JONATHAN COHN JULY 22, 2011
What did the president offer and when did he offer it? That’s the question everybody was asking yesterday, following reports in multiple media outlets that Obama and House Speaker John Boehner were close to negotiating another large deficit reduction package.
According to the reports, including this thorough dispatch from TPM's Brian Beutler, the package would have looked a lot like the one Obama and Boehner had nearly constructed two weeks ago: More than $3 trillion in total spending cuts, including changes to all of the major entitlement programs and significant defense reductions, coupled with about $800 billion in new revenue. But this plan reportedly had a few new wrinkles, too – none of them too appealing. Instead of specifying the form of the $800 billion in revenue, the plan would call for Congress to find the money by a certain date. If Congress failed, then the Bush tax cuts affecting high incomes would expire as planned in 2012 – or, perhaps, the Affordable Care Act’s controversial requirement that everybody get health insurance would be rescinded.
If that last part surprised you, don’t feel bad. It surprised everybody, as it has nothing to do with the budget debate and seems like a completely unnecessary capitulation to Republicans. And it’s really difficult to know whether this is something the administration so much as winked at, let alone condoned, in any serious way. Then again, the Obama Administration has surprised a lot of people by its willingness to offer concessions on Medicare, Medicaid, and Social Security – in exchange for what look like awfully tiny concessions on tax revenue. And while the White House pushed back hard against the deal stories yesterday, publicly and privately, the nature of the pushback was interesting: Officials kept saying the reports mischaracterized the state of play, that a deal really wasn’t imminent. They were not going out of their way to dispute details.
Again, you should view all of these reports (including mine!) with at least some skepticism. Among other things, I wouldn’t assume that the sources for these stories always know as much as they think or that the reporters like me always understand what we are being told. Still, it seems increasingly clear that Obama wants a large deficit reduction deal, even if it means giving more ground than the Republicans are giving and even if it means infuriating much of his own party. Just look at the graph that Ezra Klein posted yesterday, copied below: At this point, Obama is offering a deal that would demand less revenue than either his own deficit commission or the Gang of Six put on the table. And I’m among those who thought neither proposal had enough revenue anyway.
The cynical explanation for this posture is that Obama is obsessed with appealing to political independents, whom he views as the key to his reelection. That probably gives the president too little credit: I continue to believe the driving force here is Obama’s determination to the president who tackles the nation’s hardest, unsolvable problems in an adult, responsible way. But that is also why I find this approach so baffling. The deal, as taking shape, doesn’t seem particularly responsible.
Among other things, it would all but guarantee that the Bush tax cuts for middle-income Americans stay in place. If Obama were truly serious about taking politically difficult steps to stabilize the budget, he’d be trying to avoid that outcome – something that could be easily done, as my colleague Jonathan Chait has pointed out repeatedly, simply by waiting until 2012 to have the entire tax debate.*
Keep in mind that, by seeking to balance the budget while keeping in place the majority of the Bush tax cuts, Obama would be downsizing the government in more or less the way conservatives have always wanted. When Bush first promoted his tax cuts, at a time when the budget was actually in surplus, he promised that they would act like a “fiscal straightjacket” on the size of government -- in effect, "starving the beast" as Republicans since Reagan have been dreaming of doing.
It didn’t quite work out that way, at least during Bush's tenure. Taxes came down but spending went up, thanks to two wars and the creation of a new entitlement, the Medicare drug benefit, for which Bush and his allies couldn’t be bothered to pay. But instead of addressing that problem by allowing revenue to go back up to where it was, during the Clinton years, Obama seems to be proposing we settle at a new equilibrium, with lower overall revenue.
I say "seems" because so much remains uncertain and I'd very much like to be wrong about this. But nothing I've read or heard in the last 48 hours makes me think I am.
* To be clear, any tax hikes or spending cuts should wait until the economy has recovered. In fact, in an ideal world, a deal on the budget would focus on job creation as well as deficit reduction.