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The Art of the Deal
Author: BobR    Date: 07/22/2011 12:58:34

With a fixed dealine quickly approaching, President Obama seems to be doing what he can to ensure that the debt ceiling is raised in time to avoid calamity, including floating a generous proposal yesterday. He had previously endorsed a plan by the Senate "Gang of Six". Both have been rejected by House Republicans because they include revenue increases. Yet they will likely have to accept a deal anyway. Let's take a look.

President Obama's most recent offer has something for everybody to hate. For those on the left, there are "adjustments" to programs like Social Security and Medicare. You will definitely be hearing screams like "Oh my God - he's really done it this time. This is the Worst. Thing. Ever..." Let's look at those cuts, shall we?

  • Increasing the eligibility age for Medicare recipients from 65 to 67 by 2036.
  • Raising co-pays and premiums for Medicare beneficiaries based on their incomes. Such "means testing" already exists; the president's proposal would expand it.
  • Decreasing the size of annual cost-of-living increases in Social Security benefits.

Okay, um... that doesn't seem too bad, does it? Let's take them one by one.

Medicare Eligibility Age: This is a two year increase over 25 years. In the same time frame, life expectencies are predicted to rise by 3.5 yrs. This means the increase will actually lag behind the population. In that same time period as the baby boomers reach the age where they will be able to make use of Medicare, the number of people signing up will increase fairly dramatically. This increase is actually rather conservative.

Income-based premium increases: This means that the people who can afford it will pay a little more, and those that can't will see no change. This should make progressives happy.

Decreasing COLA increases: There actually haven't been any COLA increases the last couple years because of the economy. So (zero x anything) = zero. Once the economy begins to improve, then this will be a factor, but without hard numbers it's hard to tell how much. Note though that this isn't a decrease to existing payments, but a reduction of future increases to payments.

For this progressives are going to write him off?

The Republicans, of course, are acting as expected:
Some pundits and political insiders say Republicans should leap at the offer. But there's a hitch: The new revenue — mainly from overhauling the tax code and lowering rates by eliminating or limiting a broad swath of loopholes, deductions and tax breaks — presumably would violate a no-net-tax-hike pledge that scores of Republican lawmakers have signed.

Mostly for that reason, House Republicans so far have rejected Obama's overture, despite the interest shown by Speaker John Boehner. Some pro-Republican analysts seem bewildered.

Obama's offer of big spending cuts would have "brutally fractured the Democratic Party," and congressional Republicans probably "will come to regret this missed opportunity," wrote David Brooks, a moderate-to-conservative columnist for The New York Times.

Even anti-government anti-Obama stallwarts like Grover Norquist are backpeddling, saying that letting tax cuts expire do not violate the Tea Party anti-tax pledge. Presumably, Norquist knows this is the best deal the Republicans are going to get, and letting the debt ceiling default is bad for everyone.

For Obama, though, this is a win-win (from the first linked article):
If Congress approves a version of the "grand bargain," Obama can run next year as a president who began taming the runaway deficit, extracted concessions on higher taxes from Republicans and put Medicare and Social Security on a possible path toward greater stability.

If congressional Republicans block the plan — and especially if the Aug. 2 debt ceiling deadline is missed — Obama might persuasively argue that he tried his best to strike a compromise, at some political risk to himself. Recent polls suggest that strategy is working, as Americans seem disgruntled with the Republicans' dug-in opposition.

This is the art of the deal. Put the opponent into a position of having to reject what they want so that they will have to take what you are offering.

96 comments (Latest Comment: 07/23/2011 00:11:13 by wickedpam)
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