Harry Reid Throws Down the Gauntlet In Front of … Obama. Hurray. [UPDATED]

Obama pushed forward despite strong reservations expressed by top congressional Democrats — especially Reid — who privately described it as a “bad deal” that would increase Republican leverage in future budget fights. …

Reid figured Democrats could get a more favorable agreement if they waited. When Reid saw an offer that Obama had considered pitching to McConnell on Sunday, which included provisions opposed by Senate Democrats, the majority leader crumpled up the document and tossed it into the burning fireplace of his Capitol office.

The fiscal cliff deal that almost wasn’t, John Bresnahan, Carrie Budoff Brown, Manu Raju and Jake Sherman, Politico, today (H/T Josh Voorhees, Slate)

I’m happy with the ‘cliff’ deal.  That’s because it’s only a start. Here’s what I mean:*

Although he’s been strongly criticized by many liberals for caving on the $250,000 floor for a raise in the income tax rates after saying repeatedly that that was a ‘must’ for him, Obama was, in my opinion, right to sign off on the ultimate deal, in which the rate for incomes above $450,000 will rise to 39.6%–not the earlier-discussed possible compromise of 37% for incomes above $250,000–and in which capital gains taxes also will rise, to 20% for that same group.  

I suspect that a huge factor in Obama’s preference for this deal rather than going over the cliff and forcing an up-or-down House vote on the rate rise on incomes above $250,000 was the issue of the expiration of extended unemployment-compensation benefits for about two million people, the loss of which, whether for a few weeks or permanently, would have been devastating for the people affected and surely would not have helped the economy.  Extension of those benefits may well have been a casualty even of a successful post-cliff bill lowering the floor for the rise in income tax rates.  So might the Earned Income Tax Credit, which of course benefits members of the 47% who Mitt Romney and many other Republican politicians do not think it’s their job to worry about.

So I disagree, for once, with my beloved ideological alter ego, Paul Krugman that it might have been preferable to go over the cliff, even for a few weeks, since little economic damage would have resulted during that brief period.  The damage would have been acute to quite a number of people, if not to the economy as a whole.  That’s important.

Which is not to say that it was reason enough to give away the store.  Which, if the Politico account is accurate, apparently was, as of Sunday, what Obama wanted to do–until Harry Reid reminded him that Senate Democrats would not rubber-stamp his proposal and that approval by the Senate Democrats was as important as approval by the House.  Reid presumably told Obama that he (Reid) would not allow a giveaway bill to be brought to the Senate floor.  Just as Boehner could deny a floor vote on the bill in the House, Reid could do the same in the Senate.  And he would do exactly that on a giveaway of the type that Obama has a habit of offering.  

Among all the commentary about winners and losers from the events and the outcome, there’s been little mention of Reid.  I agree with the consensus about who, among those mentioned in the particular article, won and who lost.  I certainly agree that Biden is a big winner.  I think he’ll be playing a larger role in negotiations and communication with Congress, and that’s good thing.  But I think the negotiations and communications will be with Reid as much as with McConnell and Boehner.  And that’s a really good thing.

For that reason–Harry Reid’s and the other Senate Democrats’ increased importance in negotiations on major fiscal deals–but only for that reason, I don’t share the deep fear that Krugman and many other liberals have right now that Obama will largely hand the advantage to the Republicans.  He may try, just as he did suddenly two weeks ago, when days after saying he wouldn’t budge from the $250,000 tax-rate-increase floor, he spontaneously offered a $400,000 floor and (apparently) a reduced cost of living adjustment for Social Security–which, given his propensity to negotiate with himself rather than requiring the Republicans to negotiate with him, was viewed, by the Republicans and everyone else, as maybe just his opening offer.  

That is the fear: that he will try.  But, slow as he is in picking up on political winds, whether it’s the commandeering by the right of the rhetoric and agenda on economic stimulus issues and national healthcare reform, or, now, anti-rightwing fiscal policy, and respectively responding to or employing those winds, this time he won’t have the luxury of not noticing that Reid and the other Senate Dems are, now, post-election, going to use their enhanced power.  

Krugman ends his blog post today by saying:

Maybe this time will be different. Maybe the Treasury is secretly preparing to invoke the 14th amendment, or issue a trillion-dollar platinum coin, or direct that the whole budget gap be taken out of spending dear to Republicans. But I have to say that I now expect Obama to cave on the ceiling; and so, of course, do the Republicans, which means that the crisis is going to happen.

The only thing that might save this situation is the fact that Obama has to be aware just how much is now riding on his willingness to finally stand up for his side; if he doesn’t, nobody will ever trust him again, and he will go down in history as the wimp who threw it all away.

But even that may not be enough. I guess we’ll see.

I don’t think it matters whether that is enough.  Because it is enough that the post-election power has shifted, to a meaningful extent, from the House Republicans to the Senate Democrats.  They will not dictate the terms.  But neither will the House Republicans, however willing Obama still is to let them.  And the shots Obama calls will be as much with Harry Reid in mind as with John Boehner in mind.  Reid, I trust, will insist.  The Republicans do hold some of the cards in the upcoming debt ceiling game.  Just not enough of the cards to run the table against Harry Reid.

*I added the italicized, boldfaced sentences in light of the comments to this post as originally published.

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