From bad to worse to worst
by David Atkins ("thereisnospoon")
As the default crisis negotiations enter what promises to be a rollercoaster week, Harry Reid and John Boehner are each bringing forward their own plans, neither of which much resembles Obama's desired "Grand Bargain" of entitlement cuts and revenue increases. It thus appears the American people are now down to three options in this default crisis mess: bad, worse, and worst. And when the least mind-numbingly awful plan is the one put forward by Harry Reid, it's clear the country is up a creek without a paddle:
The House speaker, John A. Boehner, and the Senate majority leader, Harry Reid, were preparing separate backup plans to raise the nation’s debt ceiling on Sunday after they and the White House were unable to form a bipartisan plan that would end an increasingly grim standoff over the federal budget...
Mr. Reid, the Senate’s top Democrat, was trying on Sunday to cobble together a plan to raise the government’s debt limit by $2.4 trillion through the 2012 elections, with spending cuts of about $2.7 trillion that would not touch any of the entitlement programs that are dear to Democrats or raise taxes, which is anathema to Republicans.
President Obama could endorse such a plan, even though it would fall far short of the ambitious goal of deficit reduction and entitlement changes that he says are necessary to shore up the nation’s finances...
The contours of Mr. Boehner’s backup plan were not entirely clear, but it seemed likely to take the form of a two-step process, with about $1 trillion in cuts, an amount the Republicans said was sufficient to clear the way for a debt limit increase through year’s end. That would be followed by future cuts guided by a new legislative commission that would consider a broader range of trims, program overhauls and revenue increases.
The first thing to understand about these negotiations is that there is a clear dividing line between what Congressional Democrats want, and what the White House wants. The White House, for reasons that seem inscrutable and can be endlessly debated, really wants to put Medicare and Social Security on the chopping block.
Is that because it's what Wall St. and campaign contributors want? That theory has some resonance given the Democratic Party's capture by Wall St. over the past twenty years. But the theory falls apart when one considers the White House's firm stance on insisting on revenue increases and subsidy eliminations on those same wealthy contributors, including hedge fund managers. To the White House's credit, they have firmly insisted that at least token revenues be part of the deal.
Perhaps more plausibly, one might surmise that the White House really and truly believes that putting at least Medicare on the chopping block is necessary for the nation's long-term budgetary health, within the limitation that significant actions to address revenues and income inequality will not be on the table in the near future. That theory requires belief in a blindingly stupid political myopia, and nearly automaton-like appreciation for political technocracy on the part of the President and his advisers, but it would be in keeping with the Administration's approach to the healthcare problem: bend the cost curve where possible, within the presumed political realities imposed by Republicans. And yet that theory, too, is belied by the fact that regardless what one might think about the fiscal challenges faced by Medicare, there is absolutely no reason to consider changes to Social Security as part of any deficit-related deal, as it is a self-sustaining program that won't run out of funds until 2037 at the current rate. So from a technocratic standpoint, why touch it at all? To say nothing of the fact that, from a technocratic standpoint, it would be far easier and more useful for deficit reduction to simply use gridlock to allow the Bush tax cuts for the wealthy to expire on schedule.
And if, as some suggest, the President is making a political calculation to "appear to be the adult in the room" in order to appeal to a slice of independent voters seen as critical for the 2012 election, why not do that without touching the third rail of Social Security? There are many ways to play Mr. Purple without going there. The question of what exactly is going through the heads of President Obama and his advisers may be the greatest mystery in all politics right now.
Congressional Dems who need to answer to their constituencies every two or six years have a little more political sense, and are standing fairly strong for now against both Obama and the GOP. Talk to many of them in private as I have recently, and one imagines having similar conversations at Netroots Nation: these folks are furious with the Administration, the GOP, and with the situation they're being put in, but there's not much they can do about it at the moment. So they're trying to get the best deal they can under the circumstances. Which brings us to the Reid proposal.
On the Senate side, Dave Dayen once again has a tremendous rundown (better than anywhere in the traditional media) of some the deals of the Reid proposal. The heart of it is this:
Given the numbers used here, I would guess that the outline of the cuts would be similar to what Nancy Pelosi suggested in a meeting with bloggers on Friday. It hinges on an accounting gimmick that would “reduce” deficits based on drawing down the wars in Iraq and Afghanistan. Because CBO essentially calculates the cost of war based on the previous year’s cost, by capping war spending at a lower number you “save” a good deal. As Pelosi described it, that could add up to $1 trillion to the total savings.
So you can get to $2.5 trillion pretty easily, then. Take the $1 trillion from the wars, add $1.2 trillion in agreed-to cuts from the discretionary budget, and add $200-$300 billion from foregone interest payments and you’re there.
This is obviously not a great deal, with its $1.2 trillion in cuts to the discretionary budget (we don’t know exactly where those cuts will fall). But compared to digging into entitlements, it’s better than some of the other ideas.
Boehner's "deal" hasn't even come into form yet, but would likely entail even more cuts, no tax increases, and a reprise of this same fight once again prior to the 2012 election, which is a non-starter for Democrats.
The fact that $1.2 trillion in discretionary spending cuts, with not even a hint of an attempt to provide further economic stimulus or address income inequality, is the best deal currently on the table is truly depressing. But that is what comes of 30 or more years of an increasingly extreme Republican party, and a Democratic Party that has actively declared that "the era of big government is over" while doing little to prepare ground for a rhetorical counterattack beyond the shifting sands of its own moderation and "reasonable" position.