If this weren’t so terrible, it would be funny.
The Administration is worried that there won’t be a fiscal cliff deal by year end. Per Bloomberg:
The co-chairman of President Barack Obama’s 2010 fiscal commission said it’s unlikely the president and Congress will reach a deal by the end of this year to avert the so-called fiscal cliff.
Erskine Bowles, also a former chief of staff to President Bill Clinton, estimated there is a one-third probability the sides will strike a deal by the end of this year. Speaking today at a breakfast in Washington sponsored by the Christian Science Monitor, he said there’s another one-third chance that all sides will reach a deal early in 2013.
“I’m really worried,” Bowles told reporters. “I believe the probability is we’re going over the cliff.”
Bowles isn’t involved in the budget negotiations, though he said he met with Obama yesterday.
Yves here. Given the Bowles visit with Obama, this means (as we’ve indicated from the get go) that Obama really has his ego invested in getting a deal done by year end.
In fact, NOT getting a deal done is far better for everyone except the uber rich. As Paul Krugman has stressed, going into 2013 with no deal in place is not a dramatic event, and would substantially weaken the Republican’s bargaining position as far as preserving tax breaks for the wealthy are concerned. And if the Administration wanted to preserve middle cut tax relief, like lower payroll taxes, it can make that retroactive to the start of 2013.
Letting the negotiations go into 2013 also increases the odds of preserving Social Security and Medicare in their current form, since they will not be affected at all by the automatic budget cuts that would kick in in the absence of a deal.
But Obama, through folks like Bowles who have media access, is putting out panic signals to pressure Congresscritters to get a deal, any deal, done by December 31. And he’s also trying to rally the middle class to petition Congress to implement austerity, when the experiments in Ireland, Latvia, Portugal, Spain, and Greece all have shown that it makes debt to GDP worse and increases unemployment while shredding social safety nets. In other words, as Lambert has put it, we are all supposed to demand Congress to have one kidney removed.
From the Financial Times:
Mr Obama sought to increase pressure on Republicans to give ground by launching a new social media campaign.
The move by Mr Obama heightened the political theatre surrounding the US budgetary stand-off, with little more than a month left before the American economy is hit by a mix of spending cuts and tax increases that could tip it back into recession.
“I’m asking Americans all across the country to make your voice heard,” Mr Obama said, suggesting emails, phone calls and the use of social media such as Facebook and a new Twitter hashtag called #My2k, a reference to the $2,000 tax increase per family that would occur if the US plunged over the fiscal cliff.
“I want to make sure everybody understands this debate is not just about numbers. It’s a set of major decisions that are going to affect millions of families all across this country in very significant ways,” Mr Obama said.
No kidding, except the options that Obama is allowing to be considered range from utterly dreadful to merely awful. And the part the officialdom is failing to acknowledge is that the immediate hazard of hitting the fiscal cliff tripwire is on the impact on confidence. Obama’s scaremongering to sell the deal is damaging confidence now, while telling the truth, that any impact of the fiscal cliff would be gradual and in any event could be reversed (for instance, via making tax changes retroactive to the beginning of 2013, or catch-up payments) would alleviate the increasing nervousness among businessmen (also flagged in the FT article cited above, based on the latest Fed beige book).
So I urge all NC readers to go mess with Obama’s messaging:
Use #My2k and Facebook to tell everyone that we need to run deficits when the economy is slack and unemployment is high, and the deficit hysteria is being promoted by Wall Street and big businesses to get their tax levels lowered at the expense of the middle class, particularly by cutting Medicare and Social Security
Call your senators and representative and give them a piece of your mind
Obama won’t change course, but Congrescritters are a different story. If the powers that be insist on engaging in economic malpractice, they need to be reminded that the public is overwhelmingly opposed to cutting Social Security and Medicare.