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Plan B Dies, Prepare to Go Over the Cliff

With the caveat that no one knows anything, not least of all me, it’s very hard to see how we don’t go over the fiscal cliff at this point. 

Here’s why: Once the House GOP deserted John Boehner last night, there were basically two options for striking a deal before January 1. Either Boehner passes a cliff-averting deal with a majority of House Republicans, or he passes one with a few dozen Republicans and a majority of House Democrats. Alas, I see neither of these things happening this year.

The first one isn’t going to happen because there’s simply no way Boehner and Barack Obama are going to reach a compromise that a majority of House Republicans will embrace. Boehner clearly couldn’t muster a majority (or anything close) for the compromise he and Obama tossed around Monday—about $1.2 trillion in revenue, with tax rates rising on income over $400,000 per year, and about the same amount in spending cuts, including cuts to Social Security benefits via a stingier cost-of-living adjustment. If Boehner could have gotten remotely close to a majority of his caucus behind this, he would have brought it up for a vote instead of detouring into his cockamamie and disastrous “Plan B.” Clearly, he could not. 

Meanwhile, Obama can’t really make a more generous offer to Boehner at this point. Liberals were essentially told Monday night that this was the offer that was going to secure the deal. They spent the next 24 hours agonizing over whether they could support it. Most came to the conclusion that it was borderline offensive, but that they could hold their nose and accept it rather than risk the uncertainty of going over the cliff. But, having told them this what they’d have to swallow to get a deal done, the White House is going to find it damn near impossible to get them to swallow more. At least anything else meaningful. Long story short, there’s no deal that wins a majority of House Republicans that Obama can sign off on. And no deal that Obama can sign off on that wins a majority of House Republicans. 

That leaves option two: Boehner passes a bill with a rump group of Republicans and a majority of House Democrats. There are actually two ways this could happen. First, Boehner could essentially accept the offer on the table from Obama, perhaps with a tiny symbolic concession that lets him claim he squeezed more out of the president. Or Boehner could take up the bill the Senate has already passed, which extends the Bush tax cuts for families making under $250,000 per year and lets them expire above that. 

Unfortunately, it’s extremely hard to imagine Boehner embracing either of these measures and putting them to a vote, for the simple reason that passing either one over the opposition of his caucus would leave him incredibly vulnerable only days before he stands for re-election as Speaker. (That happens on January 3.) If Boehner wants to keep his job, this just isn’t something he’ll screw with. And for whatever reason—certainly not the quality of life it affords him—Boehner comes across as a man who wants to keep his job. 

So, as I say, we’re probably going over the cliff. Then what?

Well, at that point, the world starts to look pretty good for the Democrats and the White House. First, as Jonathan Chait and Ezra Klein have pointed out, because all the Bush tax cuts will have expired, the $1.2 trillion in tax increases Obama is seeking suddenly become a $3.8 trillion tax cut. (The expiration of the Bush tax cuts would produce about $5 trillion in revenue over 10 years; $5 trillion minus the $1.2 trillion Obama in revenue wants will leave $3.8 trillion for taxpayers to pocket.)

Better yet, polls overwhelmingly show that the public will blame Republicans for pushing us over the cliff. As things stand today, House Republicans can tell themselves voters are on their side. Many won re-election with upward of 60 percent of the vote. In their minds, Obama has no more of a mandate than they do. It’s only the arbitrary coincidence of the Bush tax cuts expiring and the automatic spending cuts kicking in next year that gives him leverage. If we go over the cliff, on the other hand, that self-delusion will get harder to maintain by the hour. The public backlash will be intense. The media coverage will amplify it to the nth degree. Conservative pundits will turn on them, as will Senate Republicans (whose leader, Mitch McConnell, was conspicuously silent after Boehner’s Plan B went down in flames). The House will be completely isolated and will see that it’s not Obama who’s trying to pull one over on them, it’s voters who are demanding that they act. It will play out in much the same way as their surrender on the payroll tax cut last year, with House Republicans completely intransigent until they were abruptly squashed by public opinion and abandoned by their own party. So the middle class tax cuts will be extended and the upper income cuts will mostly expire. 

The only question is what else gets thrown into the mix—unemployment benefits, infrastructure, the payroll tax-cut extension, low-income tax credit extensions, etc., to say nothing of the spending cuts the White House and Boehner have been negotiating. My hunch is that, because Obama’s position will be enhanced, post-cliff, and House Republicans will be grasping for something—anything—that puts them out of their misery, Obama will win on most of these issues, too. 

But not all of them. The GOP is in such disarray that it’s tempting to believe Obama has played his hand masterfully. He hasn’t. In fact, he’s made some serious negotiating mistakes that will result in a worse deal than he should by all rights achieve. In particular, by prematurely backing off his “non-negotiables” in order to clinch a deal that wasn’t clinchable this year—by going up to $400,000 for the income threshold at which the Bush tax cuts expire when he previously insisted on $250,000, by agreeing to Social Security benefit cuts when he previously said they were off the table, and by negotiating over the debt limit (don’t get me started on that one)—Obama has weakened his bargaining position for when the eventual deal is struck, presumably in January. Despite the additional leverage he’ll gain once we’re over the cliff, it’s very difficult to imagine Obama reneging on these offers. Yes, in theory, he can say they were only good before January 1, and that the price of a deal has gone up. But, in practice, I suspect the media will cover the episode as one continuous negotiation rather than two separate negotiations. And it’s very difficult to pull back a concession during a negotiation once you’ve made it. 

In the end, what Obama failed to understand is that, appearances notwithstanding, he was never negotiating with Boehner. He was always negotiating with the majority of the House GOP, which is obviously well to Boehner’s right. Making concessions to them didn’t make a deal more likely. It just undermined his own position. (It’s also why the suggestion that it may get easier for Obama and Boehner to strike a deal over the next few days, in the relative calm afforded by the House’s adjournment for Christmas, seems to miss the point.) It's also why going over the cliff always looked more or less inevitable. Whatever Boehner’s desire to avoid that outcome, he was never the relevant decision-maker. It was always his conservative rank and file, a group that can’t be reasoned with, and which only understands the language of total victory or defeat. As luck would have it, it looks like they’ll be getting an outcome they comprehend.  

Update: Tweaked the first mention of the $400,000 threshold, which was a bit imprecise.

Update II: It's probably worth briefly laying out what I think is the most likely path to avoiding the cliff. I'd say it's Boehner bringing up the Senate's under-$250,000 extension bill, which passes with a lot of Democratic support and a handful of Republicans. As Philip Klein has argued, House conservatives have tended to give Boehner a pass when they think he's completely out of options. And, sometime between Christmas and New Year's, they may come to that conclusion in this case. So Boehner may be able to get the Senate bill through the House without risking his speakership, even though it will pass with mostly Democratic votes.

A more ambitious deal with Obama, on the other hand, would appear to be a nonstarter, mostly for the reasons I lay out above. I doubt Boehner would get the "out of options" pass on that one, since the Senate's bill would be preferable. As with the deal that resolved the debt-ceiling crisis last year, the House GOP caucus would do what needs to be done to avoid a catastrophic PR hit, while conceding the absolute minimum to the president.