Liberals Overestimate Obama’s Leverage on the Fiscal Cliff

The Fiscal Cliff is still unresolved.
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”