A Guide to the Fiscal Cliff Hostage Talks

It’s Day 24, and the Republicans still have no plan. Daniel Gross asks, Who are the chumps now?

11.30.12 10:11 PM ET

Fiscal cliff hostage situation. Day 24. A lot happened. But nothing happened. At Treasury, Secretary Tim Geithner, who, like his predecessor Hank Paulson, wears a training watch, went through a rigorous cross-fit routine and mainlined Red Bull in preparation for his upcoming Sunday Show Marathon. On the hill, Senate Minority Leader Mitch McConnell LOL’ed at the president’s proposal, which includes lots of tax increases as well as Gene Sperling’s holiday policy wish list. CNBC’s Rick Santelli, reacting to the flood of companies issuing dividends before tax rates rise, conducted what seemed to be an on-air audition for Fox Business Network. The Daily Beast’s fiscal cliff countdown clock went live.

House Speaker John Boehner staged a brief press conference and pronounced a “stalemate” and that the two parties were “almost nowhere.”

It’s much too early to declare failure, however.

The fiscal cliff hostage crisis is soon to enter its fourth week. But really, the talks about ransoming the hostage haven’t even begun. Typically in a hostage situation, the party holding the hostage sets out its demands. President Obama has finally done that, with Treasury Secretary Geithner personally presenting the plans to Congressional Republicans on Thursday. There’s nothing surprising about the Republicans’ dismissive response.

There is something surprising, however, about the Republicans’ failure to offer an alternative. To be sure, there has been a well-documented, and sudden outbreak of real-keeping among Congressional Republicans, with dozens of legislators abandoning Grover Norquist’s no-tax pledge and acknowledging the need for more revenues. But the guys who want to liberate the tax cuts being held hostage have yet to propose an offer.

And the leadership still does not seem to grasp what is happening. This is not August 2011, or August 2012. The choice before McConnell and Boehner is not between the really unattractive proposal President Obama is offering and their preferred solution, which is the status quo on taxes plus huge cuts in discretionary spending and immediate action on entitlements. Rather, the choice is between what the President is offering—i.e. lots of tax increases paired with small spending cuts and very modest entitlement reform—and the 24-pack of whoopass that the fiscal cliff will deliver in about five weeks: much larger tax increases, plus much larger spending cuts, and no entitlement reform whatsoever.

Yes, President Obama wants to avoid the fiscal cliff. But he also wants to avoid being made to look like a chump, as repeatedly happened in his first term. And so rather than make a proposal and then respond to a stiff arm with a better offer, he is refusing to negotiate with himself. Instead of compromising on his initial offer—and hoping that meeting the Republicans half way with an initial offer will help bring them to the table—he went the other way. The president moved his goalpost further to the left. And rather than try to play an inside game and issue pleas for comity and compromise from the White House, he’s taking his popularity on the road.  

All of which has plainly flummoxed the Republicans. In the past, Republicans could count on the president to cave, and to function as their own policy shop. Instead of devising a program they could live with, President Obama and his staff would do the work, trying to come up with something that Republicans would support. This time he’s not. And that’s exposing the clown show that is Congressional Republican fiscal and tax policy. Simply put, the party has no single plan that it supports that would allow it to protect its greater legislative achievement of the past 20 years—the Bush tax cuts—and reduce the deficit.

So on Friday, when journalists asked Boehner for the Republicans’ specific preferred plan on how to cut entitlements immediately, he mumbled generalities. Sure, there’s the Paul Ryan budget. But that doesn’t start cutting and eliminating Medicare for a decade or two. When asked for the amount of tax revenues the GOP would like to raise, and the specific deductions it might cap to raise revenues, there is likewise silence from the leadership. Yes, some Republicans have started freelancing. Senator Bob Corker issued his own plan, which is full of specifics. But Corker speaks for himself, and recognizes that he is not really going to be party to a deal.

Does this mean the hostage is doomed? Not so much. There’s still plenty of time. Goldman Sachs strategists apparently believe that the two parties have until as late as Dec. 21 to strike a deal. Of course, that’s also the day the Mayans think the world will end.