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  • Dec 26, 2014
  • Updated: 1:55pm
Column
PUBLISHED : Sunday, 23 December, 2012, 12:00am
UPDATED : Sunday, 23 December, 2012, 4:25pm

Republican crazies scuttle deal with Obama

As long as John Boehner's party is controlled by extremists, no deal is possible

BIO

Paul Krugman is a professor of economics and international affairs at Princeton University and an op-ed columnist for The New York Times. Krugman received the Nobel Memorial Prize in Economic Sciences in 2008 for his work on international trade patterns.
 

A few years back, there was a boom in the US in poker television - shows in which you got to watch the betting and bluffing of expert card players. Since then, however, viewers seem to have lost interest. But I have a suggestion: instead of featuring poker experts, why not a show featuring poker incompetents - people who fold when they have a strong hand or don't know how to quit while they're ahead?

On second thought, that show already exists. It's called US budget negotiations, and it's now in its second episode.

The first ran in 2011, as President Barack Obama made his first bid to cut a long-run fiscal deal - a so-called Grand Bargain - with House of Representatives Speaker John Boehner. Obama held a fairly weak hand, after a midterm election in which Democrats took a beating. Nonetheless, the concessions he offered were breathtaking: he was willing to accept huge spending cuts, and a rise in the Medicare eligibility age, in return for a vague promise of higher revenue without any increase in tax rates.

This deal, if implemented, would have been a huge Republican victory, deeply damaging both programmes dear to Democrats and their political brand. But it never happened. Why? Because Boehner and his party couldn't bring themselves to accept even a modest rise in taxes. And their intransigence saved Obama from himself.

Now the game is on again - but with Obama holding a far stronger hand. He and his party won a solid victory in this year's election. And the legislative clock is also very much in their favour. All the tax cuts implemented under his predecessor George W. Bush are scheduled to expire at the end of the month.

Yet last week progressives suddenly had the sinking feeling that it was 2011 all over again, as the Obama administration made a budget offer that, while far better than the disastrous deal it was willing to make the last time around, still involved giving way on issues where it had promised to hold the line - perpetuating a substantial portion of the high-income Bush tax cuts, in effect cutting Social Security benefits by changing the inflation adjustment.

And this was an offer, not a deal. Are we about to see another round of the president negotiating with himself, snatching policy and political defeat from the jaws of victory?

Well, probably not. Once again, the Republican crazies - the people who can't accept the idea of ever voting to raise taxes on the wealthy, never mind either fiscal or economic reality - have saved the day.

We don't know exactly why Boehner didn't respond to the president's offer with a real counter-offer and instead offered something ludicrous - a "Plan B" that, according to the non-partisan Tax Policy Centre, would actually raise taxes for a number of lower- and middle-income families, while cutting taxes for almost half of those in the top 1 per cent. The effect, however, has to have been to disabuse the Obama team of any illusions that they were engaged in good-faith negotiations.

Boehner had evident problems getting his caucus to support Plan B, and he took the plan off the table on Thursday night; it would have modestly raised taxes on the really wealthy, the top 0.1 per cent, and even that was too much for many Republicans.

As in 2011, then, the Republican crazies are doing Obama a favour, heading off any temptation he may have felt to give away the store in pursuit of bipartisan dreams.

The Republican Party, as now constituted, is just not an entity with which the president can make a serious deal. If the US is going to get a grip on its problems - of which the budget deficit is a minor part - the power of the Republican Party's extremists, and their willingness to hold the economy hostage if they don't get their way, needs to be broken. And somehow I don't think that's going to happen in the next few days.

The New York Times

 

Jake van der Kamp is on holiday

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Just before reading this I watched an interview of George Osborne from 3 days ago. Osborne believes the UK is becoming more globally competitive by tackling it's deficits and that that absolutely involves tackling entitlements. I think he has it right. As for Mr. Krugman, I don't think he has it right at all that ANYONE in the GOP is not ready for major reforms in entitlements, such as recommended by the Simpson-Bowles commission. What "huge spending cuts" did Obama propose? Over the last 5 years I have steadily lost all of my respect for Mr. Krugman. The issue of the day is about spending, not taxes.
 
 
 
 
 

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