Groundhound Day, April Fools, or just plain insanity

You aren’t the best thinker when you roll out of bed in the morning. So when I awoke to see the news that President Obama was going to once again try to get Republicans to agree to a grand budget bargain, safe to say I was taken aback. The New York Times reports on the details that will be announced next week:

Besides the tax increases that most Republicans continue to oppose, Mr. Obama’s budgetwill propose a new inflation formula that would have the effect of reducing cost-of-living payments for Social Security benefits, though with financial protections for low-income and very old beneficiaries, administration officials said. The idea, known as chained C.P.I., has infuriated some Democrats and advocacy groups to Mr. Obama’s left, and they have already mobilized in opposition.

As Mr. Obama has before, his budget documents will emphasize that he would support the cost-of-living change, as well as other reductions that Republicans have called for in the popular programs for older Americans, only if Republicans agree to additional taxes on the wealthy and infrastructure investments that the president called for in last year’s offer to Mr. Boehner.

Mr. Obama will propose other spending and tax credit initiatives, including aid for states to make free prekindergarten education available nationwide — a priority outlined in hisState of the Union address in February. He will propose to pay for it by raising federal taxes on cigarettes and other tobacco products.

I’m going to reserve judgement until the official announcement, however, I would be lying if I didn’t say I have deep reservations. The President has tried many times before to negotiate with Republicans by going right, only to be rebuffed. Republicans have been very public about the fact that they don’t believe working with the President in any way  helps them politically. The possibility that the President is playing a longer game, working to box Republicans in by offering them a deal, in which saying no will paint them as extremists and cause the public to blame them, is why I’m withholding judgement.

I’m still waiting for the far more intelligent conversation on entitlements, spending, and taxes that we ought to be having. For example, instead of cutting social security, why not implement a tiered social security benefit based upon your lifetime income and remove the cap on social security taxes. If you work hard and make little money over your lifetime, think manual labor and manufacturing, you should be able to retire at 65. But bankers and paper pushers, for example (I’m one of them by the way), should have to wait longer to retire.

We should also have an honest discussion about taxes, which Republicans refuse to have and the reason they will never agree to President Obama’s budget proposal. I love this summary and graph from Data Pointed:

Overall, taxes stayed low until 1940, spiked during World War II, remained high through the Korean conflict, and eased slightly in the mid ’60s. From there, they held steady, until President Carter emancipated poverty-level wagemakers with his tax-free under-$8000 bracket, creating the blue wedge in our graph. Three years later, Reagan entered office and began turning the tables, finishing in 1988 with his retrograde 28% upper rate. The rich were now on tax vacation, at the expense of the poor and middle class.

A modified Reagan-era tax system lingers to this day. To his credit, Dubya did reduce taxes on very low earners, so they’re no longer getting hammered. But, the people at our economy’s core – the full-time workers earning between $20,000 and $150,000 a year – still pay at up to double the rate of the ultra-wealthy, relative to what history suggests they should.

*Update: Ezra Klein says it better than I can:

As badly as Obama wants a budget deal, Boehner seems just as determined to keep him from reaching one. For liberals, this is close to an ideal situation. The Republican Party’s brand continues to worsen. The Democratic president manages to look reasonable without ever actually signing a painful compromise into law. And Medicare and Social Security remain safe.

Consider this another way. Imagine hardcore, Social Security-loving liberals had managed to place a Manchurian candidate into the top ranks of GOP leadership. What would they have him do?

One answer would be that upon hearing the codeword “revenues,” he’d tearfully confess that Republicans had it all wrong, and the country needed higher taxes and Medicare-for-all. But what would that achieve? He’d be instantly ejected from the Republican Party. His word would carry no weight. All that brainwashing would’ve been for nothing.

Another answer is that they’d have him cut a deal with the president. But any deal that could secure Republican votes — if indeed any deal could secure Republican votes — would require big cuts to the programs that liberals hold dear, and the cost of adding further tax increases would be a reversal of defense cuts that liberals quite like. The political advantage Democrats hold on Social Security and Medicare would also be weakened, and the GOP could run in the next election as a more moderate party willing to accept tax increases in return for entitlement cuts. Then, upon winning, they could cut taxes again.

The more strategic position would be for the Manchurian Speaker to do something akin to what Boehner is doing now: Take control of the Republican Party and use conservatives as cover for scotching plausible deals that liberals don’t like in a way that weakens the brand of the Republican Party.

Boehner, of course, isn’t a Manchurian speaker. He’s simply the leader of a party that won’t abide any further tax increases. But his party is losing elections, its brand is in tatters, and his reaction to Obama’s budget will come as a great comfort to many on the left. That should give him some pause.

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