The Dead Week

You didn’t get what you wanted for Christmas. No one really ever does. Little girls don’t get that pony, or at least most little girls don’t. Little boys don’t get that semi-automatic assault rifle with a case full of thirty-round snap-in clips each, filled with hollow-points, or at least few do, which, along with that pony wish, is probably a good thing. The holiday is one for making adjustments. Even in wealthy families funds are finite, and no one, really, should get exactly what they want, which is pretty good training for the real world, which bends to no one’s will or precise desires. Be thankful for the pretty damned good gifts – not the stuff of your wildest dreams, but close enough, or if unexpected, surprisingly cool. There’s no point in being a jerk about things. Whiners who are deeply disappointed in life, who tend to be angry and outraged that there’s no pony or whatever, just don’t get it. Yes, you can see disappointment everywhere, and thus lead a miserable life, in rage, or you can see good stuff you can work with. That’s sort of the Christmas lesson – there’s family and friends and many pleasant and thoughtful surprises, so roll with it. Heck, things might be better than you thought, better than you ever imagined – if you’re willing to forgo your carefully constructed absurd fantasies.

No one ever learns that lesson, which leads to the dead week between Christmas and New Year’s Eve, with its second onset of carefully constructed absurd fantasies about what that one evening is going to be like. Midnight, that night, probably won’t be magical – it’s just an arbitrary demarcation of course, no longer the date on the Julian calendar but simply the one on the more useful Gregorian calendar folks first started using in the seventeenth century. They moved the date. It didn’t matter. A dozen years ago the only excitement that midnight was whether all the computers in the world would seize up and die. They didn’t. Assorted geeks had fixed the few things that needed to be fixed and the moment passed with barely a ripple.

This year isn’t even that exciting. All we have is that fiscal cliff looming at midnight. To recap, as part of the deal last year to raise the debt limit, as usual, the agreement was to raise it on the condition that serious discussions about spending cuts and increased revenue would occur later. Republicans agreed that in exchange for refusing the government the means to pay the bills now due, for money already they themselves had appropriated and had been spent long ago, thus crashing the world’s economy forever – their original threat – at the end of this year the Bush tax cuts would be allowed to expire as planned, suddenly raising taxes on everyone, which is a shock the still-fragile economy hardly needs, and there’d be matching automatic spending cuts that both sides would find appalling, on all the spending on healthcare and social services and education, which would infuriate the Democrats, and on all defense spending too, which would infuriate the Republicans. In short, both sides created a major crisis for everyone out of thin air and they then gave themselves an absolute deadline to solve this cooked-up crisis.

Then they ignored the whole thing, save for a bit of occasional posturing – but now it’s too late. There will be a major shock to the economy. Yes, some of that shock will be gradual – folks will pay much more in payroll taxes, but once you earn over a bit more than a hundred grand a year you don’t have to pay anymore of those taxes at all. Only the poor and the middle class have to worry about that, and the massive spending cuts can be eased in, on the assumption that Congress will do something about those in the first few months of the year. The only ones who will be hurt immediately, and hurt badly, are the two million people receiving extended unemployment benefits. Those benefits will end at midnight, as the year ends, and those folks will then be penniless, unable to buy even basic necessities. This is of course a Republican dream scenario – those folks will all have to get jobs and stop mooching off the good people. Yes, there are no jobs, and two million consumers will be removed from the demand side of things, but this will encourage inventiveness, and certainly encourage a sense of personal responsibility. The idea seems to be that this is more important than having an additional two million customers for your goods and services, which may be another carefully constructed absurd fantasy, but that’s supply-side economics for you.

It’s just that in the dead week after Christmas everyone involved in this mess seems to have decided they didn’t get what they really wanted for Christmas. Obama has won the election and all the polling showed everyone agreed with him, even the rank-and-file Republicans, that taxes should remain low on ninety-eight percent of everyone and the top two percent should go back to what they had been paying in the Clinton years. But Obama didn’t get that for Christmas. The Republicans, still in full control of the House, would never agree to that, and they suggested cutting Social Security and Medicare and Medicaid benefits, deeply, to get things back in fiscal shape – but they didn’t get that for Christmas either. No one got their pony, and then everyone went home.

That led Politico to offer Washington’s Christmas gift to America: Nothing – their gloomy day-after-Christmas assessment of this mess. With House Republicans unable to round up the votes for a counteroffer by John Boehner, the chances of those guys in the House reaching a “grand bargain” with Obama and Senate Democrats seem remote at best. The most likely outcome is a stop-gap measure that postpones some of the tax hikes and spending cuts. The next Congress will have to clean things up. These guys won’t.

It’s just that the next Congress will look a lot like the current one. The balance of power will be basically the same, with the same polarization. Politico seems to think the atmosphere is so bad that everyone now assumes Congress will at least kick the can down the road, as they say. We’ll just get more of the same. It does seem that some Republicans believe that the public will blame any economic disaster that happens on Obama and his silly insistence on higher tax rates for the wealthy, even if the polls show the public already poised to blame only the Republicans for another economic collapse. The week after Christmas is always tough. No one got what they wanted, and it was a dead week for fuming about that, or for adjusting to the real world.

Nothing gets done in the dead week after Christmas, of course – everyone is on vacation or just pretending to work – but that doesn’t mean you can’t try:

With historic tax increases set to hit virtually every American in five days, President Obama and members of the Senate are headed back to Washington on Thursday to take one last shot at a deal to protect taxpayers and the gathering economic recovery.

If anything, hope for success appeared to have dimmed over the Christmas holiday. The Republican-controlled House last week abdicated responsibility for resolving the crisis, leaving all eyes on the Senate. But senior aides in both parties said Majority Leader Harry M. Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) have not met or even spoken since leaving town for the weekend.

One small sign of progress came from House GOP leaders, who vowed Wednesday to call the House into session and stage a vote on anything the Democratic-controlled Senate approved.

But Speaker John A. Boehner (Ohio) and other top Republicans also demanded that Senate leaders take up a bill approved by the House months ago that would preserve expiring tax cuts for the wealthy as well as the middle class.

Boehner said screw it – let the Senate figure it out, or let them pass the Tea Party bill they had sent over there, protecting the wealthy completely and grudgingly allowing the riff-raff their tax cuts too, if really necessary:

The White House, meanwhile, was working with Reid on an alternative package that would keep Obama’s vow to let taxes rise on income over $250,000. Top Senate aides said their approach also would protect millions of middle-class Americans from having to pay the costly alternative minimum tax for the first time and would keep benefits flowing to two million unemployed workers who otherwise would be cut off in January.

Oops. It’s the same old impasse. Boehner can’t possibly get his House folks to agree on that, but then it got more complicated:

Financial markets, already unsettled by the prospect of dramatic tax increases and spending reductions, may also face a new battle over the limit on federal borrowing. Treasury Secretary Timothy F. Geithner announced Wednesday that the debt will hit the $16.4 trillion cap on Dec. 31, leaving roughly two months for Congress to raise it or default on the nation’s obligations.

In two months, the same crew in the House is prepared to fight the same battle as before – the debt ceiling will not be raised and America will default on all its payments, ruining the bond market and crashing the global economy, unless Obama cuts spending to the bone, or less, on Social Security and Medicare and Medicaid and anything else they can think of, and also lets the rich pay next to nothing in taxes, and so on. Obama says he won’t negotiate with them on this, this time – but he may have no choice. Geithner set out the facts here, and the House Republicans really can crash the world’s economy and ruin our credit rating forever, and ruin America forever – and they will. They’ve got Obama in a box – they’ll make it so the only way the United States can pay its bills is to stop all domestic spending, every single bit of it. They think they have the leverage, and they do.

Robert Reich says it’s just basic game theory:

In a game of highway chicken, for example, the driver that can’t swerve because he’s tied his hands to the steering wheel and chained his foot to the accelerator forces the other to swerve in order to avoid crashing. The trick is for the first driver to convince the second that he’s crazy enough to have committed himself to instant death if the second doesn’t act rationally.

House Speaker John Boehner’s failure to persuade rank-and-file House Republicans to raise taxes even on millionaires fits the fanatic’s strategy exactly. Boehner can now credibly claim he has no choice in the matter – Republican fanatics in the House have tied his hands and manacled his feet – so the only way to avoid going over the cliff is for Obama and the Democrats to make more concessions.

The White House’s hope of getting the Senate to pass legislation that raises taxes on the wealthy in order to pressure Boehner won’t work because the legislation can’t possibly get through the House. That’s the point: Boehner has demonstrated he has no choice; the fanatics are in charge there.

Obama may have won the election, and may have “won” all the public polling, and the American people may have thought what they were getting for Christmas was a more equitable tax scheme and some economic stability, but now things aren’t working out:

Obama could decide going over the cliff isn’t so bad after all – as long as he and congressional Democrats introduce legislation early in 2013 that gives a tax cut to the middle class retroactively to January 1st (extending the Bush tax cut to the first $250,000 of income) and restores most spending – and Republicans feel compelled to go along.

But with Boehner’s hands tied and the fanatics in charge, this gambit becomes far riskier. What if we go over the cliff and House Republicans continue to hold out against any tax increases on the rich while demanding major cuts in Medicare and Social Security?

That’s the problem and Reich sees only one way out:

The path of least resistance is for Obama and the Democrats to offer to keep everything as is, through 2013 – extend all the Bush tax cuts and continue all current spending (lifting the debt limit along the way) – unless or until a “grand bargain” on the budget is agreed to before the end of the next year. This is likely to satisfy enough Republican fanatics to gain a majority in the House. And it would avoid the fiscal cliff, kicking the can down the road and giving everyone more time.

Deficit hawks in both parties won’t like it, but that’s okay. Unemployment is still way too high and growth too meager to justify trimming the deficit any time soon.

It’s just that this changes nothing:

Even down the road, Boehner’s hands will still be tied and the fanatics will remain in charge – which will give Republicans the stronger position in negotiations leading to a “grand bargain.” Compromise would have to be almost entirely on the Democrats’ side.

Democrats are good at that of course. The other guys never have to give in, so Reich suggests just going over the cliff and forcing the Republicans’ hand:

It’s a risky strategy but it would at least expose the Republican tactic and put public pressure squarely on rank-and-file Republicans, where it belongs. The fanatics in the GOP have to be held accountable or they’ll continue to hold the nation hostage to their extremism. Even if it takes until the 2014 midterms to loosen their hold, the cost is worth it.

That’s calling for a lot of misery. That’s not what you expect at Christmas time, even if you don’t get a pony.

Kevin Drum offers his theory of why Boehner just threw up his hands and punted to the Senate:

Remember that during the debt limit talks last year, Boehner initially handed off negotiating duties to Eric Cantor, hoping that if Cantor signed off on a deal it would get the rest of the Tea Party caucus to throw in their votes as well. But Cantor double-crossed him after a few weeks, pulling out of the talks and pushing them back in Boehner’s lap so that Boehner would have to take the heat for agreeing to any tax increases. But even at that, Boehner didn’t give up: he tried to keep negotiating until it became clear that the Cantorites just flatly wouldn’t approve any feasible deal. Eventually a deal got done after Mitch McConnell got involved.

We’re seeing the same dynamic this time around: Boehner trying to negotiate, but eventually giving up after it became clear that the Cantorites wouldn’t agree to any feasible kind of deal. So now he’s going back to the debt-limit playbook, and hoping that maybe a deal that comes with the imprimatur of Senate Republicans will also get enough Republican votes in the House to pass. Besides, if a deal passes the Senate that gives him an excuse to bring it to the floor even if it doesn’t have the votes of a majority of the Republican caucus.

The problem here is that Mitch McConnell, the wily top-dog Republican in the Senate, will want to take Obama’s most recent proposal and use that as a starting point to move things even further rightward, as Matthew Yglesias carefully explains but doesn’t like much:

But that’s exactly why Obama would be foolish to take any such thing seriously. Starting in the New Year, the Senate gets more liberal. The House also gets more liberal. And the policy baseline also gets more liberal. The White House isn’t going to pull the plug on negotiations, but unless Boehner comes back to the table with something new to say they have no incentive to further weaken their hand.

Drum adds this:

Yep. However, for PR reasons, Obama has to remain the adult in the room at all times, continuing to negotiate honestly even in the face of seemingly relentless intransigence. No ultimatums, no walking out of talks. But on January 1, taxes on the middle class go up and the economy slowly begins to slide into the great Republican Recession of 2013.

That’s the leverage that will finally force GOP leaders to get serious. Obama will never say so publicly, but I imagine he knows this perfectly well.

The great Republican Recession of 2013? Maybe that’s how to frame all of this, but the Washington Post’s Ezra Klein suggests that Obama’s leverage on the first day of this next year might not be as strong as all that:

There are good theoretical arguments that the fiscal cliff’s tax hikes gives Democrats the bulk of the leverage, but the White House has watched Senate Democrats fold on taxes again and again and again. They worry that if we go over the fiscal cliff, skittish Senate Democrats will quickly fold before some House-passed plan that raises taxes on income over $750,000, does nothing on stimulus, and sets up a debt-ceiling fight for early next year. The White House thinks it’ll be very difficult for them to veto anything Senate Democrats agree to, and so they would prefer to strike the deal themselves rather than getting into a situation where vulnerable Senate Democrats could strike a deal on their behalf.

Drum offers that back-story to this. Senator Kent Conrad, the Democrat from North Dakota, publicly caved in on taxes on national television Sunday with no prompting at all:

It turns out that Conrad told Chris Wallace, after literally seconds of badgering, that his ideal compromise would split the difference between Obama’s latest proposal and John Boehner’s latest proposal. This would produce a plan with more spending cuts than tax hikes, even though Boehner has already publicly agreed to a 1:1 split. If Conrad is willing to give Boehner more than he asked for without any pressure at all, what are the odds that he and his fellow centrists in the Senate would be willing to hold out for more than a few minutes during a real negotiation with the anti-tax zealots in the Republican Party?

That’s a thought, and Drum adds this:

Plenty of people have questioned Obama’s negotiating skills over the years, and not without cause. But when you’re dealing with fanatics in the other party and mushballs in your own, it makes things pretty tough. That’s the reality Obama has to deal with.

Add too that just because Obama is heading back to Washington, that doesn’t really mean a whole lot:

According to House Republican leadership aides, House GOP leaders have not yet called their members back to Washington D.C., and WILL NOT be in session tomorrow for legislative business. According to one GOP aide, “It’s up to Senate Democrats to act right now.”

During the House Republican conference meeting late Thursday night, leadership told the conference that they would be given 48 hours before being called back to D.C. after Christmas. According to aides, leadership has not given that notice yet.

Steve Benen comments:

Look, it’s Wednesday. The last conceivable day to reach some kind of resolution is Monday. If House GOP leaders intend to give the caucus 48-hour notice, that leaves a very small-and-shrinking window. Even if the White House and Congress were to work something out tomorrow – that’s extremely unlikely, but just for the sake of conversation – the soonest the House would even consider voting would be Saturday.

As for this notion that it’s “up to Senate Democrats to act,” I’ve been hearing that a lot today and it seems more and more peculiar every time. Senate Democrats can pass a perfectly sensible package tomorrow, filled with popular proposals that enjoy broad support from the American mainstream, and which would earn the president’s signature. But if it can’t overcome a GOP filibuster and pass the right-wing House, it won’t matter – and Senate Democrats aren’t in a position to accurately guess what Republicans might find tolerable.

No one can guess anything. Everyone’s still trying to figure out why they didn’t get exactly what they wanted for Christmas, even if it was a carefully constructed absurd fantasy. The end to all government spending on most everything – a break for the poor and middle class with those who have done very well here chipping in a bit more – peace and goodwill on earth – a pony? Name your fantasy, and you can spend the week after Christmas disappointed – everyone is on vacation or just pretending to work so knock yourself out – but disappointment is a dead end. It’s best to deal with what you’ve got, and what you got this holiday season. Actually, you have no other choice. And you really didn’t want a pony anyway. No one needs more horseshit.