Paul Krugman is a Political Rookie. Or How Barack Obama Left John Boehner Holding the Teabag, Again.

Boehner-cryingPaul Krugman is a political rookie. At least he is when compared to President Obama. That's why he unleashed a screed as soon as word came about the debt ceiling compromise between President Obama and Congressional leaders - to, you know, avert an economic 9/11. Joining the ideologue spheres' pure, fanatic, indomitable hysteria, Krugman declares the deal a disaster - both political and economic - of course providing no evidence for the latter, which I find curious for this Nobel winning economist. He rides the coattails of the simplistic argument that spending cuts - any spending cuts - are bad for a fragile economy, ignoring wholeheartedly his own previous cheerleading for cutting, say, defense spending. But that was back in the day - all the way back in April of this year.

But as I said, Paul Krugman is a political rookie compared to Barack Obama. He is either unwilling or unable to actually look at the deal that was announced and realize what just happened: Barack Obama ate John Boehner's lunch, and then he turned Boehner out to go preach to his conservative colleagues that this eating of the lunch by Obama is actually politically good for them.

I am not kidding. Nor exaggerating. I will show you exactly how that happened if you bear with me a little bit. But first, let's get some details of the deal out of the way so that everyone has an idea what we're talking about.

The details

Here's the quick and dirty (The White House has a summary here and more details here):
  • $900 billion in initial cuts (below CBO's baseline) through capping discretionary spending (meaning that nothing is being cut right now). Both parties had largely agreed to these cuts during the debt talks. This is really only about $750 billion of actual cuts; the other $150 billion comes from saving on interest payments on the national debt. This also raises the debt ceiling by $900 billion.
  • Initial cuts do not include Social Security, Medicare, Medicaid, or programs for the poor. It actually increases Pell grants - even in Boehner's bill.
  • $350 billion (almost half of these cuts) in cuts in the base defense budget - these are not simply the savings coming from winding down the wars. This actually cuts the base defense budget.
  • Specifically protects the President's historic investment in Pell Grants.
  • Sets up a bipartisan "supercommittee" of Congress (half and half Democrats and Republicans) to achieve $1.5 trillion in additional deficit reductions with both tax reform and entitlement reform on the table.
  • They must achieve at least $1.2 trillion in reduction or automatic cuts set in of that amount, spread equally between security (Defense and Homeland Security, mainly) and domestic spending set in. Social Security, Medicaid, low-income assistance programs and Medicare benefits are exempt (yes, I know you can swear you read or heard on the ether that it is not so, but it is. Follow along below). These are the so-called "triggers."
  • Either way, the debt limit increases additionally by a commensurate amount to the cuts (at least $1.2 trillion, at most $1.5 trillion).
  • A balanced budget amendment is guaranteed a vote, but not passage. But Congress can avoid both the supercommittee requirement and the alternate automatic cuts if it sends a balanced budget amendment to the states (which. will. never. happen. - because Republicans won't agree to anything balanced in terms of the balanced budget amendment.).
Remember that the President can still veto anything coming out of this committee and Congress (in which case the triggers go into effect).
    The triggers - whom are they for, really?

    Now let's get to the fun part: the triggers. The more than half-a-trillion in defense and security spending cut "trigger" for the Republicans will hardly earn a mention on the Firebagger Lefty blogosphere. Hell, it's a trigger supposedly for the Republicans, and of course, there's always It'sNotEnough-ism to cover it.

    No, the loudest screeching noise you hear coming from Krugman and the ideologue Left is, of course, Medicare. Oh, no, the President is agreeing to a Medicare trigger!!! Oh noes!!! Everybody freak out right now! But let's look at the deal again, shall we? From the White House fact sheet, here is what the President actually agreed to.
    Consistent With Past Practice, Sequester Would Be Divided Equally Between Defense and Non-Defense Programs and Exempt Social Security, Medicaid, and Low-Income Programs: Consistent with the bipartisan precedents established in the 1980s and 1990s, the sequester would be divided equally between defense and non-defense program, and it would exempt Social Security, Medicaid, unemployment insurance, programs for low-income families, and civilian and military retirement. Likewise, any cuts to Medicare would be capped and limited to the provider side.
    Read that again. That's what the media and the whiners are not telling you. The President agreed to no Medicare benefit cuts in the "trigger." None. The cuts, if they automatically happen, would go to whom? The providers. Who are these providers? Doctors, hospitals, clinics, Medical device makers, service providers, drug manufacturers. Who do you think they mostly donate to in the political season? The entire pressure on these Medicare cuts are on the private medical (and pharmaceutical) industry! So let's ask that question again. The Medicare "trigger" is a trigger really from whom again? As a matter of fact, both big triggers (Defense and Medicare provider cuts) are triggers for the Republicans!

    So while Krugman is correct in pointing out that the Teabaggers will hold everything and its mother hostage in order to get what they want, what they want is already being taken away from them: they will not be able to threaten the deficit reduction group with looming cuts in Social Security, or programs for the poor, civilian or military retirement, or Medicaid, or even Medicare benefits. Instead, if the Republicans do not let the deficit committee act in a manner commensurate with the President's demand that it include tax revenue increases, they will be setting up big defense cuts and setting themselves up for dry campaign coffers on donations from the medical and pharmaceutical industries.

    And oh, by the way, has Congress ever adjusted Medicare provider payments that are scheduled to decrease by law? Oh, that's right. Congress does that every year. It's called a Doc Fix.

    Therein lies the other little open secret about this. There is no such thing as a "locked in" decrease in spending. It simply does not exist. Congress, I hate to tell the blathering screaming blowhards, is the lawmaking body. It can say this year "Oh yes, we're really going to do this next year," and then next year say "Oh, never mind, we're not going to do it." And they do it all the time.

    The triggers and the timing

    You see, these so-called "triggers" do not go into effect in 2012. They go into effect in... drumrolls... 2013. Again from the White House fact-sheet:
    Enforcement mechanism established to force all parties – Republican and Democrat – to agree to balanced deficit reduction. If Committee fails, enforcement mechanism will trigger spending reductions beginning in 2013 – split 50/50 between domestic and defense spending. Enforcement protects Social Security, Medicare beneficiaries, and low-income programs from any cuts.
    So the President gets the debt limit increases now, and the triggers don't even kick in until more than a year from now. The cuts are backloaded. Why do you suppose that is? Yeah, because Congress is notorious for changing its mind when push comes to shove. Oh, and there's this thing that's supposed to have happened by 2013. Oh right, a presidential election will have intervened. Republicans already lost the 4th reddest district by going after Medicare. So anyone who thinks that absent something from this "supercommittee," Congress will not actually block a big Medicare provider cut in an election year please step forward; I have a bridge in Brooklyn to sell you.

    The unwritten trigger for the Republicans

    There is another little trigger for the Republicans, but it's technically not part of the deal. It's a trigger to get serious about revenue increases. It's the Bush tax cuts. And the President is ready to use his veto pen to raise taxes on the rich if Republicans prevent the committee charged with deficit reduction from seriously delving into revenue increase. From the White House:
    If the Committee does not succeed in meaningful balanced deficit reduction with revenue-raising tax reform on the most well-off by the end of 2012, the President can use his veto pen to raise nearly $1 trillion from the most well-off by vetoing any extension of the Bush high income tax cuts.
    In other words, do meaningful tax reform to raise revenue and take away the tax welfare state from the ultrawealthy and multinational corporations, or the highest income brackets will go up anyway. Oops.

    Let me update this here a little bit, since several people in the comments have raised the question that the tax cuts for the rich aren't decoupled from the rest of the Bush tax cuts, and so if Obama vetoes a bill to extend all cuts, he will have raised the middle class rates too. That's nominally true. But Obama has threatened repeatedly that he would veto any further extension of the Bush tax cuts for the upper income brackets, presumably even if that means everyone goes back to the Clinton rates. By the way, policy-wise, that'd be a good thing - most progressive economists far and wide advocated for it, and the December deal was based on the unemployment benefit extension and other things, not just the middle class breaks.

    But keep in mind that this is a trigger for Republicans either way (and there is no reason to assume the certain failure of the deficit reduction supercommitee). Their goal is not just to not tax the rich. The super rich, who pay mostly capital gains anyway, could care less what the top bracket were. For the Republicans it's about an ideological, pro-corporate warfare to starve the government of money to perform the essential functions. And if the Bush tax cuts expire - in part or as a whole - Grover Norquist's political pull just gets drowned in that bathtub he wants to drown the federal government in.

    As it turns out, if you look at the details, the President essentially gave up almost nothing in the triggers. John Boehner, as usual, put himself between two triggers (three, if you count the clock ticking on the Bush tax cuts), both bad for his party. McConnell is basically trying to sell his surrender pig with a little lipstick on. And Boehner went dancing to his conservative House morons about how great this deal is for them. But then by now, we should all have learned that John Boehner is very bad at his job, and that President Obama always eats his lunch, and leaves him there holding the teabag.