My Friday post about how reporters are missing a big part of the “fiscal cliff” story—the leverage President Obama and congressional Democrats can gain in the debate over rich people’s taxes by not doing anything until after the New Year—opened by approvingly citing a blog post by Slate’s Matt Yglesias. And I added an update at the end flagging a new Yglesias column that declared, “the Bush tax cuts are toast.”
So I should also flag a Monday post by Bloomberg’s Josh Barro, who delivered some of the sharpest commentary on economic policy over the course of the campaign, and who says that Yglesias is “wrong, wrong, wrong”:
If the fiscal cliff isn’t resolved before the end of the year, House Republicans will pass a tax cut in January—a tax cut that extends the Bush tax cuts in their entirety, including the part for people with high incomes. The Senate will pass one that excludes the high income tax cuts. Then both parties will say they have passed a tax cut bill and are just waiting for the other side to agree to it.
Democrats cannot force Republicans’ hand unless they are more willing than Republicans to let all the Bush tax cuts expire. And they won’t be. A full expiration might well cause a new recession, which would be even more politically damaging for the Barack Obama administration than for congressional Republicans. Congress is already about as unpopular as it can become, and Republicans know they are not going to get their legislative agenda enacted in the next two years anyway. But a new recession would greatly interfere with Obama’s second-term plans.
Democrats will eventually win this fight, Barro says—but only once the economy has improved enough that they can credibly threaten to let all the Bush tax cuts expire. Until then, the GOP has the edge in this game of chicken.
I don’t know who’s right about what which side will prevail in the tax debate if we go over the not-really-a-cliff, though I suspect there’s more uncertainty at play than either Yglesias or Barro acknowledges. And with GOP media elites like Bill Kristol now entertaining the idea of a millionaire’s tax—a proposal that some Democratic senators prefer on the merits to higher rates on households earning $250,000—some sort of post-“cliff” compromise doesn’t seem out of the question. (Yglesias, for his part, responds that “Barro, uncharacteristically, has this all wrong”; his follow-up notes that the so-called “middle-class” portion of the Bush tax cuts—which Democrats want to preserve—delivers substantial benefits to rich people, so it would be perverse for Republicans not to take it.*)
But to bring this back to media criticism—it is, of course, not the job of news reporters on the budget beat to predict the future. Coverage of the fiscal debate on TV and in newspapers, though, has seemed oblivious to the considerations Yglesias and Barro are arguing about. And that makes it very hard to explain what’s really happening.
The “fiscal cliff” is being pitched to readers and viewers as a looming catastrophe, which our elected representatives must confront by putting aside their partisan differences, “showing leadership,” and embracing a long-term budget plan that nobody likes. And who knows? Maybe something like that will happen. But nothing about the objective fiscal situation means it “has” to happen, and the cliff/slope/curb/metaphor of choice doesn’t change that. So it seems more likely this will be the latest inflection point in a running battle over taxes and spending, which won’t be joined in earnest until after Jan. 1.
If that’s the case the next six weeks is mostly posturing, which is kind of a downer from a media perspective—but it means we’re headed for a standoff that could be a pretty fascinating political story. And the sooner reporters start focusing on that story, the better they’ll be able to cover it.
* This sentence has been updated with a new link.