Tuesday, March 20, 2012

More Austerity Attempts Coming Post Election

You can see the impending suck from miles away: David Dayen:
The Washington Post has a first draft of history piece about the debt negotiations last year that tells us mostly what we already knew: that the White House was ready to sign onto a document that increased the Medicare eligibility age and instituted chained CPI, which would cut Social Security cost-of-living increases.  In exchange would be $800 billion in new taxes, roughly the cost of letting most of the high-end Bush tax cuts expire (though this would be achieved by actually lowering rates and broadening the tax base).

Harry Reid and Nancy Pelosi reluctantly agreed to try and sell this. Republicans would only do it if they could count “dynamic scoring,” the notion that tax cuts pay for themselves in economic growth, in the deal. Republicans say the White House accepted that. The White House denies it.

Then the Gang of Six came out with their deal in the Senate, which included much higher tax increases than what the Administration was about to sign off on. This blew up the deal when Obama seemed to endorse the Gang of Six process (which included more tax increases), Republicans immediately backed away from it; after the White House tweaked their deficit deal with House Republicans to catch up with the Gang, the Republicans summarily rejected it.

The deal could have easily become a reality were it not for the troublesome appearance of the Gang of Six. And it could still become a reality. It says right there in black and white at the end of the article: “White House officials said this week that the offer is still on the table.” What’s more, despite the change in attitude from the President, who’s in election mode, from a conciliator to a fighter, there’s a signifying event coming at the end of the year that will force a number of these same choices to be negotiated again.

By January 1, 2013, the Bush tax cuts will expire, the payroll tax cut will expire, unemployment benefits will expire, the “doc fix” on Medicare reimbursement rates will expire, and the “trigger” of $1.2 trillion in across the board defense and discretionary spending cuts will be triggered. Taken together, this mass of deficit-reducing changes would wipe out the primary budget deficit, leaving mostly a deficit made up of financing for the national debt. Debt-to-GDP ratio will fall, the key number often cited for sustainability. Oh, and the debt limit will run out around this time as well, making it more of a forcing event.
One of the side effects of completely broken system of government is that when things actually do have to get passed, they get bundled into some sort of awful catch-all shock doctine where people can't sort out who is responsible for what afterwards. Additionally, huge bipartisan clusterfucks are the only way horrible austerity measures like these will get passed, and the backers of these measures are fully aware of that fact.

Something will need to get done in December, a lot of congressmen will never face voters again, the ones that will won't face them for another two years. It's gonna be ugly.

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