That Cliff

Up on Hollywood Boulevard here you can get a stiff and quite traditional martini at Musso and Frank – they’ve been serving those since 1919, along with basic grill fare – a big steak and a side of creamed spinach and that sort of thing. It really is old school, dark and moody, with those wise-cracking waiters who always seem to be guys in their seventies and eighties. It’s a trip back in time, and when they were out here writing screenplays – slumming as it were – Hemingway and Fitzgerald and Faulkner used to drink there, heavily. So did Raymond Chandler, but it wasn’t exactly a writers’ hangout. It was a place to be depressed about Hollywood, where all the deep metaphoric stuff those guys wrote had to be turned all literal by the studios. Out here if something is a cliffhanger there’s usually someone actually hanging from a cliff – the hero in real trouble or the sweet young thing the hero somehow has to rescue. That’s how things worked in the old silent serials like the Perils of Pauline and later in those decades of Republic serials – often there was an actual cliff and you had to come back to the movie theater the next week to see what happened next. Now, with television shows, you have to tune in next week, and there are fewer cliffs – but it’s usually something just as literal. Someone’s in a real jam and the dilemmas aren’t subtle – someone’s trapped in a haunted elevator or whatever and you’ll just have to wait to see how they do the impossible and escape. We don’t do subtle out here in Hollywood. Faulkner got out as fast as he could. Hemingway didn’t last much longer either. Fitzgerald stayed, and he kind of drank himself to death. Enough with the cliffs, already!

The whole business is tiresome, even if a useful plot device to generate traffic. Dickens did the same sort of thing. His novels were originally serialized – everyone wanted to know what would happen to little Nell of course. And now we have a cliffhanger of an election, where everyone want to know how Obama can get himself out of the predicament he’s in – one quite bad debate performance, one quite good debate performance, and one debate to go, and Romney surging in the polls. Yes, tune in next week. The race is too close to call. Obama is at the edge of the cliff, hanging on by his fingernails, and you really won’t know if Romney will push him off that cliff until late in the evening of the first Tuesday in November – if then. After all, a dozen years ago that Bush-Gore thing wasn’t decided for another month, and there every damned day was a cliffhanger. This time it may be easier on everyone, but not much easier. Democrats are no doubt already drinking heavily. That’s the Fitzgerald response to unresolved and seemingly unending tension of the most crude and obvious sort. Who needs it? Little Nell dies, by the way.

Still we are dealing with a useful plot device to generate traffic – a cliffhanger of an election keeps all the political pundits tapping away at their laptops and posting those breathless analyses of the dire nature of the situation, and it certainly keeps every talking head on Fox News and MSNBC and CNN talking on and on. A cliffhanger of an election generates jobs, or even makes careers, even if all the talk is what-if speculation. The statistician Nate Silver, who almost always gets it right, is now saying forget all the polls and predictions – there’s too much noise to know what’s going to happen. Yes, Obama is at the edge of the cliff, but Silver is telling everyone to cool it – his best guess, that Obama survives, is provisional at best. We’ll all just have to wait. Here that calls for a short drive down the street to Musso and Frank for a stiff martini, or seven.

The odd thing is that we’re not even talking about the real cliff, because that’s too scary. That would be what everyone calls the fiscal cliff. On December 31, 2012, at midnight, everything changes. In late February, Ben Bernanke was the first person to use the term “fiscal cliff” for what we’re facing. Testifying before the House Financial Services Committee he described “a massive fiscal cliff of large spending cuts and tax increases” – all that stuff that kicks in at midnight.

Wikipedia had a complete and heavily footnoted and mind-numbingly detailed description of how this all came about – but it comes down to a series of chickens coming home to roost. The terms of the Budget Control Act of 2011 are scheduled to go into effect – as you remember that included the spending cuts agreed upon as part of the debt ceiling deal from 2011, where the Republicans refused to raise the debt ceiling, forcing the United States for the first time into default and declare itself bankrupt and stiff the Chinese and anyone else holding our bonds, unless Obama agreed to trillions in cuts to all social programs, dismantling everything done since FDR and so on. Obama said he’d agree to some cuts, but he wanted to go back to the previous tax rates to bring in a bit more money. The Republicans would have none of that. There was no way they’d agree to raise taxes a penny, and Obama’s idea that maybe just millionaires and billionaires could get back to the old tax rates was totally unacceptable – that was class warfare. Obama and John Boehner almost struck that deal, but the Tea Party folks in the House forced Boehner to abandon that, and finally Boehner wouldn’t even return Obama’s phone calls. There was no way out, but somehow everyone decided that the United States declaring bankruptcy and stiffing the world was a bad idea. The compromise was to allow Obama to raise the debt limit, for now, but agree that on the first day of the next year there would be deep automatic cuts to everything, without exception – at least twenty percent, and that would even include the military. The Budget Control Act of 2011 stipulated that no one could call for any exceptions of any kind.

This was brutal and crude – draconian as they say – but no one took it seriously. The Democrats didn’t want every social and educational program crippled or destroyed, and surely the Republicans didn’t want the military eviscerated. The idea was that the prospect of such cuts would get each side to talk to the other side and work something out – no one wanted Armageddon on these matters. But it didn’t work out that way – no one really talked at all, except to endlessly sneer at each other, which is what one would expect in an election year. Thus we are at the edge of that cliff.

There’s more of course. Among the other laws set to sunset at midnight on December 31, 2012, are the end of last year’s temporary payroll tax cuts, so that’s a two percent increase for most workers, and there’s the end of certain tax breaks for businesses, stimulus stuff, and shifts in the alternative minimum tax that would take a larger bite in taxes from millions of folks. And there’s the big one, the expiration of the massive Bush tax cuts from 2001 and 2003, along with the beginning of taxes related to the new Affordable Care Act. There are a lot of chickens coming home to roost. We are at the edge of a cliff here. All these tax increases and spending cuts could easily drive the economy back into a recession, or worse. That might actually be likely. Of course the deficit, as a percentage of GDP, would be cut in half, as if that matters. Still, we wouldn’t be as bad off as Greece, as if that matters.

The problem is that no one is working on any of this, and some are worried:

On Thursday, 15 of the nation’s largest financial companies warned President Obama and Congress in a letter that interest rates could spike significantly if policymakers do not agree to stop the series of automatic tax hikes and spending cuts and replace them with a long-term plan to tame the federal debt.

In an interview, JPMorgan Chase chief executive Jamie Dimon said he would use all the power he has as head of the country’s largest bank to press lawmakers for a solution. Dimon is a major backer of a Washington-based campaign known as “Fix the Debt,” which is planning to spend $30 million to pressure lawmakers.

“I will do whatever it takes,” he said.

This item goes on to explain that the White House and congressional Republicans now appear ready to play chicken over all this:

Administration officials say the president is prepared to veto legislation to block the tax hikes and spending cuts unless Republicans agree to increase tax rates on the wealthy, a red line for many GOP lawmakers.

The cliff is there. It’s real enough, but Obama would rather not play nice with House conservatives who refuse to extend the Bush tax cuts for the middle class, unless, as Lori Montgomery reports in the Washington Post, tax cuts for the rich are included in the package:

Freed from the political and economic constraints that have tied his hands in the past, Obama is ready to play hardball with Republicans, who have so far successfully resisted a deal to tame the debt that includes higher taxes, Obama’s allies say.

In the days after the November election, the tables will be turned: Taxes are scheduled to rise dramatically in January for people at all income levels, and Republicans will be unable to stop those automatic increases alone. …

Some Republicans – such as Sen. Jim DeMint (R-S.C.), a tea-party favorite – have conceded that an Obama election victory would amount to a mandate to raise the top rates. But [John] Boehner recently ruled out that idea, and senior GOP aides say letting the top rate rise, even briefly, above 35 percent is a line party leaders cannot cross.

The election is a cliffhanger, but if Obama wins, getting safely off that particular cliff, we have a second cliffhanger, relating to the survival of the economy. Nothing is easy, and there’s this:

If he wins reelection, Obama may finally be able to dictate the terms of a bipartisan debt-reduction deal. And if he loses to Republican Mitt Romney, Obama could make sure that tax rates rise before he hands over the keys to the White House on Inauguration Day in late January.

Administration officials declined to say whether the veto threat will stand if Obama loses the election.

Obama has never explicitly said whether he is prepared to let the new year arrive without taking action to avoid the cliff. Some Republicans, noting that the president has backed off demands for higher taxes twice in the past, are skeptical that he will stand firm now.

Just don’t bet on it this time:

Impediments to a deal are legion. Democrats pumped up on an Obama victory would resist compromise on the top rate, a point of partisan contention since it fell from 39.6 percent to 35 percent more than a decade ago as part of a package of tax cuts signed by President George W. Bush.

That still ticks them off, and if Obama wins the Republicans would really be stuck:

One option is revisiting the terms of a deal Obama discussed with Boehner and House Majority Leader Eric Cantor (R-Va.) during last year’s battle over the federal debt limit. At that time, Republicans offered to generate $800 billion in fresh cash for the government over the next decade through an overhaul of the tax code and Obama agreed to push the top rate below 35 percent.

But Democrats say they would want far more than $800 billion if Obama wins. Even if the parties could agree on a revenue number, no one believes lawmakers could rewrite the code before hitting the cliff in January. So the tax-writing committees would have to do the rewrite next year, leaving the issue of where to set the top rate in 2013 as one of the thorniest barriers to a deal.

Jonathan Chait sees things the same way. On December 31, Obama can simply let the Bush tax cuts expire and then start with a clean slate, and at that point, Obama is the one with all the leverage:

On January 1, 2013, we will all awake to a different, substantially more liberal country. The Bush tax cuts will have disappeared, restoring Clinton-era tax rates and flooding government coffers with revenue to fund its current operations for years to come. The military will be facing dire budget cuts that shake the military-industrial complex to its core. …

All this can came to pass because, while Obama has spent the last two years surrendering short-term policy concessions, he has been quietly hoarding a fortune in the equivalent of a political trust fund that comes due on the first of the year. At that point, he will reside in a political world he finds at most mildly uncomfortable and the Republicans consider a hellish dystopia. Then he’ll be ready to make a deal.

Leading up to the New Year, there will be a concerted effort to preempt this policy shift, by bringing the two parties together to consummate a version of the endlessly touted (but little-understood) Bowles-Simpson agreement that GOP House members rejected.

The Republicans can now bring up the Bowles-Simpson stuff – that commission’s suggested mixture of tax increases and spending that they hated before, and led by Paul Ryan, that they roundly rejected as utterly foolish – but that may be too little too late. Chait argues that Obama will refuse to make a Bowles-Simpson kind of deal as this year winds down, because he knows that his leverage will be far greater once the Bush tax cuts are finally gone. Chait says he knows “what Obama-land looks like when it’s under the spell of bipartisan delusions” – and there will be no more of that. There was the debt ceiling fiasco – and all we got from that was a downgraded credit rating. Chait is convinced Obama is no longer under any delusions about Republican obstructionism – it’s all bullshit and there’s no need to deal with it. Obama can just wait calmly until January begins and then let Republicans be the ones hanging on the edge of the cliff if they refuse to negotiate. They will. They’ll have no choice. He’ll have them by the balls. Their hearts and minds will follow.

Kevin Drum isn’t so sure:

Obviously this scenario depends on Obama winning reelection, but it also depends on Democrats holding firm. If Republicans can peel off a few centrist Dems in the Senate and pass some kind of deal, Obama might be hard pressed to hold out. Nonetheless, I think Chait is basically right. A freshly reelected Obama has little reason to waste time negotiating in December (though he’ll probably have to pretend just for the sake of form), when he knows that January produces a whole new ballgame. And unlike 2010, when the economy was fragile and January heralded a new Republican majority, 2012 will be just the opposite.

Republicans won’t concede on taxes unless their backs are to the wall and they no longer have any choice. Obama probably gets that. We can all hope, anyway.

Yes, but it will still be a cliffhanger, and as for how this all came about, Jonathan Cohn simply says we just live in two different countries:

We’ve come to think of “blue” and “red” states as political and cultural categories. The rift, though, goes much deeper than partisan differences of opinion. The borders of the United States contain two different forms of government, based on two different visions of the social contract.

In blue America, state government costs more – and it spends more to ensure that everybody can pay for basic necessities such as food, housing, and health care. It invests more heavily in the long-term welfare of its population, with better-funded public schools, subsidized day care, and support for people with disabilities. In some cases, in fact, state lawmakers have decided that the social contract provided by the federal government is not generous enough. It was a blue state that first established universal health insurance and, today, it is a handful of blue states that offer paid family and medical leave.

In the red states, government is cheaper, which means the people who live there pay lower taxes. But they also get a lot less in return. The unemployment checks run out more quickly and the schools generally aren’t as good. Assistance with health care, child care, and housing is skimpier, if it exists at all.

The result of this divergence is that one half of the country looks more and more like Scandinavia, while the other increasingly resembles a social Darwinist’s paradise.

If that’s so it’s no wonder we always get cliffhangers. We get unresolved and seemingly unending tension of the most crude and obvious sort as the Scandinavians and the social Darwinists work on trapping each other on the edge of some cliff or other. At least neither Obama nor Romney even mentioned the fiscal cliff in the first two debates. If they had we’d all end up a Musso and Frank, drinking heavily. There are only so many cliffhangers we can stand.


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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