Cliffhanger avoidance, from Robert Reich

Economist/policy wonk/good guy Robert Reich sends along notes on the discussions in Washington (at his Facebook site, and at his personal site) (links added here for your benefit and ease of use):

Robert Reich

Rhodes Scholar, former Secretary of Labor and UC Berkeley Prof. Robert Reich

Apparently the bidding began this afternoon. According to the Wall Street Journal (which got the information from GOP leaders), Tim Geithner met with Republican leaders and made the following offer:

— $1.6 trillion in additional tax revenues over the next decade, from limiting tax deductions on the wealthy and raising tax rates on incomes over $250,000 (although those rates don’t have to rise as high as the top marginal rates under Bill Clinton)

— $50 billion in added economic stimulus next year

— A one-year postponement of pending spending cuts in defense and domestic programs

— $400 billion in savings over the decade from Medicare and other entitlement programs (the same number contained in the President’s 2013 budget proposal, submitted before the election).

— Authority to raise the debt limit without congressional approval.

The $50 billion in added stimulus is surely welcome. We need more spending in the short term in order to keep the recovery going, particularly in light of economic contractions in Europe and Japan, and slowdowns in China and India.

But by signaling its willingness not to raise top rates as high as they were under Clinton and to cut some $400 billion from projected increases in Medicare and other entitlement spending, the White House has ceded important ground.

Republicans obviously want much, much more.

The administration has taken a “step backward, moving away from consensus and significantly closer to the cliff, delaying again the real, balanced solution that this crisis requires,” said Senate Minority Leader Mitch McConnell (R., Ky.) in a written statement. “No substantive progress has been made” added House Speaker John Boehner (R., Ohio).

No surprise. The GOP doesn’t want to show any flexibility. Boehner and McConnell will hang tough until the end. Boehner will blame his right flank for not giving him any leeway — just as he’s done before.

It’s also clear Republicans will seek whatever bargaining leverage they can get from threatening to block an increase in the debt limit – which will have to rise early next year if the nation’s full faith and credit is to remain intact.

Meanwhile, the White House has started the bidding with substantial concessions on tax increases and spending cuts.

Haven’t we been here before? It’s as if the election never occurred – as if the Republicans hadn’t lost six or seven seats in the House and three in the Senate, as if Obama hadn’t won reelection by a greater number of votes than George W. Bush in 2004.

And as if the fiscal cliff that automatically terminates the Bush tax cuts weren’t just weeks away.

But if it’s really going to be a repeat of the last round, we might still be in luck. Remember, the last round resulted in no agreement. And no agreement now may be better than a bad agreement that doesn’t raise taxes on the wealthy nearly enough while cutting far too much from safety nets most Americans depend on.

If Republicans won’t budge and we head over the fiscal cliff, the Clinton tax rates become effective January 1 – thereby empowering the White House and Democrats in the next congress to get a far better deal.

Watch that space.

It’s especially interesting to me how House Minority Leader Nancy Pelosi (D-California) and Senate Majority Leader Harry Reid (D-Nevada) will work to get a solution, if the GOP continues its blockade to almost all action.


5 Responses to Cliffhanger avoidance, from Robert Reich

  1. Jim says:


    I had no idea. I knew that President Carter got the ball rolling on deregulation with his airline dereg. That was bad enough. He’s a lovely man, a devout Christian and a much better former President.

    Thanks for the heads up on this.

    I wonder if America will ever have a truly liberal President in my lifetime? I suppose I could count LBJ if looking solely at domestic policy.



  2. Ed Darrell says:

    I regret to say it was Carter who opened the doors of mental institutions. The idea was that the institutions were making them worse.

    Reagan screwed those people by cutting off the shift of funds from institution to housing and care outside of institution, leaving them penniless, homeless, and outside of medical care.


  3. Jim says:


    We totally agree. I’d raise spending on lots of things. In 2009, I would have re-established the WPA and CCC. I believe in a generous dole, too. Such policies have only helped countries like Norway, Austria and Denmark avoid the fiscal disasters that other European nations have not.

    Is NASA an economic luxury? How many jobs does it create? It could create millions if we’d get serious. Actually, so could the foreign aid you advocate. That’s a win-win.

    My “cuts” would come from weapons of mass destruction (we continue to crank them out), unnecessary and/or immoral military programs and operations (the School of the Americas needs to go), ending the drug war, legalizing (& taxing) pot and releasing non-violent offenders from prison if they are not deemed mentally ill. If they are — then more spending (which would create more jobs) would be called for. Reagan flung wide the doors of mental institutions across America. That mistake was copied by numerous states. It has been an unmitigated disaster.

    There is so much that can and should be done. And no, I don’t see many cuts worth making other than the ones I cited. And cuts in corporate subsidies/welfare of course.


  4. Ed Darrell says:

    You hit upon two small areas of fat that can easily be cut in times of economic downturn.

    But apart from those, I don’t think there are a lot of areas that can be cut, or should be cut. In fact, I can name several areas of small spending that should be increased dramatically — like foreign aid, which is much less than 1% of the federal budget, or like PBS, which is about a tenth of that; and we need to double spending on the National Parks, and on grazing aids and reforestation of other federal public lands used to supply us with food and fiber (including timber).

    Reality is that federal spending growth is slower under Obama than anybody since Hoover; our deficits have been decreasing faster than anyone since Coolidge. We’ve cut to the bone in most programs. We need to increase revenues.

    The best way to increase revenues is to have more taxpayers, that is, reduce the unemployment rate dramatically, and cut under-employment. The second best way is to increase incomes to the millions in the middle class, instead of to the dozens of billionaires.

    We need government that works and works well. That’s the bottom line. Start there, and we’re off to prosperity.

    The GOP, Tea Party, and far too many libertarians, don’t want to go there.


  5. Jim says:

    As you well know, Ed, there is no love lost between me and the Libertarians. Particularly the more current manifestation in the Tea Party and Paulite branches.

    But I’ll tip my cap to old school Libertarians on a couple of points as touching on spending cuts. There IS a lot of fat in the federal budget that can be dramatically excised.

    It’s time, for instance, to end Prohibition. It’s still in effect, you know. Just not on booze. The criminalization of marijuana has been a boon to gangsters, drug lords and two-bit crooks. For the record, I’ve never packed a bowl or fired up a fatboy. I only inhaled once. (Yeah, really.) I find the marijuana culture depressing, lacking in intellect and without merit. (I speak here of the “420” culture…not folks who have a medical need.)

    I’m seeing no serious evidence that pot is any more deleterious to brain cells, physical health, highway safety or crime rates than is alcohol. I say this not to excuse recreational marijuana use or to suggest that driving under the influence…of ANYTHING…should be regarded lightly by the legal system. It’s just that we figured out that alcohol is, for better or worse, close to an American staple. Pot’s not quite there but it is ubiquitous.

    Let’s legalize it.

    And then (here is where my Libertarian friends will disagree) tax the living hell out of it just as we have (wisely, I would argue) done with tobacco. If someone wants to poison their body and brain with pot, make them pay handsomely for the privilege.

    And then put that tax money to work helping addicts, paving roads or improving our schools.

    We’d be cutting incarceration rates, clearing court dockets and reducing spending on interdiction. And we’d be raking in the bucks where a new “sin” tax is concerned. (Aside from the added benefit that those unwilling to pay the tax would stop smoking.)

    Reich is right. I agree with him. But I think liberals CAN propose truly serious spending cuts and new revenue streams. Of course, I’d also raise the top tax rate to something more resembling what it was under Eisenhower or Nixon. So don’t think I’ve taken any more than a sip from the Libertarian communion cup.




Please play nice in the Bathtub -- splash no soap in anyone's eyes. While your e-mail will not show with comments, note that it is our policy not to allow false e-mail addresses. Comments with non-working e-mail addresses may be deleted.

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: