I haven’t been paying close attention to the Fiscal Cliff negotiations. I’ve been more or less assuming that since the shape of a final deal seems fairly obvious, the two sides would decide to reach that deal before rather than after damaging the economy and the country’s international standing with another demonstration of our inability to govern ourselves.
That might be true. But this weekend I became aware of another interpretation, held by some people who are both smart and well-connected.
On this alternative theory, Republicans are so terrified of Grover Norquist that they simply will not vote for rate increases, while the White House has done the arithmetic and knows that no plan without rate increases can be made to add up, even if the housing industry, the charitable sector, and the state and local government would hold still for it.
But the day after we go over the cliff and rates rise all by themselves, it becomes much easier for Republicans to vote for what would then be a pure tax cut. And the reaction from the markets and the corporate sector to the cliff-diving exercise will concentrate their minds. Of course, the CEOs could apply some mind-concentrator right now, but their hatred of Obama is so intense that they’d rather not if they don’t have to, and they don’t think they have to because they can’t imagine that the Republicans on the Hill are so stupid, stubborn, and cowardly that they need to be told.
So we could be in for a bumpy ride. I just hope that the White House follows through on Dick Durbin’s insistence that one element of the deal must be the abolition of the debt ceiling, which Boehner promises to use as an extortionate threat every time it comes up.
Meantime, none of the obvious measures to either raise revenue reduce spending while improving efficiency – alcohol taxes, congestion taxes, GHG taxes, financial-transactions taxes, negotiated drug prices in Medicare Part D, a public option in Obamacare – is under any sort of discussion.