Obama Negotiates - Not

Bruce Krasting's picture


At his press conference yesterday, the President said (again) that Step Number 1 in the cliff negotiating process is to have Congress pass the middle class tax extension (<$250k). Obama said that after the middle class cut was signed into law, he would negotiate with Congress on all of the other issues that are on the agenda for the end of the year. I, for one, don't believe a word of that offer. If Congress were to agree on those middle class cuts, Democrats would no longer negotiate on the remaining issues, they would dictate the outcome.


The President’s words:


I won't pretend that figuring out everything else will be easy


"Easy"? I would say "impossible" is a better description. If the middle class tax cuts are signed into law, the Democrats will not give an inch on the rest of the critically important issues. Who's kidding who?


In the end, there will (probably) be some agreement that will result in taxes on wealthy American’s going up, while middle class taxes rates are held at the Bush era levels. But the idea that Republicans, and the 48% of the people who did not vote for Obama, should grant the middle class some tax bennies prior to getting an understanding on all of the other items that are on the fiscal cliff, is just silly to me.


The other day, Democratic Senator Patty Murray (WA) spoke about allowing the country to fall off the cliff. Murray (and presumably Obama) believe that Republicans would crumble when the consequences of the "cliff" crush the Republican political base. Her words:


“If the Republicans will not agree with that (preconditions for negotiations), we will reach a point at the end of this year where all the tax cuts expire and we’ll start over next year”


Senator Murray wants to play hardball. So does the President. Both are insisting that Republicans bend over and agree to "fix" one aspect of the fiscal cliff prior to the end of the year, and then push off addressing all the remaining issues to sometime in 2013, maybe, possibly, no promises though. The thinking by Obama and Murray (and many other Democrats/liberal pundits) is that they have all of the bargaining chips on their side of the table.


I think that Murray and Obama have it backward. If the US does fall off the cliff, then it will be the Democratic base that will have its ass handed to it.


-The under $250k Bush tax cut would go away. This would be a middle class disaster. It would cost the 97% a whopping $223 billion in take-home pay in 2013.


-The AMT would hit people with incomes of > $50K. The IRS puts the number of new taxpayers who will get hit with the AMT at 30m. 97% of those poor folks are in the middle class today.


-Payroll taxes go up on 1/1/13. That will cost the average family $1,700; this is a very “regressive” tax increase. The cost to middle class workers will be another $112 billion in lost take-home pay.


-Unemployment insurance benefits would be cut.



I think the President has made a very dangerous move in the game of chess that is called the fiscal cliff. I don’t think Republicans will agree to give Obama the one thing he has insisted on without getting an agreement on all (or most) of the other issues. The “Reds” would be stupid if they did that.


I don’t know where Obama learned his negotiating skills, but he needs a tutor. I think the odds are very high that House Republican’s say “No”, and do not give Obama what he wants. If Boehner (or some other big shot Republican) says “no” at (or after) this Friday's meeting, the odds of falling off the cliff will shoot through the roof. Markets will respond accordingly.


The market reacted appropriately to the President's press conference yesterday. It fell like a stone after he reiterated his demand that Congress fix one thing today, and leave everything else blowing in the wind. The US stock market has lost more than $1Trillion since the election. A significant portion of that loss is attributable to the President's insistence that his horse goes before the cart.


Maybe the election results give Obama the right to negotiate using the tactic, "My way or the highway". But I don't think Obama really has the stick he needs to beat Republicans into submission. At some point he will be forced to recognize that his bare knuckle fighting style is going to get his Administration bloodied, and bring his base of supporters a world of hurt.



Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Orly's picture

Watch for the one-more-time ramp in equities if for nothing else than to push the EURUSD pair above 1.28.  That level seems to be the magical tipping point to all things global.

The EURUSD pair should push higher from here to reach ~1.295.

The AUDUSD pair will try to break out to ~1.05.

That leaves the EURAUD pair bottoming at ~1.19.

The Father Christmas Rally just got a new meaning!

Best of luck trading!


NEOSERF's picture

We can only hope the word "brinkmanship" starts to be bandied about again...right around Dow 9500, you'll see amazing concensus...

Ghostdog's picture

Yes that is what is needed, a new word. They always seem to come up with one when they need it!

Ghostdog's picture

Makes no difference what these elected penile implants do, the markets will ALWAYS dictate the ultimate ending. Bring it on boys!

masterinchancery's picture

Just tell the Community Organizer to pound sand.

kaiserhoff's picture

The tax increases are real.  The proposed budget "cuts" are complete lies.  They are, at most, reductions in the previously expected increases. 

Nothing at all gets cut, regardless of any alleged compromise.  This sort of horse shit is why nothing can be done until after the collapse.

Middle_Finger_Market's picture

Obama sorry O'bomber learn't his negotiation skills in Somalia...in an Al Queda/CIA camp. True Story.

orangegeek's picture

Obama pulled the plug on keystone after agreeing with the GOP he would do it in 2011 - Barry's compromise.


In the end, we are all headed down the toilet and Barry can't do a damn thing except hang on and lie to the media about it.

venturen's picture

I just imagine Obama and the GOP are Thlema and Louise going over the cliff...but I can't figure out which is which!

roadhazard's picture

If Obama could just negotiate like the repubicans we would all be... in the exact same place.

DavidJoshimisk's picture

The republicans (if they have the stomach for it) can do nothing and let the already passed legislation take effect. Then do nothing again in February when the government again comes up against the debt ceiling. The President would be forced to legislate by executive order (exposing the truth about "separate but equal" branches of government) and congress and the supreme court would not dare to challenge him...this is where things get interesting. Any other path is just business as usual.

Big Ben's picture

Obama has obviously been studying the tactics of another famous Chicago resident: Al Capone.

eatthebanksters's picture

Obama owns it...his own comittee has pointed out that his proposed tax increase on the wealthy provides very little in the way of financial relief and that closing loopholes would a much better solution.  So, start there and if the closed loopholes don'traise enough revenue then bring the discusionback around to raising taxes.  The issue here is one of ideology; Obama wants to show his base that his disain for rich people is real, after all he was the one who led the demonization of this group during the election.  It's a show and nothing more.  I think the republicans ought to hold firm and show Americans that Obama continues to promise things he can't deliver and that he risks way to much for stupid reasons.  When we reach the fiscal cliff he will point is finger at the Republican house - he does that well and the American public stupidly buys his bullshit - but the republicans ought to hold up a mirror so the world can see what really is there in Obama's reflection....that this guy is an amateur, a thug and a loserwho is in so far over his head that he'sout of control.  Sometime you need to forget politics and stick to principal, Obama is an asute politician and the Republicans standno chance against his machine (look at how he will slither out of the Benghazi scandal), but no one can stand up to principal.

notadouche's picture

Self hating 1 percenter.  Though he makes it out like he only makes a little over $250k per.  He fails to recognize that he has free safety, free manison's, free private jets, free vacations, free parties, free private chef.  Hell pretty much free everything so his real wealth is much higher than he likes to pretend.

vincent van goo's picture

Obama has made the GOP his bitch.  This will not end well.

bobbydelgreco's picture

sorry bruce you don"t get it obama doesn't care if his base suffers (i refer you to a harper's article 2 months back) he cares about who gets blamed & when it goes to shit it won't be him it will be republicans who get blamed the republicans initiated a plan that would only work if obama lost

Panafrican Funktron Robot's picture

This is 100% correct, they'll figure out a way to blame it on Repubs, ex., "They wouldn't budge on insisting on a tax cut for the wealthy, that's the only reason we have this impasse".  Reality and facts don't matter in rhetoric.  There is no debate, this is pure sophistry with the result already predetermined.  As Dr. Paul mentioned, there is a 0% chance we don't go over the fiscal cliff.  0%.  This has been the intended result all along.  They will frame it as shared sacrifice, but as you mentioned Bruce, this particularly screws over the middle class, who were already getting screwed via dollar debasement.  This is simply accelerating the wealth transfer.  Same stuff has been happening in Europe for a few years now.

Ghostdog's picture

Yep, when you have 3rd graders writing for Yahoo news and 5th graders reading it, nothing good will come of it when the children will blame who Mommy tells them too

azzhatter's picture

Both sides idea of compromise is that you agree with me and we'll call it a compromise

Benjamin Glutton's picture

Rise Above, Bruce?


BraveSirRobin's picture

I see it as an effective ploy. The press will beat the Republican congress with a sledge hammer, placing all dire outcomes on their intransigence.

If the fiscal cliff is averted the economy probably will benefit, and economic activity will pickup (all other things being equal) despite the marginally higher taxes on the “rich.”

So, if Obama wins, he will probably get a boost (at least short term) in economic activity. If he loses, he can blame any bad outcome on the Republicans.

He will compromise on the size of the tax increase, to make it appear he is reasonable and not intransigent, hence the initial gambit of doubling the proposed tax increases in the opening round. So the argument shifts from whether or not we have a tax increase to how big of a tax increase we will have.

The Republican ploy should simply try and get an extension on the status quo, to get more time to negotiate to find spending cuts, and allow the new congress to get seated and have input. They should indicate they are willing to look at revenues if the President is willing to look at equivalent spending reductions. They should immediately propose an extension of the status quo for 1 year. They have to make him the inflexible bad guy.


mind_imminst's picture

+1 for you sir! No matter what the Repulicans do, whether they negotiate faithfully with the Persident, say no, or say yes to everything the President wants, they will absolutely get blamed by the mainstream press, for every negative outcome that is to come. The President is an infallible god in the eyes of the mainstream press (well, except FOX news and some other alternative outlets that don't drive the news cycle).

If we want to reduce the deficit, end the wars, and pay down debt, then we should just bite the bullet and go over the fiscal cliff. If we don't do it now, it will just be worse later. I don't like it. Austerity sucks, but money does not grow on trees. 

Thisson's picture

It does not make much difference to the "economy" whether money is spent by government or consumers.  What matters to the economy is what happens to investment.  Raising taxes just means the government spends more and consumers spend less.  Lowering taxes just means that the government spends less and the consumers spend more.  GDP remains the same unless investment/exports change, and these taxes don't materially impact either of those components of GDP.  This "fiscall cliff" is the financial equivalent of the Y2K scare.

dexter_morgan's picture

Frank Marshall Davis Jr. does not negotiate, why would you negotiate when you have 100% of the correct solutions?

Brixton Guns's picture

If you arent aware by now that Slick Barry [www.slickbarry.com] is a full-on MPD Manchurian MK-Ultra subject who is "handled", then you just have not done your homework.

a growing concern's picture

To what end, though? If it's ostensibly for the financial destruction of the US for eventual integration into a one-world government, why are they trying so hard to keep the house of cards propped up? To extract maximum wealth for their benefactors before the transformation?

Bobportlandor's picture

To extract maximum wealth for their benefactors before the transformation?


Thats How I see it.

divide_by_zero's picture

Amazing, you got a couple of down ticks for stating the truth. Orwell's words come alive.

dexter_morgan's picture

haven't you heard - people can't handle the truthh

Brixton Guns's picture

truth is hate speech to those who hate truth

notadouche's picture

Everytime the death of a party is predicted, that party comes back to win control in spades.  Never fails.  Repubs with Reagan got cocky and some hick from Arkansas gets elected.  He gets popular and of course the Republicans can't possibly when then Gore can't deliver what was handed to him on a tee had he any skill whatsoever.  Should've never come to Supreme Court.  Should've never been close enough which tells you all you need to know about Gore.  Now here we are again with the pronounced death of a party.  For all of these so called "intellectual elites" they certainly do not live by the notion of history and how it repeats.  They are too busy patting themselves on the back assuming they own the universe.  Next go 'round they will be the same ones wondering what the hell happened.  Then the Repubs will do the same thing.  Wash, rinse, repeat.  

At the end of the day, while the media will never hold Obama accountable for squat he will be responsible for the results of his 8 years and he won't escape that.  If it's good, and I hope it is, the so be it.  But if it's the disaster they seem to be secretly be hoping for thinking it will be the deathnell to the Republican party they will be sorely mistaken.  They are just too stupid or too blind or too arrogant to see that right now.  I suspect a little bit of all 3.

Quantum Nucleonics's picture

I say, let's go off the "cliff".  It's absurd that half the people in America don't pay income taxes.  It's dangerously undemocratic.

Dr. No's picture

The absurdity is that any of us pay income tax....

oldman's picture


Thanks for a well written and concise piece     om

Moocao's picture

What if the Fiscal Cliff is allowed to pass, but the Democrats then initiate a bill that would then allow a lower middle income tax rate?

In which case the Republicans will now be in the spotlight for failing to vote for a bill that would decrease middle income tax rate after the cliff happens?

Make the bill retro-active so that people get a refund after tax season

Ball in Republican court.

“Rebellion to tyranny is obedience to God.”-ThomasJefferson's picture

When over half the people who voted, re-elect a no account community organizer from God only knows; with a background and education transcript of God only knows; you get what you deserve.

When the combined stinkfest of rupubs/dems get together and finally figure out a way to hurt the most people financially, while still able to cling to power; the problem as they see it is resolved.

Like it or not, the USA is a nation reliant on entitlements.  

In the coming months and years, more and more people will cross into the poverty stricken category.  

The democratic branch of government will have themselves an army of dependant voters.

The repubs will continue to wander around in a daze, all the while looking for someone to blame; when in reality, the voters left the party and went for the free lunch.

As a nation, we are fucked.

MassDecep's picture

At this point Repubdemo's are the same entity. Any viable candidate's get Ron Pauled. You are right, we are screwed, and things are about to get much worse shortly. Be aware of the mind control propaganda. It consist of 99% of what you hear, the remaining 1% being what you dig for.

References for your enjoyment if you are don't already know. http://www.americanfreedomradio.com/Fabian_4_Liberty_12.html


Winston Churchill's picture

That's the Democrats intention.

I do not believe it will happen because time is now against them.

Even though my crystal ball is suffering from premature

prognostication,this shit show only has a couple of years left

until the end of the play.

I must admit to expecting it sooner but everything is now converging on 2014,

if a Black Swan doesn't collapse it before.

Bicycle Repairman's picture

"When over half the people who voted, re-elect a no account community organizer from God only knows; with a background and education transcript of God only knows; you get what you deserve."

That's right.  The Republicans still couldn't beat this guy.  Moreover, they still refuse to admit why they got beaten.  Half the people did not vote.

Hey Republicans, why don't you talk to some of those non-voters?

Arroneous's picture

you are correct sir.  surprisingly it gets lost on quite a few that the droves of people rioting in the streets in spain, italy and greece are the unions.. 

tweake's picture

Directly opposite the talking points usually droned out on the subject, the Bush tax cuts made the tax code WAY MORE PROGRESSIVE, leading in fact to the situation we have where about half of households pay little or no income tax. Or quite often get a return check ( negative tax rates).

One reality check - coming up.  Oh Well.

Bicycle Repairman's picture

Obama won (hat tip to Karl Rove on the nomination of Mitt).  He will not face the electorate again.  Raising income taxes across the board does not effect the Democratic base.  Four years from now the Democratic base will only be larger thanks to unlimited immigration (hat tip to GW).  That extra tax money can be spent on a variety of supporters.

Obama will throw the Republicans a sop on MIC spending and raise taxes as much as he wants, without any meaningful political repercussions.  Again, hat tip to GW on expanding the Democratic base.

nofluer's picture

WHAT "extra tax money"? By the time Obamacare puts most of the small businesses out of business, there won't be enough tax money to buy a Hostess Twinkie... assuming they have the Chinese plant up and running by then.... Guess "We the PEOPLE" will have to learn to spell "Zimbabwe" and "Weimar" by next year. I hear that if you can spell them both, the govamint will give you a free wheelbarrow... NOT! (If you have that much money you can steal a wheelbarrow to carry your digital money chips in! Another case of history rhyming.)

Bicycle Repairman's picture

I think I'm catching a red arrow from a member of the Republican National Committee.  While I have your attention: Fuck You.

MassDecep's picture

Bi Repair

The Divide and Conquer concept permeates your mind. Please consider reprogramming.

Bicycle Repairman's picture

Conservative America has been victimized by the bait and switch concept.  Reprogramming of the Republican party is indicated.  Or it's complete destruction.