A Recap on the State of Play on the Fiscal Slope
The President and Speaker Boehner met last night about the fiscal slope, but only for less than an hour. Meanwhile, White House Press Secretary Jay Carney blasted Boehner for what he described as “fantasy economics” right before the meeting.
The talks are going nowhere because all the players know what will happen. The White House and Congressional Democrats have a decided advantage on the tax issue, and either before the end of the year or shortly thereafter, they will win on that, at least partially, by getting the Bush-era tax rates above $250,000 to expire. If anything has acquired a totemic quality in this debate, it’s that, and Republicans no they have no choice but to allow it to happen, lest they want to see all tax rates go up and then have to face more headlines about holding things hostage over tax cuts for the rich.
That policy, by itself, raises $800 billion over 10 years, $1 trillion if you add in the savings to debt service. And it’s possible you could see more revenue gains out of rises in the capital gains tax rate, or the estate tax.
But increasingly, Republicans have located their strategy in the debt limit, seeking to retreat to higher ground and use that vote, and the threat of a default, to force fiscal changes. Speaker John Boehner admitted as much yesterday, saying that he wants to use the debt limit vote to “to bring fiscal sanity to Washington, D.C.” He described the vote as Congress asserting its “ability to control the purse,” which is completely illogical. Congress controls the purse when it makes appropriations. The debt limit vote merely authorizes the Treasury to pay for the obligations Congress already approved. So the proper analogy with the debt limit is Congress controlling the ability to dine and ditch if it so chooses.
This probably isn’t all that informative a post, but that’s the state of play. In a matter of weeks, the tax-side issues will get dealt with. Then Republicans will take the debt limit hostage and try to negotiate over spending and social insurance. However they want Democrats to dictate the spending cuts so they can pin them on their opponents. In addition, they really want to attack programs for the poor, rather than those for the elderly, which represents a substantial portion of their base. And hitting the poor isn’t all that popular.
The only real wild-card at this point is whether the sequester will get delayed or not.
Photo by RenoTahoe under Creative Commons License.