You might surmise from all this that Obama is simply living in a dream world. That is the conclusion drawn by several of the smartest liberal political analysts I know. I have a different conclusion: Obama does have a plan to break the legislative impasse and settle the long-term struggle over the scope of government. It does not rest on the GOP’s coming to its senses and thinking of the national good. The plan is the very opposite of naïve. And he can put it into effect even more quickly than Romney could enact his own plan.
Here is how it will happen. On the morning of November 7, a reelected President Obama will do … nothing. For the next 53 days, nothing. And then, on January 1, 2013, we will all awake to a different, substantially more liberal country. The Bush tax cuts will have disappeared, restoring Clinton-era tax rates and flooding government coffers with revenue to fund its current operations for years to come. The military will be facing dire budget cuts that shake the military-industrial complex to its core. It will be a real-world approximation of the old liberal bumper-sticker fantasy in which schools have all the money they require and the Pentagon needs to hold a bake sale.
All this can come to pass because, while Obama has spent the last two years surrendering short-term policy concessions, he has been quietly hoarding a fortune in the equivalent of a political trust fund that comes due on the first of the year. At that point, he will reside in a political world he finds at most mildly uncomfortable and the Republicans consider a hellish dystopia. Then he’ll be ready to make a deal....
This is not the story you have heard about the budget. You have probably heard a terrifying tale of dysfunction and impending doom, with the catchphrase “the fiscal cliff” used by budget wonks to describe all the automatic changes scheduled for January 1. It’s a story of disaster that could arrive by accident and must be prevented at all costs. Every aspect of this narrative is inaccurate....
It’s true that should all this come to pass and Congress does nothing at all, allowing all automatic deficit reductions to stay permanently, then our economy would be hit by a powerful shock—a massive anti-stimulus. This is the outcome that terrifies moderate liberals like Howard Fineman, who warns that the nation is about to “go over the fiscal cliff with no hang glider.”
But here is a case where a bad metaphor has caused everybody to think about the matter in exactly the wrong way. When you walk off a cliff, the first step is your last. There is no such thing as falling halfway down a cliff. But the “fiscal cliff” is not a cliff at all. The economic damage is cumulative. It is the opposite of the debt ceiling, when the doomsday clock ticked down to a moment of sudden calamity. A full year of inaction would do a lot of damage, but a week, a month, or even a couple of months would not. The president would have enough control over the mechanics of the budget to delay the effects of higher taxes and spending cuts in order to cushion the blow to the economy. Even if the tax hikes and spending cuts go into effect, any deal that gets signed later could be retroactive. Meanwhile, the Federal Reserve could also take emergency action to keep the recovery afloat....
In essence, the main domestic work of the past three presidents—Clinton, Bush, and Obama—is all on the ballot this November. Whichever party wins will have within its grasp the power to break the back of the other’s political-economic macro-strategy. Obama and Romney may like to say they can work their will through agreement and reconciliation with the other party. But the tools that will be at their disposal are too blunt even to acknowledge.