Jared Bernstein on the cliff deal in the offing
As Ezra notes in the link above, the theory of the case for the WH is a) we avoid the cliff, finally break the Rs on tax rates, and get UI, and b) when we get to the debt ceiling fight, well insist that for every dollar of spending cuts, theres a dollar of new tax revenue. If the Rs want a trillion in spending cuts for a debt ceiling increase of that magnitude, the WH will only agree if a) the Rs identify the cutsno more Ds doing that work for them, and b) any such cuts are accompanied by the same amount in new tax revenues.
OKbut what are you gonna do, WH, when Rs say, forget it
lets default? Unless the President is willing at that point to tell his Treasury Secretary to go forth and borrow as neededi.e., override the Rsthis plan will fail.
So, heres my first blush response to this deal. The thing that worried me most in the endgame is that the WH would be so intent on a deal that theyd lock in too few revenues with no path back to the revenue well, and that theyd leave the debt ceiling hanging out there. Remember, the ultimate goal of Repubicans here is still to starve the beastto shrink government by hacking away at both sides of its ledgerreceipts and outlays.
Those fears will be realized unless the President really and truly refuses to negotiate on the debt ceiling and is willing to blow past those who would stage a strategic default. If he is not, and if this cliff deal passes, then I fear the WH may have squandered its hard won leverage.
more...
http://jaredbernsteinblog.com/the-cliff-deal-in-the-offing/