we started reducing the deficit through $1 trillion in spending cuts. Those have already taken place. The agreement being worked on right now would further reduce the deficit by asking the wealthiest 2 percent of Americans to pay higher taxes for the first time in two decades. So that would add additional hundreds of billions of dollars to deficit reduction. So that's progress, but we're going to need to do more.
    Now, the same is true for any future deficit agreement. Obviously we're going to have to do more to reduce our debt and our deficit. I'm willing to do more, but it's going to have to be balanced. We're going to have do it in a balanced responsible way. Obama's speech

    Still left to be done

    "...cutting programs that are really important to seniors, students and so forth. That has to be part of the mix..." - President Barack Obama [on Meet the Press]

    Doesn't anyone in the media ever ask (5.00 / 5) (#12)
    by Anne on Mon Dec 31, 2012 at 05:23:06 PM EST
    why "programs important to seniors, students and so forth" HAVE TO BE part of the mix?

    It would be one thing if he were in favor of increasing payments to SS recipients, or making more loan money available to students, but no.  For reasons I absolutely do not understand, this president and members of both political parties seem to think it's a good idea to make changes to safety net programs that further reduce the standard of living for seniors and the disabled.  That somehow, it would be unfair - to the rich, I guess? - to look at those with the least and say, "no - you've sacrificed enough."

    Heaven forfend...


    Seems to me that the corporate owned (5.00 / 5) (#13)
    by MO Blue on Mon Dec 31, 2012 at 05:36:37 PM EST
    media has been telling us that the world will end if we don't cut those programs. Otherwise, we will become like Greece, don't ya know.

    Anyway, we gotta have those savings to offset the tax reform (reduce corporate taxes etc.) that is in the works for next year.


    My older brother reads everything he can, (none / 0) (#17)
    by oculus on Mon Dec 31, 2012 at 06:28:33 PM EST
    including Krugman re financial/Econ. current issues. He worked really hard on regist. and GOV in FL.  He supported Obama. But, when I stated to him a couple days ago it would be very difficult for people existing on Social Security is the COL formula adversely effects their income, he replied, Social Security was never intended to be a person's sole retirement income. Pretty surprising.  .

    I have to agree about original intent (5.00 / 3) (#18)
    by MO Blue on Mon Dec 31, 2012 at 06:59:40 PM EST
    Regardless of original intent, it has always been the sole retirement income for very low wage workers.

    Unfortunately since defined pensions and jobs with living wages have gone the way of the dodo bird, more and more people will be relying on Social Security as their sole retirement income.

    The COLA also impacts over 50 programs which will result in eliminating eligibility and or decrease benefits for children's programs, poverty programs and disability programs etc. It is also a tax increase on everyone including the working poor.



    Agree. (none / 0) (#19)
    by oculus on Mon Dec 31, 2012 at 07:02:12 PM EST
    Perhaps that was not its original intent, but (5.00 / 4) (#21)
    by caseyOR on Mon Dec 31, 2012 at 07:19:44 PM EST
    back in the old days the middle class had defined benefit pension plans, thanks to the unions. Poor people, of course, were always totally reliant on SS.

    Now, with the scam that is the move to 401Ks, and the end of defined benefit pensions, more people than ever find SS is the biggest chunk of their retirement income.

    Here are some scary numbers: the SSA administrations says that approximately 23% of married recipients and 46% of single people get 90% or more of their retirement income from Social Security. 53% of couples and 74% of singles get half or more of their income from SS.

    So, maybe SS was not originally meant to be all or most of one's retirement income, but guess what, things change. And now we find that the quality of life for most retirees would be seriously compromised by cuts to SS.


    It may not be intended to be (5.00 / 2) (#24)
    by Militarytracy on Tue Jan 01, 2013 at 09:55:36 AM EST
    A persons sole retirement income, but for many Americans under our brand of capitalism it is and there is nothing they can do about it.  

    Original intent on the current COLA (5.00 / 2) (#27)
    by MO Blue on Tue Jan 01, 2013 at 12:42:46 PM EST
    The COLA is part of Social Security's basic benefit. It is NOT a benefit increase. The COLA is designed to make sure that Social Security's modest but vital benefits do not erode over time.1 Without these annual adjustments, the benefits would slowly but inexorably lose their purchasing power. Without it, the longer one lived, the less purchasing power her or his benefits would have.

    The proposed chained CPI is explicitly designed to make sure that Social Security's modest benefits erode over time and that they would slowly but inexorably lose their purchasing power. The chained CPI is designed so that the longer a person lives the less purchasing power her or his benefits would have. It is purposely built into the calculation.

    BTW, the chained CPI (which Obama keeps offering) is considerably to the right of Nixon and completely in conflict with the original intent of the COLA:

    With the support of the overwhelming majority of Democratic and Republican members of the House and Senate, President Richard Nixon signed the COLA into law on July 1, 1972 saying that this "action constitutes a major break-­‐through for older Americans, for it says at last that inflation-­‐proof social security benefits are theirs as a matter of right, and not as something which must be temporarily won over and over again from each succeeding Congress."

    Source of quoted data: Strengthen Social Security...don't cut it.  - Ten Things Everyone Should Know About the Social Security COLA cut.


    I think this part should be bolded (5.00 / 1) (#28)
    by shoephone on Tue Jan 01, 2013 at 01:01:28 PM EST
    The proposed chained CPI is explicitly designed to make sure that Social Security's modest benefits erode over time and that they would slowly but inexorably lose their purchasing power. The chained CPI is designed so that the longer a person lives the less purchasing power her or his benefits would have. It is purposely built into the calculation.

    and emailed to the pants-wetting Democrats in Congress.


    So, is there a way we won't take this lying down? (none / 0) (#23)
    by womanwarrior on Mon Dec 31, 2012 at 08:57:06 PM EST
    Watching The People Speak tonight on New Year's Eve, based on Howard Zinn's A People's History of the United States and Voices of a People's History of the United States.  Will We the People act to stop this? or will We the People let it go down again?  

    lol. "We the People" (5.00 / 1) (#25)
    by Mr Natural on Tue Jan 01, 2013 at 10:01:53 AM EST
    have big TVs and round the clock cable entertainment.  "We the People" don't need no stinkin' thinkin'.

    "We the People" will be prevented (5.00 / 3) (#26)
    by Anne on Tue Jan 01, 2013 at 12:01:51 PM EST
    from meaningful protest; thanks to our good friends at the Justice Department, the FBI and Homeland Security, OWS is a considered a domestic terror group.