Liberals Overestimate Obama’s Leverage on the Fiscal Cliff

December 19, 2012Danny Vinik 5 Comments

The Fiscal Cliff is still unresolved.

Over the past couple of days, the White House has taken a lot of heat from liberals for agreeing to using chained-CPI in Social Security. Different writers have lashed out at such a deal and argued that the President is back to “negotiating with himself.” Many of these liberals see going over the fiscal cliff as better than the deal Obama is currently offering. They believe that going over the cliff will give Obama more leverage in the negotiations and allow him to extract a better deal from Republicans. However, I’m very skeptical of this for three reasons:

First, the President is in such a great position now because Republicans really don’t want the Bush tax cuts to expire for anyone. The President wants to extend the tax cuts as well, just not for those making $250,000 a year or more (his most recent offer upped this amount to $400,000). In his counteroffer, House speaker John Boehner agreed to raise rates on those making more than a $1,000,000.

But the rates on everyone automatically rise on January 1st (though its effects don’t occur for a few months). This where the President’s leverage comes from. He would sign a bill extending the tax cuts for the middle class, but Republicans won’t because they want to extend rates for the upper class (and small businesses) as well. That’s why the President can say:

It’s unacceptable for some Republicans in Congress to hold middle class tax cuts hostage simply because they refuse to let tax rates go up on the wealthiest Americans

The polling has largely backed up the President, with the American people blaming Republicans for not compromising.

The thing that many liberals have overlooked is that this can change quickly. Boehner’s offer to raise rates on those making over a $1,000,000 may not be much substantively, but it represents a big shift in the Republican party. For years now, the Republicans have adamantly refused to raise taxes. Period. End of question.

Now, the Speaker is finally offering to let taxes rise on the wealthiest Americans. The American people may see this as a major compromise for Republicans and believe that the President is now holding the middle tax cuts hostage. I haven’t seen any polling since Boehner submitted this offer to the President, but I’d be very interested in it. If we go over the fiscal cliff, it’s possible that Obama could receive much of the blame. That would certainly put him in a much worse bargaining position. Continue reading “Liberals Overestimate Obama’s Leverage on the Fiscal Cliff” →

Switching to Chained-CPI and How Politicians Spin it

December 18, 2012Danny Vinik Leave a comment

I’m getting a bit annoyed at the liberal blogosphere about how they’re spinning the proposal to use chained-CPI for Social Security. Here’s Ezra Klein:

The way we measure inflation right now really does mismeasure inflation. Chained-CPI really is a bit more accurate. But that’s not why we’re considering moving to chained-CPI. If all we wanted to do was correct the technical problem, we could make the correction and then compensate the losers.

But no one ever considers that. The only reason we’re considering moving to chained-CPI because it saves money, and it saves money by cutting Social Security benefits and raising taxes, and it’s a much more regressive approach to cutting Social Security benefits and raising taxes than some of the other options on the table.

The question worth asking, then, is if we want to cut Social Security benefits, why are we talking about chained-CPI, rather than some other approach to cutting benefits that’s perhaps more equitable? The answer is that chained-CPI’s role in correcting inflation measurement error is helpful in distracting people from its role in cutting Social Security benefits. Politicians who are unwilling or unable to offer a persuasive political or policy rationale for cutting Social Security benefits are instead hiding behind a technocratic rationale. We’re not “cutting benefits,” we’re “correcting our inflation measure.”

Emphasis mine. I sympathize with Ezra’s annoyance here. Switching to chained-CPI is being billed as a “technical fix.” If we wanted to implement such a technical fix, we don’t need it to be part of a grand bargain. Social Security benefits should increase with inflation. If we’re using the wrong measure of inflation, then we need to fix that. The reason Republicans are so set on fixing it now is because their ultimate goal is to cut benefits, not to correct the inflation measure. Thus, Ezra’s right when he says:

We’re not “cutting benefits,” we’re “correcting our inflation measure.”

However, Ezra makes the exact same error in the bolded section above. Continue reading “Switching to Chained-CPI and How Politicians Spin it” →

Are Senators Warner and Manchin “Shameless + Untrustworthy?”

December 17, 2012December 17, 2012Danny Vinik Leave a comment

Here’s a tweet from Time Magazine writer Michael Grunwald:

I tweeted with Mr. Grunwald briefly about this and I don’t quite agree. He’s referring to the separate remarks by Senator Mark Warner (D-VA) and Senator Joe Manchin (D-WV) stating that they’ve changed their opinions on gun control and now want stronger regulation.

Grunwald tweeted: “I’m suggesting they’re not really switching their opinion, and people shouldn’t get their hopes up” and “But in our business we don’t have to pretend awful opportunists aren’t awful opportunists. Aurora was shattering too.”

The question comes down to whether you believe Warner and Manchin changed their opinions for political purposes or really had a change of heart. Certainly, none of us knows for sure, but it’s unfair to rule out a change of heart.

Grunwald believes that Virginia Tech, Aurora and every other mass shooting would have been enough to change their minds. The fact that Warner and Manchin are doing so after Friday’s tragic events and now that there is desire for greater gun control demonstrates not a change of hearts, but a politically-motivated decision.

Maybe that’s so, but I’m not so sure.

The reason is: this time is different. It’s sad, but it’s true. The shooting at Newtown has hit people across the country harder than the ones in Aurora and in Oak Creek. Part of it is the sheer number of tragedies this year – there have been 13 shootings with multiple fatalities just in 2012. But it’s more than that.

It’s different from Aurora, Oak Creek and others. This was a targeted attack on the most innocent people in our country in one of the most innocent locations. If an elementary school in a safe town is not safe, nowhere is. That’s not to say that shootings in a movie theater or a temple should not cause widespread outrage and provoke demands for more gun control. But the shooting at Sandy Hood caused an even greater emotional response for the precise reason that it targeted little kids.

That’s what sets Newtown apart from all of the other tragic shootings.

It’s why the petition for the Obama Administration to address gun control has received a record number of signatures. It’s why people everywhere are shaken and demanding new legislation. It may just be why Senators Manchin and Warner have changed their minds.

If it turns out that they are doing so just to gain political points, then Grunwald is right, that is shameless, untrustworthy and revolting. That would be a new low for American politics and I sincerely hope it is not the case. Until I see evidence proving that, I’m willing to give them the benefit of the doubt