Is this really a raw deal for Democrats?
of the good and the bad in the debt limit deal. The major 鈥済ood news鈥� is that if this breaks the impasse on passing an increase in the debt limit, the U.S. will avoid immediate default on its debt. The 鈥渂ad news鈥� is there wasn鈥檛 much movement in terms of actual bipartisan policymaking, and the Democrats seem to have totally caved in to the Norquist-led entrenchment of the Republicans on taxes鈥揳s in No New Ones.
There are no revenue increases in this first round of deficit reduction, and if the second round鈥檚 special committee of sitting members of Congress (yet to be named) fails to agree on enough deficit reduction, the triggered automatic cuts will leave tax policy untouched as well.
Bill puzzles over the Democrats鈥� poor negotiating strategies on this issue:
[T]hat leads directly into the remarkable politics of the situation. The deal that was enacted is, politically, a complete capitulation by the Democrats. There are no tax increases as part of the initial trillion-dollar package. That package is all spending cuts, which was the original Republican position.
It鈥檚 particularly notable that the deal is all spending cuts when public opinion clearly wanted a mix of tax increases and spending cuts. In just the most recent example of this fact, a July 18-20 CNN/ORC International poll showed that almost two-thirds of respondents preferred a deal with a mix of spending cuts and tax increases. Only 34% preferred a debt reduction plan based solely on spending reductions. Also, the plan that was enacted was significantly to the right of the Gang of Six proposal and the Bowles-Simpson commission. It鈥檚 as if the two parties each started out on their own 25 yard line. The Dems moved to the 50 yard line, while the R鈥檚 moved back to their own goal line. Then the agreement was settled on the Republican鈥檚 25 yard line, right where the Republicans started.
The proposal to enact the new commission鈥檚 policies or enact an automatic trigger virtually guarantees no new taxes because the automatic cuts are all on the spending side. The Obama administration鈥檚 defense of this is, in Gene Sperling鈥檚 words, quoted by CNN: 鈥淵ou want to make it hard for them just to walk away and wash their hands. You want them to say, if nothing happens, there will be a very tough degree of pain that will take place.鈥� While I have affection and respect for Sperling, and his comment reflects a sound strategy, that strategy has nothing to do with the actual outcome in this case. If the Democrats wanted the Republicans to bear 鈥減ain鈥� or to pay attention to a 鈥渞eform or else鈥� situation, they would have been well-advised to include tax increases in the 鈥渙r else鈥� part. It is certainly not going to be easier to negotiate with the Republicans when the do-nothing alternative is all spending cuts.
I鈥檓 annoyed, too, but I鈥檝e been annoyed with the Democrats鈥� (including most importantly President Obama鈥檚) position on the Bush tax cuts for years. And I am more hopeful about the 鈥渟econd round鈥� possibilities than Bill is. For one thing, Speaker Boehner spelled out his interpretation of the 鈥渘o new taxes鈥� pledge in It calls for tax reform that sticks to the 鈥渃urrent-law baseline,鈥� suggesting that that prevents taxes from being raised. But that only prevents revenue levels from coming up relative to current law, which has all of the Bush tax cuts expiring at the end of 2012. It certainly doesn鈥檛 rule out revenues coming up relative to current policy, which is fully-extended and deficit-financed Bush tax cuts. There鈥檚 a difference between the two standards that鈥檚 worth $2.5 trillion over ten years by the Bush tax cuts alone. So there鈥檚 a lot of room for a second round of deficit reduction鈥揑 mean deficit reduction relative to 鈥渃urrent policy鈥� only, not current law鈥搕hat鈥檚 quite heavy on the revenue side of the budget, if this is where Boehner means to go with this.
This would turn out to be quite a good deal for the Democrats who want revenues to be an important part of the solution. It would raise revenue and reduce the deficit even more than President Obama himself has ever proposed. So maybe we shouldn鈥檛 consider 鈥渢he deal鈥� as one where Democrats gave away everything to the Republicans. I think they鈥檙e genuinely negotiating with themselves, too. And Republicans will have to come to grips with what they as a party really mean by 鈥渘o new taxes.鈥� Perhaps the most important negotiations over the next few months leading up to the 鈥渘ext round鈥� of policy agreements will be within each of the political parties rather than between them.
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