Yesterday I argued that the President is bluffing on his veto threat. Today I want to respond to some great feedback from friends and readers. Warning: discussions of negotiating strategy and tactics can get a little dense.
1. I agree that Senate Democrats would likely block any bill that the President would veto. This means the veto threat is important principally to reinforce Leader Reid’s efforts to hold his Democrats together as a unified bloc.
But if I’m right that the President thinks he cannot afford to risk a recession, then the President needs a new law. Whether a bill dies in the Senate or as a result of his veto, in either case no law –> fiscal cliff –> recession –> severe damage to the rest of the President’s agenda. My hypothesis is that the President is unwilling to take that risk, so he needs the House and Senate to pass a bill he can sign. I think my argument holds whether the veto would be actual or merely a tool to reinforce his allies stopping a bill in the Senate.
2. I agree that, were it not for the recession risk, many Democrats, possibly including the President, would think that no new law was a good fiscal policy outcome. Yes, the President and almost all Congressional Democrats say they want to extend current tax rates for the non-rich. But if all tax rates go up, future deficits will be $5.4 trillion lower. If the sequester is allowed to bind, deficits would be reduced by another $1.2 trillion over the next decade. This outcome, of no new law, would give the President a lot more fiscal flexibility. The deficit and debt problem would be far from solved, but he would have more room to propose new spending that I’m guessing he wants.
There’s an interesting intra-Democratic party tension here. Which is more important to elected Democrats: preventing middle class tax increases or having more room to increase government spending? The President insists he wants to prevent tax increases on the middle class, but it’s easy to believe that he, and especially some Congressional Democrats, would be happy to have such broad-based tax increases to finance their desires to expand government.
If you think the President thinks the potentially quite significant fiscal policy benefits (from his point of view) of no deal are greater than the costs of a 2013 recession and the damage it would do to his entire policy agenda, then you disagree with me and should conclude the President is not bluffing.
4. There are clearly some important Congressional Democrats (e.g., Senator Patty Murray) who appear willing to risk a recession so they can have more money to spend. I disagree with those who suggest those Congressional Democrats would block a bill that the President wanted to sign. If he wants a deal, he’ll be able to deliver the Democratic votes to pass it, and if he wants a bill blocked, they’ll block it for him.
Indeed, the President’s greatest tactical weakness is the varying views within the Democratic party, and especially differences between confident liberals like Senator Murray and nervous in-cycle moderates. Congressional Republicans need to figure out how to expose and exploit these differences and split Congressional Democrats. I will address that in a future post.
5. One wise friend thinks the President is so confident that he would win an early 2013 blame game that he is willing to risk a recession.
In this view you agree that the President still wants and needs a new law to avoid a recession. You also think that not only does the President think he has negotiating leverage now, he thinks his leverage would increase after the new year if there is no new law. You would argue that he is willing to gamble that, faced with the prospect of being blamed both for tax increases and triggering a recession, Republicans would quickly fold in January 2013 if there is no deal. Therefore, you think he thinks risking a recession still won’t result in a recession, because it will end quickly when Republicans cave.
Thanks to all who provided great feedback and counterarguments. For now I’m going to stick with my original view. I think the President thinks he needs to get a deal because I think his highest priority is (and should be) avoiding even the risk of triggering a new recession in the first year of his second term.
What scares me more is that I fear the President wants a deal but doesn’t know how to get one with Republicans. My working hypothesis is that the President is an ineffective negotiator when dealing with those who disagree with him. This view is heavily reinforced by Bob Woodward’s book The Price of Politics. Other than two years ago when he swallowed the Republican view whole and extended all tax rates, the President is oh-for-Administration in major bipartisan legislation. At the moment I worry less about the President’s goals and priorities, and more about his negotiating skill and his capacity to reach agreement with those with whom he strongly disagrees.
(photo credit: Jim Moran)