Like most other liberals, I canâ€™t say Iâ€™m overjoyed at the fiscal cliff deal. The substance isnâ€™t so terrible. Iâ€™m especially pleased that â€œrefundablesâ€ like the Earned Income Tax Credit, as well as the basic social insurance programs, are reasonably well-protected. I still would have much rather have gone over the cliff.
President Obama and the Democrats have a real problem in that they reinforce their reputations as irresolute negotiators. Ironically, this dynamic undercuts the position of moderate Republicans who would resist hostage taking on the debt ceiling and other matters. In making last-minute concessions and in telegraphing a (perhaps substantively-wise) reluctance to risk chaotic legislative outcomes, the President raises the perceived incentives for GOP brinksmanship on precisely those matters President Obama regards as most sensitive.
Iâ€™m worried that the GOP will be further tempted to overstep in their hostage-taking. They may thus back President Obama into a position that allows no honorable retreat. Ironically, in trying to play things safe, the President may have increased the risks of disaster a few months from now. The 2014 election may exacerbate the problem. If younger voters stay home as they did in 2010, weâ€™ll turn back the clock and reward a new crop of intransigent Republican legislators.
Jon Chait presents the argument in the language of poker. I prefer the language of quantum field theory. Hence the below Feynman diagram of the fiscal cliff: