Legal Commentary

Counterfactual: What If Obama Had Not Done The Deal?

By Big Tent Democrat

By now you may have figured out that I think "The Deal" was a terrible mistake. Consider the counterfactual I propose in the title of this post - what if Obama had not done The Deal. Let's start with the positives of The Deal - unemployment insurance was extended for a year - an unmitigated good thing.To me, that is the end of the goods things. YMMV. More . . .

Now the bad things - tax cuts for the rich. Standing alone, this is not objectively a bad thing. It does have a slight stimulative effect. But it s does not stand alone. It leads to spending cuts. In the long term and medium term, taking from government programs to provide tax cuts for the rich is a terrible policy. In the short term, it is catastrophically bad policy, as it trades the most effective economic stimulus, government spending, for the worst stimulative policy, tax cuts for folks whose demand is not constrained. In addition, tax cuts for persons making more than, say, 100k a year is also bad policy, but not as bad as tax cuts for the wealthy.

Now, let's consider the counterfactual - the what if? What would not doing The Deal have entailed? No UI extension - definitely bad. No tax cuts, in theory anti-stimulative. In reality, pro-stimulative because the argument for cutting spending would be substantially weakened.

Moreover, where would we be today in the debate on taxes and spending? We would be in a debate where the demand for UI extension would be on the table, taxes would be on the table, all spending would be on the table, debt ceiling increase would be on the table, etc. In short a deal where EVERYTHING would be on the table.

The argument in favor of The Deal requires belief that The Deal was better than any deal that could be negotiated now. That argument depends on the idea that there will not be the votes for a better deal now. At least in terms of tax policy, this argument seems absolutely untenable. The tax deal was as bad as it could possibly be, It could not be worse.

On spending, it was, imo, equally bad, as the only spending "concession" the GOP provided was UI extension. Personally, I think it would have happened anyway, then or now. I place zero value on this "concession."

As for the rest of the spending deal, it is indefensible negotiation. The GOP gave up NOTHING on spending. Quite the opposite, they now control where the spending negotiations begin.

In short, the President and Dems gave up their strongest bargaining chip, tax policy, for next to nothing. Now the GOP holds all the cards, unless the President is prepared to have a government shutdown.

The Deal was and is, indefensible.

Speaking for me only

Full post as published by TalkLeft on January 14, 2011 (boomark / email).