The fiscal ‘hill’ and let’s go cliff diving on January 1

Posted by AzBlueMeanie:

There was a most excellent piece of advice for President Obama on how to negotiate the "fiscal cliff" austerity crisis with Tea-Publicans from a classmate of his at Harvard Law, Marty Latz, in today's Arizona Republic. Here are some tips for Obama on fiscal-cliff negotiations:

Acapulco_Cliff_nealDear Mr. President:

Let me be frank: You are losing leverage each day you negotiate with
the Republicans without publicly reframing the fiscal cliff as a
flexible deadline that can pass without serious ramifications
.

If you do this and wait to consummate a deal until 2013, your
leverage will strengthen and you will have a greater ability to
accomplish your goals
.

What
should you do? Here are suggestions, from someone who has been studying
and training professionals in negotiation full time for almost 20
years.

Control the negotiation agenda.

It appears you are already losing control over the agenda. How? By
accepting the narrative that the fiscal cliff is a hard deadline that on
Jan. 1 will throw our economy into a tailspin.

As you know, this is not true. The Bush tax cuts will expire and
sequestration will go into effect only starting on Jan. 1. Employers
will not suddenly fire workers if there is no budget deal by then.

Of course, consumer confidence and the market may take hits if you
don't get a deal in 2012. Critically, though, you can impact both.

How? Use your bully pulpit to promote this as a fiscal "hill" with a
gradual impact on the economy.
This will ameliorate any negative impact
on Jan. 1.

Strike when your leverage peaks.

Negotiation leverage is fundamentally based on what will happen if
you can't reach agreement with the other side. The better your
alternative to a deal (your Plan B), the stronger your leverage. And the
worse your Plan B, the weaker your leverage.

Jan. 1 thus is critical as your Plan B changes on that date. Before
Jan. 1, your Plan B includes the Bush tax cuts for the highest earners.
On Jan. 1, those tax cuts are history.

Bottom line: you automatically achieve one of your major goals on
Jan. 1 without having to give up anything in return.
This is Speaker
John Boehner's worst nightmare and a major reason he wants a deal prior
to Jan. 1.

Keep in mind, though, you will need a deal shortly into 2013 as your
leverage then starts weakening as sequestration, etc., start to
negatively impact the economy.

* * *

There's
another reason to wait until 2013 to strike a deal: The negotiations
then will be based more on shared than adverse interests.

Almost everyone in 2013 will have a shared interest in tax cuts for
the middle class and reversing sequestration's most harmful defense and
safety-net spending cuts. And the biggest conflicting interest — the
highest-earner tax cut — will be off the table.

Some, of course, believe you will poison a 2013 deal by taking the
country over the "cliff." But sometimes you must lead from strength. And
consider: Would Speaker Boehner take you over the cliff if the shoe
were on the other foot?

There will also be more Democratic votes in the new Congress.

One final piece of negotiation advice: As you reframe the cliff as a
hill, publicly work with the Republicans on a grand bargain. There's no
downside to talking. But don't make any major concessions in return for
more revenue from the top earners.

This would be akin to giving up something for nothing.

I guess the Obama Administration wasn't reading the Arizona Republic today. Go figure. Mr. Lantz, you should pick up the phone and call the White House directly, which today appeared to once again buy into the GOP narrative that the fiscal cliff is a hard deadline that on
Jan. 1 will throw our economy into a tailspin. Your classmate appears squeamish about going "cliff diving" on January 1. Reassure the President to take the plunge.

The Washington Post reports, White House report builds case for keeping middle-class tax cuts:

The White House is ratcheting up pressure on Republicans over a deal to
avoid the “fiscal cliff,” as the two sides worked toward forging a deal
before the end of the year.

* * *

On Monday, the White House warned that the average family will pay
$2,200 more in taxes next year if Congress does not freeze tax rates for
the middle class, publishing a new report in its campaign to extend tax
cuts for most Americans while allowing taxes on the wealthiest to rise.

The White House report says Americans could dramatically pull back on spending in the crucial holiday season if they expect sharp tax hikes next year, which would cut deeply into take-home pay. A tepid shopping season would interrupt a string of positive data in recent weeks that suggest Americans are opening their pocketbooks after years of post-recession caution.

The
report is part of a strategy to pressure Congress to pass legislation
that would immediately extend the George W. Bush-era tax cuts for
families earning less than $250,000 a year.

The
Democratic-controlled Senate has signed off on the legislation. Now it
is up to the Republican-controlled House to decide whether it will
follow.

But so far, Republicans have refused to decouple the middle-class tax cuts from those benefiting wealthy Americans. The higher-income tax cuts, which affect families earning more than $250,000 a year, are the central point of negotiation in talks between Obama and congressional leaders over how to avoid the year-end a series of tax hikes and spending cuts that would suck $500 billion out of the economy next year and would likely tip the nation into recession.

If
the middle-class tax cuts and related provisions were to expire, the
economy could lose $200 billion in 2013, according to the White House
report, which was completed by the Council of Economic Advisers and
National Economic Council.

* * *

“While the president is committed to working with Congress to reach
compromises on areas of disagreement, there is no reason to delay acting
where everyone agrees: extending tax cuts for the middle class
,” a
White House statement said. “There is no reason to hold the middle class
hostage while we debate tax cuts for the highest income earners
.”

* * *

The White House report says that letting the middle-class tax cut expire
— and failing to patch the alternative minimum tax, which applies to
many upper-middle-class households — could trim consumer spending by 1.7
percent in 2013. That, in turn, would slow economic growth by 1.4
percent.

* * *

Obama and the Democrats say that the wealthy should pay closer to
$1.6 trillion in new taxes over the coming decade, and they prefer to
start by allowing the upper-income tax cuts to expire, raising the top
tax brackets from 33 percent and 35 percent to 36 percent and 39.6
percent, respectively. Obama says it is not possible to raise enough
revenue by limiting tax deductions.

Democrats, led by Sen. Patty Murray (D-Wash.), say they are willing to go over the fiscal cliff if Republicans don’t play ball.

Take the dive and reset tax policy to your advantage, Mr. President.

0 responses to “The fiscal ‘hill’ and let’s go cliff diving on January 1

  1. I have no problem with President Obama letting all the Bush-era tax cuts expire and the sequestration begin on January 1. After all, John Boehner said he got 98% of what he wanted when the budget deal was made in 2011. The super committee and the sequestration were demanded by the Republicans, so they have no one else to blame but themselves. Once January 1 has passed, let’s see how fast the Republicans work to get those middle class tax cuts back. If they don’t, they’ll only prove once and for all that they truly are the party of the 1%, and the other 99% of us will remember that in 2014.

  2. P.S. Quit letting the Rs and their corporate media colleagues frame the issue by calling it the “Fiscal cliff.” Since Rs like assessments so much in public education, let’s call it a budget re-assessment.