Progressive activists are telling the White House and congressional Democrats that they would prefer no fiscal-cliff deal to one that sacrificed any benefits for Social Security, Medicare, or Medicaid. Coupled with warnings that liberals would support primary challenges to Democrats who embrace such cuts, this further complicates the hunt for a compromise before the end of the year.
In the view of many of the activists who are monitoring the talks, the progressive agenda is advanced by inaction that lets the Bush tax cuts lapse because they believe the new Congress would undo the worst of the spending cuts in January. That view, though, worries the champions of education and student-loan programs that would take a big hit from the sequester.
“On Day One, all the good stuff happens,” said Adam Green, cofounder of the Progressive Change Campaign Committee, referring to what happens if President Obama fails to reach an agreement with Republicans before the end of the year when the Bush tax cuts expire. “The Bush tax cuts for the wealthy instantly go away 100 percent.” He acknowledged that this is coupled with implementation of the sequestered spending cuts, which were designed to be painful to Democrats. But those cuts, he said, occur over “a 10-year phase-in.”
He predicted that the new Congress would immediately tackle the situation when it convened in January, most likely passing the middle-class tax cuts and restoring the spending. “So we pass a bill in week number three. That is three weeks into a 10-year period. That is a drop in the bucket. So these programs won’t really be hurt.”
Because the tax cuts expire if nothing is done, he argued that it would be “ridiculous” for the president to offer any concessions to achieve that. “Progressives win on the Bush tax cuts as long as we get past the new year. It also means that we don’t need to make concessions,” Green said. “Strategically speaking, getting past the first of the year will help the president’s hand and put the final resolution on a much more progressive setting.”
Robert Borosage, codirector of the Campaign for America’s Future, said that the deadline is the big advantage for Democrats in the current talks. “We are more prepared than Republicans to let them obstruct to the point where they face the consequences of their own obstruction,” he told National Journal. And he downplayed the impact of letting tax cuts for the middle class expire, saying that they would be remedied quickly. “Progressives feel that if nothing happens, we’ll extend the tax breaks for 98 percent the first day of the next Congress. And the lobbyists will take care of limiting the big sequestered spending cuts. And Medicare and Social Security aren’t in the sequester,” he said.
Not all liberals are as relaxed about the spending cuts, of course. Rich Williams, higher-education advocate for the U.S. Public Interest Research Group, said he is “incredibly troubled” by the prospect of the spending cuts, warning of what he calls “a student financial-aid cliff.” He said there would be great pain and uncertainty for millions of students if the deadline passes.
“There are a lot of families who would have to make some hard choices if that would happen. Just the American Opportunity Tax Credit alone expiring is thousands of dollars of presumed extra debt that folks would have to layer on top of this larger atmosphere of stagnant family finances, increasing college costs, and uncertain job markets for graduates,” he said. Going over the cliff is "certainly not a good outcome for students looking to pay for college,” he added.
According to PIRG, 11 million families would lose access to the American Opportunity Tax Credit, and 150,000 students would lose access to federal college grants, such as work study.
Borosage does not diminish the initial consequences. “It’s not like we don’t take a hit to the things we want," he said. "But compared to structural changes, for example, to the eligibility age in Medicare, we’d rather do nothing.”
Labor leaders have stopped short of advising the president to let the deadline pass. However, AFL-CIO President Richard Trumka has urged Obama to walk away from any deal that includes benefit cuts in the entitlement programs. In a speech last month to the National Mediation Board Conference, Trumka called the fiscal cliff a “manufactured crisis.”
“There is no fiscal cliff,” he said then. “What we’re facing is an obstacle course within a manufactured crisis that was hastily thrown together in response to inflated rhetoric about our federal deficit.”
The biggest reason to get past the fiscal-cliff deadline cited by Trumka and other progressive leaders is the need to refocus Washington on a jobs agenda. “The concern for Democrats,” said Borosage, “is the whole discussion, which is focused on austerity, is ignoring an economy that is still faltering and needs a lot of work.”