Harry Reid "not prepared to accept the emerging deal yet" [View all]

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The Morning Plum: Should progressives accept emerging fiscal cliff deal?

Posted by Greg Sargent

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On the spending cut side: $800 billion, including defense cuts. No rise in the Medicare eligibility age, but there would be “chained CPI” on Social Security, i.e., a change in the measurement of inflation that amounts to a benefit cut. While the hard line on Medicare is good, in essence, the emerging framework keeps taxes low on income between $250,000 and $400,000, while raising taxes on the middle class (the payroll tax cut would expire) and cutting Social Security.

However, according to an official familiar with the talks, the White House continues to insist on various ways of softening the blow of “chained CPI” that are supported by progressive economists, though the details are still unclear. The liberal Center on Budget and Policy Priorities is willing to support “chained CPI” if it is offset with a small increase in Social Security benefits for longtime beneficiaries and an exemption of of Supplemental Security Income, which is geared towards the poor and disabled. And so, a lot will depend on what the final agreement on Social Security looks like.

The left looks to be mobilizing to pressure Harry Reid not to accept any Social Security cuts, because he previously said Social Security should not be part of any deal. A senior Senate Dem aide tells me that Reid is not prepared to accept the emerging deal yet; he wants to talk to his caucus about it first.

The big picture: With this deal Obama will have broken the GOP’s fundamentalist opposition to raising tax rates on the rich (albeit only on income over $400,000) something that would have been deemed very unlikely a year ago. He will have held the line against the GOP demand for two years of Medicare — a victory. Debt ceiling hostage taking will have been deferred for two years, meaning it won’t get tied up in the next elections. He will have obtained stimulus spending — on infrastructure, and in the form of an extension of unemployment benefits — and as Paul Krugman notes, that wouldn’t happen if we go over the cliff. (I’m told the talks have not focused on the exact sum of stimulus spending the White House wants.) The price: The expiration of the payroll tax cut and the cut in Social Security benefits. That’s bad, but the damage could be limited, if the White House insists on it.

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http://www.washingtonpost.com/blogs/plum-line/wp/2012/12/18/the-morning-plum-should-progressives-accept-the-new-fiscal-cliff-deal/