JONATHAN COHN JULY 6, 2011
President Obama on Tuesday reiterated his insistence that Republicans agree to a “balanced” deficit reduction package that includes both spending cuts and new taxes. It was good to hear Obama make that argument again and, better still, to hear him make it so emphatically. But what exactly does he mean? Recent reports suggest that the administration would agree to a deal including about $2 trillion in reduced spending and about $400 billion in increased revenue. Very roughly speaking, that sounds like a ratio of cuts to taxes of roughly four- or five-to-one, depending on how you do define your categories. Other reports have cited more lopsided ratios, albeit with smaller numbers overall.
As Steve Benen, Jared Bernstein, and Ezra Klein, among others, have noted, none of these frameworks sound particularly balanced. Just think back to how we got here. Obama began this discussion with his speech at George Washington University, where he offered a deficit reduction plan that looked a lot like the one produced by the co-chairmen of his deficit commission, Erskin Bowles and Alan Simpson. Under their plan, the ratio of spending cuts to new revenue was about two-to-one (or three-to-one, if you count interest savings as a spending cut.)
At the time, liberals and sympathetic policy analysts were ecstatic about the president’s rhetoric but worried about the details of his plan. They – er, we – would have preferred a proposal that looked closer to the one that Alice Rivlin and Pete Domenici produced for the Bipartisan Policy Center. That plan, although not perfect, at least had a balance of spending cuts to tax increases of about one-to-one. And while we understood the difficulty of getting such a plan through Congress, we worried that Obama was effectively bidding too low – that by proposing a plan already skewed towards spending cuts, the final deal was likely to be even more skewed. That appears to be precisely what happened.
It’s hard to be sure, in part because negotiations are ongoing and the media reports are, as always, a bit sketchy. And it's not like major spending cuts don't deserve consideration. Purely from a policy standpoint, surely, cutting farm subsidies or waste in the Pentagon would make a lot of sense. So would further cuts to Medicare, insofar as they would expand and strengthen cost control efforts in the Affordable Care Act. Cuts to Medicaid, on the other hand, are extremely worrisome, at least at this particular moment in time. As the Center on Budget and Policy Priorities has noted, the likely effect would be further reductions in what the program pays providers, which is not a very good reform for a program that already underpays doctors and hospitals, making it more difficult for Medicaid beneficiaries to find professionals who will see them.
Obama has talked frequently about the need for both parties to make painful decisions that hurt their constituencies or require compromising core values. Again, the rhetoric is terrific. But only one party seems to making those painful decisions right now – and, come to think of it, only one party has been making those decisions for quite a while. In the late 1990s, it was a Democratic president, Bill Clinton, who reduced deficits by signing off on the painful spending cuts. Then, a few years later, it was a Republican president, George W. Bush, who increased deficits largely by enacting massive tax cuts for the wealthy. Now it’s time to reduce the deficit and, well, it’s a Democratic president ready to embrace painful cuts again, all because Republicans refuse to consider new revenue and are willing (or at least willing to threaten) letting the country default on its debt.
Could the endgame turn out better than the skeptics realize? Sure. The spending cuts could be smaller or less worrisome than they seem now. The deal could include another payroll tax holiday or investment in public works, to boost the economy. The leaks could be part of a clever political strategy to showcase Republicans for the extremists that they are. (David Brooks certainly seems to have noticed.) And this whole drama could be mere prelude to the debate over extension of the Bush tax cuts in late 2012, when they are set (again) to expire. As my colleague Jonathan Chait has been pointing out for some time, a stalemate in that fight would mean the end of the tax cuts
– producing precisely the sort of revenue folks like me want to see in the deal now.
But it’s hard to hear the latest reports and not worry that Republicans have already won a great deal
– that, with or without a default crisis, this episode will produce some combination of large spending cuts and small (if any) tax increases that reduce deficits largely by hurting the people that depend upon government programs. If that happens, the result will not only be unbalanced. It will also be unjust.
Update: To be clear, the politics of this deal might work out pretty well for President Obama and congressional Democrats. But that doesn't make the substantive outcome more appealing, as Greg Sargent points out this morning:
even if the GOP is in a difficult spot, it also needs to be pointed out yet again how much Democrats appear to be on the verge of trading away. If the GOP is in a political hole, Dems appear to be on the verge of cheerfully supplying the dirt they need to fill it, at least on Medicare.
As it is the debate is unfolding almost entirely on GOP turf, in a place where Republicans are getting far more than anyone thought possible in exchange for a debt ceiling hike that they themselves already agreed months ago was inevitable. Any concessions Dems win from Republicans on new revenues will be dwarfed by what Dems are giving up. And we don’t even know yet precisely what sort of Medicare cuts Dems are offering. If they agree to benefits cuts it could deprive them of some of the political advantage they have carefully built up on the issue in recent months. But it’s looking increasingly like the White House Dems are willing to trade that advantage away in exchange for a deal and an opportunity for Obama to reap the anticipated political advantages that come with having presided over one.
And all of this assumes the deal doesn't get worse than the latest media reports suggest. But the deal could easily get worse, as long as Republicans continue to hold firm in their insistence on no new revenue.