Keith Hennessey says that the president is bluffing about vetoing any resolution of the “fiscal cliff” that doesn’t include a tax increase:
- If there is no bill, the U.S. economy will probably dip into recession for much/most/all of 2013, and itâ€™s impossible to predict whether such a recession would be short-lived.
- A 2013 recession would be terrible for the country and terrible for the Obama Presidency. It would limit the Presidentâ€™s options across his entire policy agenda, economic and non-economic. And it could define and dominate his entire second term.
- President Obama believes #1 and #2, and therefore avoiding the risk of triggering a recession with his veto is an even higher policy priority than his fiscal policy goal.
- The President wants to get things done. He cares more about his own chances for policy success (across the entire breadth of his agenda, whenever he figures out what it is) than he cares about relative political blame. A scenario in which Republicans get most of the blame for a veto-triggered recession is still a loser for him if it means he canâ€™t accomplish his second term goals.
while Robert Reich thinks the Republicans are:
Obamaâ€™s only real bargaining leverage comes from the fact that when the Bush tax cuts expire at the end of December, Americaâ€™s wealthiest will take the biggest hit. The highest marginal income tax rate will rise from 35 to 39.6 percent (for joint filers), and the capital gains rate from 15 to 20 percent.
This will happen automatically if nothing is done between now and then to change course. Itâ€™s the default if Republicans wonâ€™t agree to anything else. Itâ€™s Obamaâ€™s trump card.
In all honesty I don’t understand why the president is so insistent about the tax increase for the highest income earners. $40 billion in revenue will do almost nothing about a $1 trillion deficit. It won’t make it any more (or less) sustainable. It’s not a start, a downpayment, or blazing the trail forward. Fulfilling a campaign pledge? So what? He’s not running for anything.
Don’t get me wrong. I opposed the “Bush tax cuts” when they were enacted as cutting the wrong taxes at the wrong time. I opposed them in 2010 when they became the “Obama tax cuts”. Indeed, that made me ill because it indicated pretty clearly that the Congressional Democrats had just been kidding when they railed against them all those years. They didn’t really giveadamn.
The estimates I’ve seen are that the harm that letting the tax cuts lapse would be small and short-lived just as the benefit to the economy they provided was small and short-lived. As I’ve been saying all along. If you’re worried about taking that money out of the economy, enact more efficient tax cuts. I’ve suggested any number of them.
BTW, I think the video clip above has several morals. First, whoever isn’t bluffing is the one who dies going over the cliff. Second, if you’re going to play “Chicken”, don’t dress fashionably.
And it’s better to have dirt on your hands than blood on your hands.