Bad deal: The White House's last-ditch plan stinks

Obama's final proposal to House Republicans is a travesty. We're better off going over the "fiscal cliff"

By Alex Seitz-Wald
December 29, 2012 3:57AM (UTC)
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This afternoon, President Obama is meeting with congressional leaders in a last-ditch attempt to avoid going over the so-called fiscal cliff. Most people in Washington think the effort is futile. That’s probably good thing, as going over the cliff is better than enacting the deal the White House is reportedly putting on the table at the summit.

While the details are sketchy and reports conflicting, according to the New York Times, the proposal would extend the Bush tax cuts up to $400,000 (instead of the $250,000 most Democrats want), and it would extend some important tax credits, but it would leave the estate tax as is, do nothing about the sequester (the automatic spending cuts that will go into effect January 1) and do nothing about the debt ceiling.


If you’re a progressive, those items are, respectively, mediocre, somewhat positive, bad, mixed and terrible. While the $400,000 threshold is tolerable in a larger deal, it’s no good in a bad deal. Changing the estate tax is a must, as current rates exclusively help the heirs of wealthy people to the tune of hundreds of millions of dollars in lost revenue. Some of the tax credits are vital, such as the Earned Income Tax Credit, but these should be passed automatically, not as something Democrats need to bargain for. The sequester is mixed because half the cuts come from the military, which are valuable and generally politically unachievable, but the other half come from the rest of the government, including programs like Medicaid and food stamps.

Other reports paint a more positive picture of the deal Obama will offer, but they seem less realistic, as the contours outlined by the Times fit with the deal Obama previously offered, which liberals rejected out of hand.

Putting off the debt ceiling means another high-stakes confrontation with Republicans early next month -- and another chance for hostage-taking and bad White House deal making. The debt ceiling and fiscal cliff should be addressed together, as Obama himself has insisted all along. Meanwhile, we don’t know if the deal extends unemployment insurance benefits or the payroll tax holiday, which are both crucial, and it has none of the valuable infrastructure spending Obama wanted.


Progressive groups, not surprisingly, are outraged by the deal. "There is not a single issue on the negotiating table where the public agrees with Republicans. That means it makes no sense to compromise on the $250,000 tax rate that the president campaigned on and won on twice. Compromising on taxes means there are hundreds of billions of dollars left on the table that will come out of programs for the poor and our grandparents on the back end. That is unacceptable, and Democrats need to continue a bright line position: Raise tax rates on those making $250,000 at least to the Clinton rates and no cuts to Medicare, Medicaid, and Social Security benefits. Period,” said Adam Green, the co-founder of the Progressive Change Campaign Committee. As Joan Walsh wrote this morning, even though Obama holds all the cards, he has disappointed in his ability to play hardball with Republicans after everyone expected him to be better this time around.

Going over the cliff is bad, too, but less so. At least it doesn't cut taxes on the wealthy while preserving entitlement programs, and at least it contains the military cuts and makes it easier for a more favorable deal to be reached in the new year, when anything Congress does will be a tax cut.

On the bright side, if Republicans reject Obama’s proposal -- as they are likely to do since it does include modest tax hikes -- and we go over the cliff, the big concessions may lead the media and the public to side with Obama in the aftermath. He looks like a compromiser, even to the point of weakness, while Republicans look obstinate and insulate, and the deal throws into stark relief just how far the GOP is willing to go to preserve the tax cuts for the wealthy. Perhaps that is the entire point of the White House’s offer.

Alex Seitz-Wald

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