Reporting on "fiscal cliff" negotiations tends to focus on one main demand by each side – President Obama’s insistence that tax rates on the wealthy go up, and Republicans’ insistence on sweeping cuts to and “reform” of entitlement programs. There’s obviously a lot more involved in this, but it’s not a bad way of understanding the basic framework of the talks. And it’s a good way of understanding why, for now at least, they don’t seem to be going anywhere.
Start with Obama’s tax hike demand. The president has now waged two national campaigns in which he’s vowed to eliminate the Bush tax cuts for high-income Americans – and he made it a particular point of emphasis on the trail this year. Two years ago, after his party suffered a midterm drubbing, Obama was coaxed into extending the Bush rates in exchange for some modest economic stimulus, and since then his resolve to let them expire (for the rich) at the end of 2012 has been apparent. What’s more, he has real leverage – whatever moral authority his electoral victory produced, plus the fact that all of the Bush tax cuts will vanish on Jan. 1 if no deal is reached.
A number of Republicans have actually acknowledged their lousy hand on taxes, and suggested the party give in on a rate increase of some sort. But this has yet to be reflected in the formal proposals that House Speaker John Boehner has presented to Obama. Officially, Republicans are still committed only to closing loopholes and deductions and to raising revenue through some kind of tax reform. Until and unless the GOP gives real ground on tax rates for the rich, there can’t be a deal.
Now consider entitlements. There are, to be sure, plenty of Democrats who say changes to Medicare (and maybe even Social Security) should be a part of any deal, but it is Republicans who are adamant that major changes be made to popular safety net programs. If this is the price for a deal that includes a rate hike on the wealthy, Obama has repeatedly expressed his willingness to play ball with the GOP and reach some kind of compromise on entitlements. (He also showed he meant it during the debt ceiling negotiations of 2011, when he put Medicare and Social Security on the table in pursuit of a “grand bargain” with Boehner.)
What makes this tricky is that most serious cost-saving measures affecting Medicare and Social Security – like, for instance, raising the Medicare eligibility age or adjusting the cost-of-living formula to reduce Social Security benefits – aren’t popular with voters. In a very basic way, this makes the GOP’s bottom-line demand different than Obama’s, since a healthy majority of voters are on-board with raising rates on the wealthy.
For now, each side is setting broad targets for entitlement savings and doing its best to avoid being linked with specific, unpopular changes. But this is a negotiation, and someone needs to kick it off by laying out a detailed plan. From the White House’s standpoint, it’s a no-brainer who should make the first move: the GOP. After all, it’s Republicans whose bottom-line demand is entitlement reform. Plus, Obama has taken plenty of heat these past few years for essentially negotiating with himself in situations like this – coming in with an offer that he thinks Republicans might actually accept, then watching as they reject it and make demands that shift the debate far to the right. If Republicans want deep Medicare and Social Security cuts, Obama now reasons, let them spell out the details first, then I’ll come back with my counteroffer. This really is a standard approach to negotiating, but as E.J. Dionne noted recently, it “looks strange only because the last two years have been so utterly abnormal.”
But so far, Republicans have shown little interest in making the first move. Boehner submitted his first offer to Obama last week and his second one yesterday, but neither apparently contains a detailed plan to obtain the entitlement savings Republicans say they want. And in a House floor speech yesterday, Boehner tried – not for the first time – to shift responsibility to Obama for detailing a spending cuts plan. There’s no mystery what’s going on here. As Greg Sargent has been pointing out, forcing Obama to go first would allow the GOP to sniff at his offer and make a counteroffer containing far steeper cuts and changes. Plus, it would put Obama on record initiating talks about very unpopular ideas.
Again, Obama holds most of the leverage here. If the GOP won’t budge on taxes and won’t make the first move on spending cuts, Obama can just run the clock out until Jan. 1, at which point the Bush rates will go away and he can call on Congress to enact a tax cut for 98 percent of Americans. So chances are, there will ultimately be some give by Republicans – although, as I wrote Monday, the threat of further debt ceiling brinkmanship might still prompt the White House to give more ground on entitlements than its base is comfortable with.