Bryan Preston @ PJ Tatler:
Keith Hennessey writes that in the fiscal cliff negotiations, President Obama is bluffing when he threatens to veto any deal that does not include a big tax hike on the rich.
It’s a good piece, but I’m not sure that it’s right. Here’s the heart of the post.
This conventional wisdom makes three key assumptions.
- The President’s top economic policy priority is his fiscal policy goal (raising taxes on the rich).
- In a veto / no bill / blame game scenario, the President can shift most of the political blame to Republicans.
- He will make his veto decision on these two bases: fiscal policy and relative political blame.
Key flaw in the conventional wisdom: The President’s veto decision is not about tax increases or political blame; it’s about causing a recession in 2013.
I make different assumptions.
- If there is no bill, the U.S. economy will probably dip into recession for much/most/all of 2013, and it’s impossible to predict whether such a recession would be short-lived.
- A 2013 recession would be terrible for the country and terrible for the Obama Presidency. It would limit the President’s options across his entire policy agenda, economic and non-economic. And it could define and dominate his entire second term.
- President Obama believes #1 and #2, and therefore avoiding the risk of triggering a recession with his veto is an even higher policy priority than his fiscal policy goal.
- The President wants to get things done. He cares more about his own chances for policy success (across the entire breadth of his agenda, whenever he figures out what it is) than he cares about relative political blame. A scenario in which Republicans get most of the blame for a veto-triggered recession is still a loser for him if it means he can’t accomplish his second term goals.
If my assumptions are correct, then the President cannot afford to veto a bill and have no compromise enacted.
But what if the president isn’t actually interested in getting things done? Or, to focus in a bit, what if the things the president wants to get done are not the things presidents usually want to get done?
President Obama essentially campaigned for another four years in office on the promise that he would tell us what he wants to do once he has won. He didn’t run on getting any specific things done, other than one thing: Raising taxes on the rich. That’s point one in the conventional wisdom points above. He explicitly said that he would view winning re-election as a mandate to raise taxes on the rich. Four years prior, he explicitly said that he wanted to raise taxes on the rich “for the purpose of fairness,” not because hiking those taxes would lead to more government revenue or stronger economic growth. He doesn’t care about those latter two things as much as he cares about hiking taxes on the rich. He rightly believes that much of his own base puts taxing the rich above economic growth and sound fiscal policy. They all know that hiking taxes on the rich does nothing to fix our fiscal problems. But they don’t care.