What Just Happened

Hardly anyone remembers now, but sports used to be far different. No one really knew what just happened – blink and you missed the big play. Was the runner really safe at home? Fans would scream that the ump was blind, but they really didn’t know whether they’d been robbed, as they say. Instant replay changed all that. Now fans in the ballpark can get a close-up slow-motion replay on the Jumbotron – over and over again. Fans at home can watch what happened from three different angles, in high-definition, and listen to washed-out former ballplayers discuss the matter. As for football, your seats in the stadium are far from the action, unless you’re rich, and most of what really matters is almost always hidden from view anyway – what happened in the pile that caused the fumble and things like that. Fans in the stadium find themselves watching the replays on the big screen, or following the action on their iPhone. Streaming live video can settle matters. Now there’s no question of what just happened.

This changed things for sportswriters. They no longer had to explain just what happened in their morning column, with, if they were lucky, a single grainy black-and-white photograph snapped at just the right moment. They were freed to talk about character and sportsmanship and momentum and whatever else came to mind – and they had hundreds of amazing photographs available to them, as photography had gone high-speed digital too. Sportswriters shifted from talking about what just happened to what it all meant, for the team, or for the sport, or for the nation, or for mankind in general. Yes, that sort of thing is irritating, but they had to write about something. Everybody already knew just what happened. They’d seen it the night before, from three angles, in slow-motion.

This is the new model for everything. Everyone knows what just happened. No one quite knows what it means. Something is going to happen next, or something scary that was going to happen next now isn’t going to happen – but it’s certain things have changed, or, unfortunately they haven’t. Watching the instant replay won’t help. Everyone can see what happened. That’s not what really matters.

Everyone can see that on the first trading day of the year the markets jumped up – the Dow up over three hundred points and so on. New Year’s Eve, the Senate, after much turmoil, had passed a bill that would keep the country from going over that fiscal cliff – the Bush Tax cuts would not expire and make everyone pay through the nose and crush the economy. Only those who made over four hundred grand a year would go back to the old tax rates, and there’d be no massive automatic across-the-board spending cuts either, stopping a third of all economic activity – those would be put off for two months, for consideration later. Long-term unemployment benefits would be extended for a full year, so more than two million people would not suddenly be penniless and so on. Republicans didn’t like much of this – no one should go back to the old tax rates, especially the noble rich who made this country great, and the long-term unemployed were lazy moochers who should just get off their lazy asses and get a job – but the downside risk of arguing those two points was too great. They gave in and the bill passed easily and was sent to the House. It stalled there on New Year’s Day, but after much nonsense about Evil Obama and True Tea Party Conservatism it passed, barely. Republicans gave up the fight there too – the Speaker voted for the thing, not amended in any way, and his Majority Leader voted against it. Their party was split, but with all the Democratic votes and a scattering of odd Republican votes, it finally squeaked by. The markets reacted appropriately. We had dodged a bullet at the very last minute. The recovery, such as it is, could continue.

That’s what happened, and there are endless items out there on the gory details – instant replays of what was hidden from view at any given instant – but folks are still trying to figure out just what happened. Yes, we know the sequence of events and the vote counts, but did something important really change just now? The only place to find talk of that is in the morning-after columns, and Jonathan Chait offers this:

The basic gist is that President Obama traded away long-term revenue – that is, his best chance to fund the government at adequate levels – in order to keep the economic recovery going. Obama had insisted for months on end he could not accept extending the Bush tax cuts on income over $250,000 a year, and the expiration of the Bush tax cuts gave him the power to back up his pledge. Now Obama has agreed to settle for less revenue – ending the Bush tax cuts on income over $450,000 a year.

He’ll make up some of the lost revenue by reintroducing a complex mechanism called Pep and Pease that reduces income tax deductions for high-income earners. … The key thing here is that this is a worse way for Obama to raise the tax revenue; because, by reducing tax deductions for the rich, it takes money off the table that could be raised by future tax reform. If Obama had raised the revenue through straight rate hikes, as he initially proposed, he could go back later and get more revenue through tax reform. Now he has cannibalized a chunk of any future revenue haul.

What did Obama get in return for giving Republicans smaller tax hikes on the rich? He got a one-year extension of unemployment benefits, wind energy tax credits, and other temporary measures. In other words, he’s buying a little insurance to keep the recovery going in return for sacrificing long-term revenue. That’s a poor bargain but not an awful one.

The next vote, sometime in February or March, is to raise the debt ceiling of course – Obama gave up on demanding that be removed from consideration this year, so Chait offers this:

So what we have is two more showdowns in which the parties disagree not just on the outcome but even on the parameters of an outcome. Obama thinks the debt ceiling needs to be raised, full stop, without becoming a bargaining chip in a fight that threatens the stability of the global economy. Republicans want to use that chip. Then there’s the sequester, which Obama thinks should be replaced with spending cuts and tax revenue, and Republicans think should be replaced with spending cuts and more spending cuts.

If Obama makes it through both these events without either accepting draconian social policy or triggering an economic meltdown, then today’s compromise will be seen as a clever first step. That’s not what I expect. I expect instead that his willingness to bargain away his strongest leverage, and the central theme of his reelection, will make the next rounds harder, and embolden Republicans further. I suspect he will wish he had ripped off the Band-Aid all at once, holding firm on tax cuts and daring House Republicans to defy public opinion.

That’s fine, but that didn’t happen, and there’s Noam Scheiber:

Put all that together and here’s what the fiscal cliff accomplished then: It affirmed to Republicans that Obama will do pretty much anything he can to avoid a debt default, regardless of what he says. It affirmed the White House anxiety that the GOP might not blink before we default. To put it mildly, that’s quite an asymmetry. I want to believe the president can get through the next stage in this endless budget stalemate without accepting some of the more dangerous spending cuts conservatives are demanding. But at this point I’m having a hard time seeing it.

Ah, so that’s what this was about, and Paul Krugman takes this further:

So, what are the two sides really fighting about? Surely the answer is the future of the welfare state. Progressives want to maintain the achievements of the New Deal and the Great Society, and also implement and improve Obamacare so that we become a normal advanced country that guarantees essential health care to all its citizens. The right wants to roll the clock back to 1930, if not to the 19th century.

There are two ways progressives can lose this fight. One is direct defeat on the question of social insurance, with Congress actually voting to privatize and eventually phase out key programs – or with Democratic politicians themselves giving away their political birthright in the name of a mess of pottage Grand Bargain. The other is for conservatives to successfully starve the beast – to drive revenue so low through tax cuts that the social insurance programs can’t be sustained.

The latter isn’t going to happen:

Romney lost, so nothing like the Ryan plan is on the table until President Santorum takes office, or something. Meanwhile, in 2011 Obama was willing to raise the Medicare age, in 2012 to cut Social Security benefits; but luckily the extremists of the right scuttled both deals. There are no cuts in benefits in this deal… and on the principle of the thing, you could say that Democrats held their ground on the essentials – no cuts in benefits – while Republicans have just voted for a tax increase for the first time in decades.

Still Krugman isn’t very happy:

It has less to do with where Obama ended up than with how he got there. He kept drawing lines in the sand, then erasing them and retreating to a new position. And his evident desire to have a deal before hitting the essentially innocuous fiscal cliff bodes very badly for the confrontation looming in a few weeks over the debt ceiling.

If Obama stands his ground in that confrontation, this deal won’t look bad in retrospect. If he doesn’t, yesterday will be seen as the day he began throwing away his presidency and the hopes of everyone who supported him.

There’s also this:

The only thing that might save this situation is the fact that Obama has to be aware just how much is now riding on his willingness to finally stand up for his side; if he doesn’t, nobody will ever trust him again, and he will go down in history as the wimp who threw it all away.

But even that may not be enough. I guess we’ll see.

The last time around, the Republicans agreed that in exchange for refusing the government the means to pay the bills now due, for money they themselves had already appropriated and had been spent long ago, thus crashing the world’s economy forever – their original threat – they’d agree to create a fiscal cliff. At the end of the year the Bush tax cuts would be allowed to expire as planned, suddenly raising taxes on everyone, which would be a shock that 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, there’d be a major crisis for everyone. That has now come and gone, but now they want to do this again. They’re willing to crash the world’s economy unless Obama agrees to roll things back to the wondrous government-does-nothing-much world of 1927 or so. Yes, we will have to raise the debt ceiling, as usual, and just like last time the Republicans will refuse to do that, meaning the United States will, for the first time, default on its debt obligations – we just won’t pay our bills for what we’ve already spent, destroying the bond market as there will be no more safe haven anywhere for capital – the end of the world’s financial system – unless Obama does exactly what they want. He’ll have to make those massive cuts in Social Security and Medicare and Medicaid, and if they want, abolish all taxes on the rich too, and abandon Obamacare, and maybe wear sackcloth. They’ve lost now but they’ll win soon enough, and win big.

That also may be what just happened, and Daniel McCarthy identifies the core problem:

The Tea Party is meant to ensure that the next go round will be different, but the Tea Party is part of the problem. In the absence of a real opportunity to shrink government, many of its activists would settle for wrecking government – which is what failing to raise the debt ceiling and let Uncle Sam to pay (or at least charge off) his bills amounts to. A wreck was also what some were hoping the fiscal cliff would produce. But there’s nothing conservative about that, and policy-by-catastrophe is detrimental to the cause of small government in the long run.

Paul Waldman understands these folks:

Many of today’s most conservative Republicans don’t care all that much about the fortunes of the GOP. They didn’t get where they are by toiling away on the lower rungs of the party ladder, patiently working their way up. They see themselves as brave mavericks, bucking the party establishment to promote their ideological agenda. I’m sure that for more than a few of them, a bipartisan chorus of voices screaming, “Are you f-ing crazy???” does nothing but convince them that they’re right.

Ezra Klein begs to differ:

The Republicans aren’t quite as crazy as they’d like the Democrats to believe. They were scared to take the country over the fiscal cliff. They’re going to be terrified to force the country into default, as the economic consequences would be calamitous. They know they need to offer the White House a deal that the White House can actually take – or at least a deal that, if the White House doesn’t take it, doesn’t lead to Republicans shouldering the blame for crashing the global economy.

If you want to know what just happened here you’ll be stumped. The Republicans gave in because they plan to threaten the end of the world as we know it, unless they get their way in every detail, or they know that sort of thing is political suicide. It’s one or the other. Take your pick.

As for other views on what just happened, there’s Joan Walsh arguing that Nancy Pelosi is still House speaker:

Poor John Boehner… Whenever he wants to pass actual legislation, the kind that will also be passed by the Senate and signed into law by the president, he’s got to rely on his predecessor, Nancy Pelosi. Once again, just as she did with the bill to keep the government running back in February 2011, Pelosi had to round up the Democratic votes to pass a bill that Boehner purported to want passed. (In the end, he voted for it, but his No. 2 and 3 guys, Eric Cantor and Kevin McCarthy, voted against it.) Pelosi kept 172 of 188 House Democrats on board; Boehner only got 85 of 240 House Republicans. Boehner further shamed himself by closing the session without a promised vote on Hurricane Sandy relief already passed by the Senate.

It’s ironic that Boehner is going around boasting that he told Harry Reid “Go fuck yourself” after Reid said he was running a “dictatorship” last Friday. Reid was paying the speaker a compliment. Far from running a dictatorship, Boehner can’t even deliver the votes of his top two lieutenants. He’s unlikely to face any real challenge to his speakership when Congress reconvenes tomorrow, but he’s speaker in name only. With a smaller majority he’ll be even less able to make a significant move without Pelosi.

Oh, and by the way, neither side really cares about deficits:

Going over the fiscal cliff would have reduced the deficit by $1.2 trillion, though at great cost to the economy. Merely allowing the Bush tax cuts to expire would have reduced it by $1 trillion, admittedly with some pain to the middle class. In the end, the deal reached Jan. 1 cut the deficit by about $620 billion. I’m no deficit hawk, but the compromise on tax rates baked into the deal reduces tax-rate progressivity and ultimately makes it harder to fund government investments Democrats believe in, whether to reduce unemployment, improve education or expand social insurance. And meanwhile, the president continues to hype deficit reduction, inviting more ugly cuts later this year.

And in case you’re wondering, the country is run by and for the wealthy:

The real scandal of the deal is that taxes went up more for people making $50,000 than those making $400,000, thanks to a combination of ending the payroll tax cut “holiday” and keeping the Bush tax cuts for those making between $250,000 and $400,000. The deal also continued the practice of protecting the wealth of the super-rich. Yes, the capital gains tax rate went up from 15 to 20 percent, but it was 28 percent before Clinton presided over its reduction during the 1997 tech boom, and didn’t apply to dividends until the Bush tax cuts. Now dividends remain taxed at the lower, privileged rate as well. The deal maintained the estate-tax exemption at $5 million, though it was set to revert to $1 million, while bumping up the rate from 35 to 40 percent. Note that the deal did nothing to hike the “carried interest” rate that helped Mitt Romney pay a scandalously low tax rate.

All of this reflects the fact that nobody involved in D.C. policy debates makes $50,000 or less, and most probably dwell in that sweet spot protected by the deal, the $250,000 to $400,000 realm of the “not really rich,” in the formulation of coastal Democrats as well as all Republicans. And not surprisingly, they’re big winners in the deal.

No one should be surprised, and the New York Times’ Charles Blow offers this:

Be clear: there is no reason to celebrate. This is a mournful moment. We – and by we I mean Congress, and by Congress I mean the Republicans in Congress – have again demonstrated just how broken and paralyzed our government has become, how beholden to hostage-takers, how vulnerable to extremism.

A fiscal cliff deal was cut at the last possible minute, covering a minimal number of issues. It was far from perfect and barely palatable. It was a compromise, and compromises are inherently imperfect. No one likes the whole of it, but they balance the bad parts against the good and see beyond dissension.

As the fiscal cliff votes came down to the wire, many repeated the aphorism: don’t let the perfect be the enemy of the good. But sadly, we are beyond even that. Now the perfunctory has become the victim of the grueling.

The American people suffered through another moment of manufactured suspense brought on by political malpractice. There was no grand bargain. There was only a begrudging acquiescence.

He also states the obvious:

We have moved from a type of governance where the art of the compromise was invaluable to one where adherence to ridiculous pledges is inviolable. (By approving this fiscal cliff deal, many Republicans voted to broadly raise taxes for the first time in decades and many are still grousing about it.)

The change has taken place primarily among Republicans, who have struggled to balance the responsibilities and prerogatives of minority-party status with the anxiety of losing their long-held power at the expense of the growing influence of minority and historically marginalized constituencies like women and gays.

Smaller federal government! Out-of-control federal spending! States’ rights! Defense of Marriage! Defund Planned Parenthood! There is an individual argument (merit not withstanding) to be made about each of these issues in its own right. But only a person who is willfully blind or hopelessly ignorant would not acknowledge the common thread that runs through them: the fear of a future in which income, wealth and cultural inequalities dissipate and traditional power structures dissolve.

Ah, so that’s what just happened, and thus this is what we can expect:

So we will soon be pushed back into a state of panic because Republican members of Congress demand a state of paralysis. We are stuck with this reckless, whining and ultimately dangerous gaggle of wounded spirits. As many people can attest, an animal is often at its most dangerous when it’s sick, wounded or afraid. Brace yourselves.

This is the new model for everything. Everyone knows what just happened. No one quite knew what it meant. Now everyone knows – a problem was solved and other far greater problems were created. The only thing to do is watch the rest of the game.

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About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
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4 Responses to What Just Happened

  1. Russell Sadler says:

    Thanks again for staying up late and giving us the best pig picture out there. You are appreciated

  2. Rick says:

    A few comments on the comments of the pundits, the first being Ezra Klein’s contradicting Paul Waldman’s contention that Republicans act like crazy people because so many of them these days never had to work their way up within their party:

    “The Republicans aren’t quite as crazy as they’d like the Democrats to believe. They were scared to take the country over the fiscal cliff. They’re going to be terrified to force the country into default, as the economic consequences would be calamitous.”

    Not so fast. Here’s a better description:

    If you’re familiar with “The Hobbit” and “Lord of the Rings”, you’re familiar with Gollum, a smarmy little creature with a split personality — one side being semi-reasonable and sympathetic, the other being pure evil and bat-shit crazy and out for total destruction. That’s today’s GOP. Much as I like almost everything Ezra Klein says, I think Waldman is right on this one. I have no doubt that Gollum would, in a heartbeat, let this country default on its debts.

    Jonathan Chait:

    “Then there’s the sequester, which Obama thinks should be replaced with spending cuts and tax revenue, and Republicans think should be replaced with spending cuts and more spending cuts.”

    And I agree with neither — not just that we don’t really need to be talking about tax revenue right now, but especially that we REALLY don’t need spending cuts at all — not even defense spending — at least until the economy gets humming again. Fix the economy first, and if we still need to, then we can worry about the deficit and debt.

    (Of course, Republicans won’t ever go for that, since their “concern” over the deficit and debt is only a ruse anyway — just a way to win over to their agenda people who don’t agree with their philosophy of creating a government so small that it can’t afford to have a safety net.)

    Paul Krugman:

    “The only thing that might save this situation is the fact that Obama has to be aware just how much is now riding on his willingness to finally stand up for his side”:

    And that’s been a major problem here. After all, there are two sides in this argument, and if you look closely, you’ll notice that Obama is on neither of them:

    (a) The Republicans (allegedly) believe we need to cut spending as a way to repair the broken economy, and (b) the Democrats, at least in theory, think we need to increase spending to help rebuild demand. Obama apparently doesn’t really believe in the Democratic position, since he too often is heard talking about seeking ways to cut spending.

    So the two things Obama needs to do right now:

    (1) Make it absolutely clear to everybody that there will be no more discussions of anything else until after the debt ceiling increase is voted on and passed (or better yet, permanently abolished as an issue), and

    (2) Start loudly building the case for Keynesianism! Too many people in this country don’t believe in it. Too many take it for granted that the economy is being held back by a crushing debt, when there seems to be absolutely no evidence of that.

    And too many people from both sides who haven’t given this any thought whatsoever think there’s too much government spending during this weak economy, having apparently forgotten the lessons of the Great Depression: You reduce the deficit during good economic times, and increase deficit spending during bad times. And not just Obama, but pundits everywhere, especially Democrats, should start talking this up, too.

    With all the constant talk we hear in the media — about deficits and debts and taxes and spending — you’d think there’d be even a little of it dedicated to the actual competing principles of the opposing sides. As it is, there’s virtually none.

    Rick

    • Madman says:

      Well said! You missed one point: that now EVERYONE is channeling Grover Norquist (except Paul Krugman). EVERYONE is fussing about THE DEBT, and EVERYONE was afraid to allow ALL the Bush cuts to expire. Even Democrats are afraid of the “crushing burden” on the middle class if those cuts ex;ired. Seems to me that those cuts did very little FOR the middle class — that is why there was no stimulative effect. I did not notice them in my paychecks — a few dollars here or there did NOT send me out on a spending spree. Therefore — the loss of a few dollars here or there would NOT be the “crushing burden” that even Democrats feared so greatly. They seem to forget the magic of broad-based taxation: that just a few dollars here and there, from MILLIONS of people, adds up to Billions very quickly. Allowing ALL those cuts to expire would FINALLY end the structural deficit they created when passed.

      Just sayin’.

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