Domenici And Rivlin Try To Sneak Some Spinach Onto The GOP's Plate

by Jonathan Chait | May 16, 2011

Pete Domenici and Alice Rivlin propose a mechanism to enact automatic, across-the-board deficit savings if Congress fails to meet deficit reduction targets:

[W]e have developed a mechanism called Save as You Go, or “Save-go,” patterned after the Budget Enforcement Act of 1990, which contained spending caps and pay-as-you-go (“Pay-go”) requirements. Pay-go stipulated that any increase in deficits be offset by equal savings elsewhere in the federal budget, thereby guaranteeing that revenue and entitlement policies enacted by Congress could not increase the deficit.
While pay-go made a major contribution to reducing deficits in the 1990s, it is not adequate to deal with today’s situation, in which deficits will grow in the future without any new legislation. Where pay-go played defense, save-go will compel Congress to play offense and cut projected deficits and debt.
Save-go requires that Congress achieve specific, annual dollar amounts of budget savings in each of three categories: discretionary (domestic and defense) spending, health-care spending, and other entitlement spending plus revenue. If, for example, Congress cut $4 trillion from projected future deficits over a 10-year period, legislation would have to be altered to hit year-by-year savings targets in each category, in total adding up to the $4 trillion.
But if Congress failed to meet the yearly targets in any of the three buckets, a trigger would be pulled. If the discretionary spending target were missed in any year, domestic and defense spending would face automatic, across-the-board cuts. If the health-care target were missed, health programs would be cut across the board. If the target for other entitlement spending and revenue were missed, other entitlements (including Social Security) would be cut and tax expenditures — the loopholes that are really “spending through the tax code” — would be cut or other revenue increased. 

The substance of the proposal sounds reasonable to me, though I reserve the right to revise my opinion after a more detailed study of it. But there's a political problem here that they're dancing around, and it becomes clear when you look closely at the history to which they refer glancingly.

In 1990, George H.W. Bush agreed with Congressional Democrats to program of spending cuts and small tax hikes. Part of the deal involved imposing a "pay as you go" rule, which requires any new entitlement spending or tax cuts be offset with entitlement cuts or tax increases. The agreement was spectacularly effective at reducing the deficit -- in conjunction with Bill Clinton's similar 1993 deficit reduction program, it resulted in a decade of sustained reduction in both deficits and the level of spending. Just look at the change from 1990 to 2001:

Republicans considered this the worst idea they had ever heard of. Conservatives revolted against the 1990 budget agreement, with all but 10 House Republicans voting against it even with a GOP president lobbying for votes. Conservatives spent years fulsomely denouncing this deal, which they called "the fiscal equivalent of Yalta" (resembling -- duh! -- FDR's sellout of Eastern Europe.) The conservative interpretation of this agreement remains that it was a pathetic policy failure which ensured George Bush's election defeat and which can never be repeated.

As soon as Republicans gained full control of government in 2001, they repealed the pay-as-you-go requirement. This allowed George W. Bush and the Congressional GOP to pass a prescription drug benefit and a series of tax cuts with zero offsetting savings. When Democrats regained control of Congress, they reimposed the pay-as-you-go requirement, which held through President Obama's first two years. But then when the GOP regained control of Congress this year, it junked pay-as-you-go and replaced it with a rule that prohibits net spending increases but allows tax cuts with no offsetting costs.

In sum, Republicans don't like the idea of a rule that prohibits debt-financed tax cuts, even if that rule also prohibits debt-financed entitlement increases. So Rivlin and Domenici are trying to get them to agree to a budget rule that follows the basic structure of the same rule they've been fighting with every fiber of their being for two decades. The plan seems to involve blending together the revenue savings with the spending cuts, the way parents might puree vegetables and sneak them into their childrens' meatloaf:

[I]f Congress failed to meet the yearly targets in any of the three buckets, a trigger would be pulled. If the discretionary spending target were missed in any year, domestic and defense spending would face automatic, across-the-board cuts. If the health-care target were missed, health programs would be cut across the board. If the target for other entitlement spending and revenue were missed, other entitlements (including Social Security) would be cut and tax expenditures — the loopholes that are really “spending through the tax code” — would be cut or other revenue increased.

I don't think they're going to fall for that. The reason I don't think they're going to fall for it is that they care way more about lower taxes and smaller government than about deficits. And that, in turn, gets to the whole reason why the "grand bipartisan model" of deficit reduction is so treacherous: You can only get somebody to compromise toward a larger goal if they share that goal. I don't see much evidence that Republicans do.

Source URL: http://www.newrepublic.com//blog/jonathan-chait/88453/domenici-and-rivlin-try-sneak-some-spinach-the-gops-plate