Tuesday, January 01, 2013

Let them eat cake! Happy New Year!

Here is Krugman saying it was a good deal, but still complaining. Of course, now we get defense cuts and across board spending cuts while getting higher taxes on wealthy and no cuts to Social Security, Medicare and Medicaid. Indeed, Dems also get unemployment taxes, payroll tax rightly expire and child credits are back in. The 250k limits to deductions, capital gains also stay in place.  I think this is a very good deal, even he now agrees- depending on what happens in March!

The only part I wish the Dems got right was Estate tax. At least they could have insisted on fixing the carried interest loophole for that. Some say they needed to leave that and capping deductions which could raise another $500bn on the table, and eliminating corporate welfare for March discussions on sequesterization and debt ceiling debate.

However, the more I read blogs on the left - I think folks forget get confused between the sequesterization and the fiscal cliff (sequesterization + tax cut expiry) . This tax deal had nothing to do with the first debt ceiling debate where Dems basically ate shit to avoid hostage taking agreeing to 1.2 trillion in advance cuts (mostly in freezes in program growth and savings from Afghan) plus 1.2 trillion in painful sequesterization in return for 2.4 trillion raise. It was all 1.2 trillion in spending cuts then, now this is 600 billion in tax raises which they get in return with little or no spending cuts. The game is now 1-1 or may be 1-2 if you assume Liberals cried for Afghan war ending.

The next game is when the 1.2 trillion in sequesterization which are the real spending cuts in both discretionary and defense spending will kick in about March (about time for Debt Limit raise again). Today GOP is claiming they don't like those sequesterization, and the defense industries will die if it happens. There is no way Dems will just let those pain sequesterization go away in March without obtaining revenue in return or save their own programs. So there will have to be an even negotiation on what gives of the 1.2 trillion just happen and everyone cries. 

So either there is a mutual disarmament (which basically means everyone agrees deficit don't matter), or adults come to the table to negotiate evenly in March, or there is mutual assured destruction (the 1.2 trillion cuts over 10 years hitting both GOP and Dem programs evenly). I sense you will get A or C. There are no adults left anymore. In fact my bets is on C, and hey who cares? Everyone keeps their tax cuts, and government cuts defense and some welfare programs. Medicare and Social Security stays intact, the selfish baby boomers win. LOL

And yes, the right strategy for Obama is to separate the debt ceiling from deficit talks. Debt ceiling should be routine and he must insist so; thank goodness there is no Triple A credit to protect again. I like the tactic of reminding the country they racked up the debt, and stop acting like kids. Let them eat cake! 

Happy New Year Folks!


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