$917 billion in Federal program cuts to be phased-in over 10 years. 3 separate increases in the Federal debt limit, all of which President Obama will have to initiate and all of which Congressional Republicans will have an opportunity to vote against without preventing the increase. The institution of yet-another commission, this one composed exclusively of current lawmakers, to recommend another $1.2 trillion-$1.5 trillion in Federal deficit reduction; if this commission fails to agree on a report to Congress or if Congress fails to pass its budgetary recommendations, $1.2 trillion in mandatory spending cuts are slated to kick-in over a 10-year period, 1/2 coming from the Department of Defense and 1/2 coming from domestic discretionary spending, particularly Medicare payments to hospitals. While taxes are at historically low levels and the gap between the rich and the poor yawns wide, the deficit reduction plan includes no tax increases on the rich or highly-profitable corporations.
Is there any silver lining in this deal for the Democrats? Yes, and it’s a big one: When the Senate passed this deficit-reduction/debt limit increase deal today, Congressional Republicans lost most of the leverage they had in the 112th Congress.
The deal passed the House by a vote of 269-161–not exactly close, considering the concerns harbored as late as Saturday that Democrats and Republicans were irreconcilably far from a deal. (With a full quorum, 218 votes are required in the House to pass a bill.) In the Senate the vote was 74-26, not very close at all in the chamber which is practically designed to grind the business of legislation and Executive appointments to a halt. The final outline of the deal is a 3-stage increase in the Federal debt limit ($400 billion immediately, $500 billion later as needed, and finally a $1.5 trillion increase some time in 2012), authorized by the President and only preventable by a subsequent 2/3-majority override in both chambers of Congress–the failure of which is a foregone conclusion given Democratic priorities. Massive Republican symbolic protest votes are possible, however–and if they come they will also be somewhat-hypocritical, as passage of Paul Ryan’s budget plan would have required a substantial increase in the debt limit anyway to pay for his proposed tax cuts. The initial debt limit increase would be accompanied by $917 billion in Federal spending cuts, those considered most-digestible by Congressional Democrats and Republicans. Finally, yet-another Congressional commission (Do we seriously need another?) would convene to find and recommend another $1.2 trillion-$1.5 trillion in deficit reduction–not necessarily spending cuts, but deficit reduction of any kind–to Congress. If that commission fails to make a report or if Congress is unwilling to act on it, then in conjunction with the President’s 3rd and largest increase in the Federal debt limit, automatic spending cuts of about $1.2 trillion will take effect–1/2 from the Defense Department’s budget and 1/2 primarily from Medicare payments to service-providers. (When considering the enormity of these numbers, consider that all these budget figures refer to savings over the course of a decade, not from annual budget amounts.)
While it is true that the President failed to secure Republican support for any tax increases in this deal, consider that the Bowles-Simpson Commission recommended about $3 trillion in Federal spending cuts along with about $1 trillion in tax increases; this deal contains about $2.1-$2.4 trillion in spending cuts. The take from the Pentagon’s budget is much larger than anticipated–almost half if Congress cannot reach a consensus on further cuts. Finally, the 3-stage debt limit increase is irrelevant as Congressional Democrats would never side with Congressional Republicans to prevent the President from passing normal Federal outlays, so Republicans have lost their primary leverage for the rest of Obama’s 1st term. Finally, the deal permits the new Congressional commission to recommend tax increases, and the Bush tax cuts are still set to expire at the end of 2012. Independent of whether President Obama is re-elected under such difficult political circumstances or turned out of office by a massive Republican electoral effort, Republicans have no leverage to prevent him from letting those tax cuts expire. The best they can do for themselves is to work with him to preserve those tax cuts for the middle- and working-class. If they want more, they will probably have to accommodate the President’s spending priorities, ironic considering the deal just inked. Even if a Mitt Romney or a Rick Perry wins the 2012 Presidential election–an unappetizing prospect in itself–and Republicans win control of the Senate, not in the rosiest plausible scenario will they get to a filibuster-proof majority there, and Liberals will dominate the Democratic ranks in Congress.
Considering the Republicans now find themselves at a significant (though strangely little-recognized) disadvantage, should the President get kudos for setting himself up well politically for 2012? No; leadership on his part, the Liberal Ironist is sorry to say, has nothing to do with this subtle improvement in his political position. The President missed an astonishing number of opportunities before reaching this point.
His 1st massive oversight came shorty after the 2010 midterm elections. In his initial post-midterm statement, the President could have made a “the people have spoken”-type declaration, announcing the legitimacy of the election and his willingness to work with the new Congress. Of course, as he is a Liberal Democrat and the House of Representatives is now dominated by very-Conservative Republicans, there would be an upper limit to the cooperation he could offer. But admitting that a course correction was necessary would certainly have been a better response to the best Republican electoral year since 1938 than his naive “I suppose I just didn’t get my message out,” which may appeal to much of the base but pointlessly played into an old narrative of “Liberal condescension.”
The President made a much bigger (and telling) error when, following the report from his own Bowles-Simpson Commission on deficit reduction on December 1st of last year, he subsequently dropped the report and hardly mentioned it again before House Budget Committee Chairman Paul Ryan (R-WI) proposed his own deficit-reduction plan, which failed primarily on the poorly-conceived plan to convert Medicare from a defined-benefit health care entitlement into a system of vouchers for personal health insurance, essentially scrapping the immensely-popular program. Following that but before the beginning of the deficit-reduction talks in earnest, the President failed to effectively shift his expectations in the direction of a deal with Congressional Republicans. (Having done such a good job of laying-out his vision for the country in his 2011 State of the Union Address, he was curiously unable to say more about the importance of maintaining the progressive state than that the rich should have to contribute to deficit reduction. In highlighting the importance of the well-off contributing to balancing Federal finances, President Obama made it seem that this was “merely” a matter of fairness, giving Republicans an unearned pass on the damage Federal spending reductions could pose to our economy now–and on the value of Federal programs the Republicans are trying to cut for reasons other than concern about the deficit.)
Furthermore, it was a revelation when the Speaker of the House said he had been on the verge of a deal for $4 trillion in deficit reduction including $800 billion in tax increases–but that at that moment the President asked for a larger tax hike. (Making unreasonable demands in a negotiation and sliding from that position only when necessary to reach a deal is actually a better path to a compromise than making moderate demands but pressing your luck and increasing your most-challenging demands when you suspect you were overly-cautious and that you have your opponent at a disadvantage; the former tack, which was the Republicans,’ may be disingenuous and risky, but it produces a sense of forward progress in negotiations, however slow.) Having expressed a desire for a “grand bargain” to bring Federal taxes and spending closer their historical ratio (Federal spending around 20% of GDP, Federal taxes around 19% of GDP, and the government dutifully making interest payments), President Obama failed to clarify just what he wanted from such a bargain. The Liberal Ironist suspects that he hoped to have his cake and eat it too, taking accolades for bringing Federal deficits down to a manageable size and for working-out a deal with Congressional Republicans without having to take the heat for signing-on to harsh spending cuts demanded by Conservatives. Now, however, frustrated demands by Congressional Republicans that the President take the initiative and move the deficit-reduction talks along seem to have been sincere.
So, suffice to say that, while the outcome of the current deal to raise the debt limit and cut Federal spending leaves the leverage for the remainder of this Congress with the President, this is less the result of shrewd bargaining on the President’s part than it is serendipity. Having run-up on the deadline due to difficulties in managing their House caucus, Republican Congressional leaders seem to have quickly settled on a deal that would focus on the least-controversial spending cuts, plus a big potential Republican giveaway on Defense spending (which, frankly, contains lots of Republican pork projects). If the Democrats sit on their hands now, Republicans will have to live-down a total of $600 billion in cuts to Defense spending in exchange for about $600 billion in cuts to Medicare payments to hospitals, avoiding a direct impact on citizens’ Medicare benefits as much as possible. As Ezra Klein has pointed out, President Obama can now simply allow all of the Bush tax cuts to expire. Republicans cannot compel him to act on their extension, and they will expire after the 2012 Presidential election. Without getting from their current 47 seats to 60 in 2012 (necessary as the most-Conservative Senate Democrats are among their best electoral prospects), Republicans wouldn’t be able to re-institute them in the current polarized political environment. In forcing a link of a necessary debt-limit increase to a charged debate over economically-damaging austerity measures, Congressional Republicans created a situation in which they would be forced to blink. The President didn’t get what he wanted from the Republicans, but he has given less than his own Commission recommended–and he can take what he wants later at no risk.
All he has to do is not lift a finger.