We tend to love Paul Krugman on this site, so it’s rare that I disagree with the man. But his analysis of the fiscal cliff deal strikes me as contradictory. He’s basically saying that we won, but he’s upset because of the way we won.
So why the bad taste in progressives’ mouths? It has less to do with where Obama ended up than with how he got there.
Krugman is talking about the fact that many feel that President Obama caved on his earlier promises (such as not extending the Bush tax cuts for anyone making over $250,000 a year) in order to reach this deal:
He kept drawing lines in the sand, then erasing them and retreating to a new position. And his evident desire to have a deal before hitting the essentially innocuous fiscal cliff bodes very badly for the confrontation looming in a few weeks over the debt ceiling.
If Obama stands his ground in that confrontation, this deal won’t look bad in retrospect.
I’m sorry, but this doesn’t make much sense. We got what you wanted, but you still feel we lost because you don’t like the way the President got what we wanted. What was wrong with the President’s approach, I ask? He caved on his promises, you say. But if the President caved on his promises, then how did we end up with what you wanted?
I’m the first to criticize the President for his “cave first, negotiate later” negotiating style – and we criticized him heavily during his first term on this very point. But I think it’s significantly harder to argue that “he caved” if you also claim that he got what you wanted.
Krugman argues, earlier in the same piece, that there are two ways progressive can lose the fiscal cliff fight.
1. Congress privatizing and phasing our social insurance programs like Medicare and Social Security. That, Krugman says, didn’t happen.
2. “For conservatives to successfully starve the beast — to drive revenue so low through tax cuts that the social insurance programs can’t be sustained.” On this point, Krugman says that the fiscal cliff deal falls short of making up the money lost from the Bush tax cuts. But, he also notes that you really can’t start at zero – i.e., no tax cuts – you have to start at tax cuts for everyone making under $250,000, since that was the Democratic position. So, you have to look at how much money is lost by changing the tax cut maximum from $250,000 to $400k/$450k, the amount in the fiscal cliff deal. Krugman says the difference is only $200 billion. Krugman goes on to explain that over the next ten years, it’s a “not crucial” amount of money.
So, the President didn’t cave on Medicare and Social Security. And he didn’t cave on giving away so much in tax cuts that we set ourselves up for a future budget crunch that ends up forcing cuts to Medicare and Social Security. But we’re still upset about the deal, because we feel like the President caved, even though he ended up getting what we wanted him to get.
This may be a bad deal, I don’t know – but it’s going to take better logic than that to convince me.
One final point. I’m not sure if what Krugman is arguing is that even though we didn’t get rolled by the Republicans, we still could have gotten a better deal had the President not caved. Maybe, but it’s not really clear to me where the President caved. Krugman admits that the President’s concession to up the Bush tax cut threshold by a couple hundred thousand dollars doesn’t add up to very much in the grand scheme of the budget and the deficit. So that’s not it.
On the estate tax, perhaps?. As I’ve already noted, I’m not very sympathetic to the notion that someone with a million dollar estate is akin to the Koch brothers. You know what we call a million dollar house in Washington, DC? A “house.” Price are so high in DC that owning a million dollar home does not even vaguely make you rich.
Then perhaps its anger over the end of the payroll tax cut holiday. Then how exactly are we going to fund Social Security if we’re going to permanently remove the funding mechanism for Social Security? And in any case, I don’t recall people making the argument two years ago that we were going to permanently repeal the Social Security tax because it was somehow immoral. That sounds like a Gingrich argument, not a progressive one. So, while I don’t have a lot of extra cash laying around to pay more this year, this is a tax we’ve had forever, and we all accepted it as part of our social contract. It was only a matter of time before it came back, so I do not buy the “it’s a new tax increase!” argument. It’s part of the deal you made in being an American. And we got lucky enough to get away with two years of not paying for it. Now that holiday is over.
Some argue that we should have just gone ahead and forced the House GOP to accept everything we wanted, and the House Rs would have had no choice but to vote for it. So far, the House Republicans are refusing to vote for this deal, which begs the question as to why they’d support a deal that’s even more progressive and less conservative?