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Friday, January 04, 2013

Paul Krugman: Battles of the Budget

Did Democrats win:?

Battles of the Budget, by Paul Krugman, Commentary, NY Times: ...our two major political parties are engaged in a fierce struggle... Democrats want to preserve the legacy of the New Deal and the Great Society — Social Security, Medicare and Medicaid — and add to them what every other advanced country has: a more or less universal guarantee of essential health care. Republicans want to roll all of that back, making room for drastically lower taxes on the wealthy. Yes, it’s essentially a class war.
The fight over the fiscal cliff was just one battle in that war. It ended, arguably, in a tactical victory for Democrats. The question is whether it was a Pyrrhic victory that set the stage for a larger defeat.
Why do I say that it was a tactical victory? Mainly because of what didn’t happen: There were no benefit cuts. This was by no means a foregone conclusion...
There were also some actual positives from a progressive point of view. Expanded unemployment benefits were given another year... Other benefits to lower-income families were given another five years... Oh, and not only did Republicans vote for a tax increase for the first time in decades, the overall result of the tax changes ... will be a significant reduction in income inequality...
So why are many progressives — myself included — feeling very apprehensive? Because ... the G.O.P. retains the power to destroy, in particular by refusing to raise the debt limit — which could cause a financial crisis. And Republicans have made it clear that they plan to use their destructive power to extract major policy concessions.
Now, the president has said that he won’t negotiate on that basis, and rightly so. Threatening to hurt tens of millions of innocent victims unless you get your way ... shouldn’t be treated as a legitimate political tactic.
But will Mr. Obama stick to his anti-blackmail position as the moment of truth approaches? He blinked during the 2011 debt limit confrontation. And the last few days of the fiscal cliff negotiations were also marked by a clear unwillingness on his part to let the deadline expire. Since the consequences of a missed deadline on the debt limit would potentially be much worse, this bodes ill for administration resolve in the clinch.
So, as I said, in a tactical sense the fiscal cliff ended in a modest victory for the White House. But that victory could all too easily turn into defeat in just a few weeks.

    Posted by on Friday, January 4, 2013 at 12:24 AM in Budget Deficit, Economics, Politics, Social Insurance | Permalink  Comments (88)

          


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