There’s been a lot of discussion on liberal blogs (see Matt Yglesias, Jonathan Chait, Kevin Drum, Greg Sargent, and Chait again) about whether President Obama’s decision to go along with the Republican insistence on tying a deficit reduction package to the debt ceiling vote constitutes a blunder or a deliberate strategy — whether he’s a “bad negotiator” who’s let the Republicans hold him (and the American economy) hostage to their demands for spending cuts, or a “clever moderate” who’s using the debt ceiling to force his own base to live with painful deficit choices.
Put me in the “clever moderate” camp. My (limited) contact with prominent Democrats suggests that people in the White House share the Republican premise that we need to do something about the deficit this year in order to reassure markets and creditors that we aren’t just going to keep sailing toward the waterfall. (This is not the consensus in the liberal blogosphere, of course, which explains a lot of progressive disgruntlement with the president.) Tying that “something” to the debt ceiling vote probably isn’t the White House’s ideal scenario, but it has two advantages: In the run-up to the vote, the president can use the specter of Tea Party extremism (“these crazies want to throw the American economy off a cliff!”) to sell reluctant Democrats on spending cuts, and in the event that the impasse can’t be broken and the government actually has to start choose which obligations it fulfills, the politics of “prioritization” will almost certainly favor the White House rather than the G.O.P., for the reasons Yglesias and Josh Barro lay out. There are economic risks here, obviously, but I think the administration has good reason to be confident that they can get a deal worked out. (John Dickerson’s rundown of the current state of play seems about right to me.)
And if they do work out a deal — and this is the crucial part — it doesn’t have to include nearly as much in the way of revenue increases as a liberal president would normally prefer, because taxes are already scheduled to go up. Republicans are being intransigent on taxes in these negotiations for ideological reasons, but also because they know that if Obama is re-elected (which is more likely than not), they won’t be able to block tax increases: With a non-stroke of the pen, he can just let the Bush tax cuts expire — for the rich, or even for the middle class as well.
This is the trump card that liberals carry into all these negotiations. If we just do nothing on taxes except let the “current law baseline” run its course, their preferred vision wins.
