Chait cuts to the chase:
That’s the core problem with Bowles-Simpson: It’s a delusional belief that a theoretical agreement for tax reform that lowers rates and ends deductions would translate into a real plan. The fiscal scolds cling to this because the tax reform alchemy is the whole thing that makes their plan appear to work. That’s why the Peterson network proclaims that lower tax rates are a key principle for tax reform – they think this will produce Republican votes for more revenue, even though it won’t. The only way to get Republicans to agree to higher revenue was to maneuver them into a situation where they had no choice — which is what is happening now.
The trouble with this analysis, it seems to me, and with the Obama administration's current bargaining position, is that Speaker Boehner has already conceded that he is prepared to raise revenues. So I don't see why Chait is insisting he hasn't.
And tax reform is good for the economy anyway, regardless of its impact on the deficit. If that can also be a way to get the GOP to increase revenues, why not?
One approach Geithner and Obama could have chosen would have been simply to demand that the GOP propose specific deductions to make up for the lost revenue of keeping the top rate where it currently is. Calling their bluff on tax reform in this precise way, getting them to propose ending deductions to make up for this fiscal gap, could begin a process of further tax reform. And that is, to my mind, more reasonable than insisting that the Clinton era top rate return, period, even if it means tipping the US and the global economy into another swoon.
Then again, all this may be all part of a negotiating strategy – in which Obama is finally not negotiating with himself. And so we should take neither Boehner's nor Geithner's current positions as anything but a game of chicken. It's a long way from Obama's first term attempts at pre-emptive centrism.
Someone asked me the other night what odds I'd give on whether we'd go over the fiscal cliff. All I can say is that they seem to have increased since the election. And that troubles me.