Deal or no deal

A fiscal cliff deal appears to be in the making. The Republicans seem willing to allow a fairly substantial rise in taxes on the affluent; in return, they want cuts in Social Security -- and the cuts look to be rather substantive. That is to say, the deal will accept something called chained CPI, an arcane term which means fewer cost-of living increases for seniors. As Brad DeLong puts it:

"Chained-CPI" is code for "let's really impoverish some women in their 90s!" It's a bad policy. It should be off the table.

Chained CPI also disproportionately hikes taxes on people in the $30-$40,000 range.

So far, this is reminding me of the Obama of the bad old days, when he was far too ready to wheel and deal on Social Security.

Paul Krugman says that the Medicare eligibility age will not be raised, but Ezra Klein seems to indicate that this option may still be on the table.

On stimulus, unemployment insurance will be extended, as will the refundable tax credits. Some amount of infrastructure spending is likely. Perversely, the payroll tax cut, one of the most stimulative policies in the fiscal cliff, will likely be allowed to lapse, which will deal a big blow to the economy.

I prefer spending on infrastructure. Creates jobs; increases the rate of growth; may ultimately pay for itself. The real problem right now is not deficit spending but uneployment. Full employment pushes wages up, which slowly but surely pushes people into higher tax brackets, which brings in scads of new revenue, which painlessly eases the deficit.

Are you curious about Defense cuts? Taylor Marsh sums up:

As for Pentagon cuts, they’re hidden under a unicorn in an addendum you’ll find after a wild goose chase.

Okay, so it’s not that opaque. Obama’s new deal calls for $100 billion in defense cuts, while his cave on Social Security is $30 billion more than that.

Obama is not negotiating from a position of strength.

The hell of it is, many GOP legislators (and rank-and-filers) will hate this deal too, since taxes on the rich are the only thing those guys really and truly care about. Boehner will have a harder time getting his team to go for a deal like this than Obama will -- even though the Dems are the ones getting screwed.

Given the situation, every Dem in the country should do whatever they can to force Obama into pursuing a more progressive course. The Republicans are going to shriek and howl anyways, so we might as well give 'em something to shriek and howl about.

A new story in The Hill indicates that the military is the place to cut the fat:

Several high-profile defense think tanks from across the political spectrum are on relatively the same page, in terms of what kind of financial hit the Pentagon should take in the coming decade, according to a recently released report.

The study, compiled by Washington-based National Security Network, found the average spending reduction to DOD coffers recommended by these think thanks came to just over $510 billion over the next ten years.

That number dwarfs the $100 to $300 billion top defense industry leaders proposed in early December as the most budget reductions the Pentagon could handle, while maintaining national security priorities worldwide.

If Democrats must make one painful sacrifice, let it be the payroll tax cut. As for Social Security: Raise the cap; problem solved.