Thinking about the fiscal cliff, and the political one

Each of the following 20 propositions are, I think, true:

1. Either there will be a deal between President Obama and the Republicans or there will be no deal and we will go over the “fiscal cliff.” This choice can be postponed until next year, but it probably can’t be avoided altogether.

2. In all likelihood, Obama won’t agree to a deal unless the tax rates of very top earners are increased.

3. An increase in the tax rates of very top earners would likely would slow the economy down.

4. Voting to increase the tax rates of very top earners (or voting “present” on a proposal to raise these rates) would hurt Republicans because those who vote “yes” or “present” might well be challenged in primaries and the resulting division would be harmful to the Party.

5. Republicans should only accept (or permit) an outcome that that entails the negative consequences described in propositions 3 and 4 in exchange for very significant concessions from the White House on spending cuts and entitlement reform OR if not accepting that outcome would send Republicans over the political cliff.

6. Going over the financial cliff would be bad for the country because it very likely would slow the economy down significantly and because the resulting defense cuts would be harmful.

7. Going over the financial cliff might or might not hurt Republicans, depending on which party receives most of the blame for not having reached a deal.

8. The Republicans have a great deal to lose if the public assigns primary blame to them for not reaching a deal. In that event, the Republicans likely will lose control of the House in 2014, leaving the Democrats in control of the White House and both chambers of Congress.

9. The extent to which the public assigns primary blame to Republicans for not reaching a deal, and thus for going over the fiscal cliff, will depend on how reasonable the Republicans’ last best offer seems to the public.

10. In the battle over public perception, the Democrats have a built-in advantage, thanks to media bias. But media bias is not necessrily a decisive advantage for the Dems, as we have seen with respect to Obamacare. Nor should Obama’s electoral victory overly cow Republicans. It does not entail the kind of popularity that will convert a losing policy hand into a winning one, as we saw following the elections of 2004 and 2008

11. The public favors an approach to debt reduction that includes meaningful spending cuts. After all, Obama was reelected on a promise to reduce the debt through a “balanced approach.”

12. Most Americans, including even a significant number of Obama voters, want to get control of the deficit primarily by cutting spending.

13. Most Americans also like bipartisanship and bipartisan commissions.

14. Bowles-Simpson is a bipartisan proposal that springs from a commission appointed by Obama.

15. Bowles-Simpson provides a balanced approach to debt reduction, and one that relies mostly on cutting spending.

16. Given propositions 11-15, there’s a good chance that, if Bowles-Simpson is the Republicans’ last best offer, the public will consider it a reasonable one, and thus place most of the blame for failure to reach a deal on Obama.

17. Because proposition 16 is by no means a certainty, and because going over the fiscal cliff would be bad for the country (see proposition 6), the number 1 option for Republicans should probably be a negotiated deal that raises tax rates for very top earners (but by less than what Obama proposes) in exchange for very significant concessions from the White House on spending cuts and entitlement reform.

18. Option 2 should be going over the financial cliff with Bowles-Simpson as the Republicans last best offer to avoid the cliff.

19. Option 1 is probably a non-starter for Obama.

20. Though far from ideal, option 2 probably would not be a bad place for Republicans to end up.

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