Budget negotiation state of play

State of play

by digby

It appears that the Obama supporters in the political establishment have awakened to the fact that he really does want to enact a Grand Bargain and that it's highly likely that it will end up being a bad deal for Democrats. Dday has the scoop today on this much-discussed article by Johnathan Chait in The New Republic (an article that made me laugh because I recalled being jeered and dismissed for my Cassandra warnings for the past two years on this.)

Dday writes:
Chait goes on to say that this deal calls for ten times as much spending cuts as revenue increases, and that this would be a horrible deal for Democrats (to say nothing of the country).

It would. But where has Chait been? This isn’t a surprise at all. The Obama budget has a mix of 2/3 spending cuts and 1/3 revenue. The Republican budget has all spending cuts and is almost impossibly cruel. Bowles-Simpson’s ratio, I believe, was 3/4 spending, 1/4 revenue. Split the difference and you’re up to 5/6 or 7/8 spending cuts. That’s not appreciably different than what’s coming out here. Democrats have always created severe imbalances in these “grand bargain” deals in favor of spending cuts, maybe because they think that’s what can pass or something, maybe because they (or more to the point, their wealthy donors) prefer spending cuts.

I’d love to see just one Democrat come out and say, “You know, just letting the Bush tax cuts expire completely would solve the entire medium-term deficit issue. And we wouldn’t even have to pass anything. Were the Clinton-era tax rates so burdensome?” But to date, that hasn’t happened. So you get these monstrously bad spending-heavy “grand bargains.”

I think that's definitional in this political environment. Even the vaunted 1983 social security deal --- which really was anticipating a short term funding crisis --- ended up being 65% cuts to 35% revenue. (That's why I don't get to retire until I'm almost 67 and neither does anyone else who's younger than I.)

The Republicans have staked out the very fringe of the anti-tax argument as their final position while the Democrats come charging in with anti-spending rhetoric and proposing cuts to poor people to establish that they are acting in good faith --- as if there's any political advantage to that. Even the Villagers applaud such gestures and then promptly forget them. (What they truly desire is for the president to capitulate to the conventional wisdom that says Americans deserve to be punished for their bad, bad behavior with "tough love" which always stimulates aristocrats in interesting primal ways.) The "bargain" almost has to contain far more spending cuts than revenue hikes just from the starting positions alone. And I'm fairly sure the White House knows this --- what they want is political credit for getting a "win" on the board. But I think that in the era of Citizen's United what constitues a "win" is a much more fluid concept than it has been in the past.

As Ezra writes today, the Grand Bargain is basically about cuts to "entitlements" and "tax reform" both of which are essentially GOP issues, depending on how you define "reform" and I think the GOP probably has the upper hand in that. (The right will never agree to cut defense --- unlike the administration they don't seem to believe that the public is impressed when they give up their principles on the alter of making "tough choices.") Cuts to Medicare and Medicaid are probably off the table for the time being after the bruising health care battle. So, Social Security is the best terrain for the Grand Bargain: it's effects won't be felt until the people making the deal are probably long dead (or comfortably ensconced in the taxpayer funded retirement), it will impress the only people who matter --- the confidence fairies and bond vigilantes, and it allows the president to be Very Seriously Presidential in Winning The Future.

The problem is that the Republicans want to lay this off on the president so they can have it both ways by saying he didn't do enough while their shadowy corporate supporters under Citizens United demagogue the cuts to senior citizens, thus insuring they will come out to vote against Obama in huge numbers. The president, on the other hand, needs the GOP to jump off the cliff with him so they can share the blame. What do you suppose the odds of the latter happening are?

Here's an example of the state of play, via Andrea Mitchell today. Deficit scold David Walker, lately of the Pete Peterson Foundation and now head of his own catfood institution said this:

Mitchell: Did he punt on the budget as he's accused of by the Republicans, or is it at least a first draft?

Walker: He punted on the structural deficit challenges. You know, he had a commission, the national fiscal responsibility and reform commission. They really tried to deal with the tough issues of the structural deficit. And frankly, their recommendations didn't seem to get much consideration by the administration and its budget. You know, the president is the chief executive officer of the united states government.The entity that he leads has a deteriorating financial condition and it could have its own debt crisis within three to five years if it doesn't change course. He needs to lead.

Mitchell: What about the argument that if he puts something out there, Savannah Guthrie was on the program earlier, and he said that their strategy is to play his cards close to the vest, my words, not theirs, and wait to see what the other side proposes, see if there's anything that come to senate negotiation, bipartisan negotiation, and then come in, rather than having everyone taking pot shots at what he puts out there.

Walker: The chief executive officer has a responsibility to lead, no matter what type of enterprise it is.

Now, we'll see what the Republicans come up with.They've now said recently that they might come up with some specific proposals as part of the house budget. We'll see whether that's the case. Realistically, we need to do the following.
There needs to be an agreement between the president and congress on short-term spending as part of the continuing resolution.

They're arguing over the bar tab on a ship that's headed towards an iceberg that could sink it. So they need to get perspective. Secondly, they need to end up focusing on the debt ceiling limit. We need to bring back tough budget controls with automatic enforcement mechanisms starting in 2013.

Mitchell: You know, there are some people, including fiscal hawks like my colleague, Lawrence O'donnell, who's been making the case that you're making. But he says we have to be very careful about not cutting too much during this weak economic period. That we can agree to cuts. I think my sense is that many people believe you should agree to something now that triggers in later. Would that do the trick?

Walker: We clearly need to recognize the difference between the short-term and the structural. Look, the real threat is not today's deficits and debt. We can have more tolerance for spending and targeted investments in the short-term if we have a plan to deal with the real threat.What's going on right now is a moral tragedy.We're mortgaging the future of our kids and grandkids at record rates. But how we solve the problem involves moral issues as well.

Walker is explicitly helping the Republicans there, taunting Obama, saying he has a responsibility to "lead" on the destruction of the safety net. And Mitchell (and O'Donnell, apparently) are pushing the idea that "future" cuts are a-ok, which I think is probably the White House position as well. I suppose if they can convince Republicans not to run their usual slash and burn political campaign against them in 2012, it might even work. What do you suppose the chances of that are?