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The McConnell Hostage Negotiation

Mitch McConnell keeps saying that cutting Medicare must be part of any deal to lift the debt ceiling. McConnell also says he won't agree to raise taxes one cent:

SEN. McCONNELL:  Yeah, look, you know, we just have a fundamental difference of opinion.  If there's any issue which clearly divides Republicans and Democrats, it's taxes.  We think we have this problem because we spend too much, not because we tax too little.  And you've heard us have this debate over the years, we're going to have it again next year in the course of the election because the president wants the rates to go up again next year. We've got a two-year extension of current tax rates right now.  I think we can stipulate this is an issue upon which there is deep-seated difference of opinion.
MR. GREGORY:  But--so here's, here's the issue that I, that I keep coming back to, which is aren't you Republican leaders guilty of the same thing that you accuse the president of on health care, which is not doing enough to build actual political consensus around these issues?  If you're not going to give anything up on taxes but you want to bring the deficit down, you say, no, these are iron-clad principles.  I mean, that's where the--you said the president was on health care.  How do we, how do we tackle real problems?
SEN. McCONNELL:  But that's not where they are on, on the issue we were talking about earlier in the program.  You've got the president, the vice president, President Clinton, Steny Hoyer all saying that Medicare has to change.  So they're--that's not something we don't agree on.  We're going to, we're going to discuss...
MR. GREGORY:  That's a long way from changing the Medicare program the way Paul Ryan wants to.
SEN. McCONNELL:  Well, we're going to discuss how to do it.  But what we're saying on taxes is it isn't necessary.  I mean, we don't have this problem because we tax too little.

The idea that tax rates have absolutely nothing to do with the the medium-term deficit is obviously absurd, and it highlights the difficulty of negotiating a fiscal solution with a party in the thrall of an ideology that refuses to acknowledge basic accounting identities.

But even if that difference could be bridged, you have the second issue. McConnell wants to use the threat of the debt ceiling vote as a hostage to force Democrats to accept policies they otherwise wouldn't. He also wants to strike a bipartisan Grand Bargain on the debt. You can't do both these things at once.

A bipartisan deal is an agreement where both parties move toward each other and make a policy change that both believe would constitute an improvement over the status quo. They can then defend the unpopular parts because they believe the agreement overall improves policy. The 1990 budget deal is an example of this. That's what McConnell has in mind when he says "none of it will be usable" in the next election. He believes both parties will endorse the unpopular elements in the deal and thus insulate each side from political damage.

A hostage-taking agreement is different. Here, one party threatens to damage something that the other party cares about, and uses this threat to extract concessions. If you pull that off, you can't also expect the other party to stand up and endorse it.

The operative example here is the deal to extend tax cuts struck last December. As a condition for extending tax cuts on income under $250,000, Republicans insisted on extending the portion of the Bush tax cuts that only apply to income over $250,000. Obama paid that ransom. But he didn't go around praising those tax cuts. He continues to call them unaffordable and promises to repeal them in the next election.

If McConnell wants to force Obama to accept his budget terms, on threat of harming the economy, then he can't also expect Obama to protect him. If he extracts Medicare cuts that Obama does not think constitute an improvement over the status quo, then Obama can take his case to the public. Democrats can say that Republicans threatened to blow up the economy if they wouldn't sign Medicare cuts, but if the public restores Democrats to power in 2012, they'll reverse those cuts. Alternatively, McConnell can negotiate a deal that Obama actually supports, which would neutralize the issue. If McConnell thinks he can do both at once, then Obama is doing a terrible job of negotiating.