I’m fiscally bipolar. Most of the time I think there’s no way the two parties will do anything to address the nation’s ruinous debt problem.
But some weeks there are rays of hope. This is one of those weeks. There is a lot going on behind the scenes of the debate over how to raise the federal debt-ceiling limit. Something good might happen.
Events are being driven by the Republican leaders. The playing field on the debt-ceiling fight is tilted in their direction, so they want to make this fight as consequential as possible. They want to use this occasion to reshape fiscal policy for decades.
They have the advantage, first, because raising the limit is extremely unpopular. According to a poll commissioned by The Hill newspaper in Washington, only 27 percent of Americans want to raise the debt ceiling while 62 percent oppose it. The only time you can get voters, especially independent voters, to tolerate a debt-ceiling increase is if you tie it to a broad array of spending cuts.
Moreover, the debt limit absolutely has to pass. The Republican Party leaders are convinced that if the debt limit isn’t raised and there’s an economic catastrophe, all politicians will suffer, but, as president, Barack Obama will suffer most. He has a powerful incentive to do a deal.
Because they have leverage, John Boehner and Mitch McConnell are aggressively pushing their case. Boehner, the House speaker, gave a speech this week laying out a maximalist position, pulling the whole frame of the debate in his direction. But the real import of the speech was this: He’s going to organize the debt-ceiling debate just as he organized the debate over the 2011 budget a few weeks ago. He’s tying the debt-ceiling limit to compensatory spending cuts. That puts the focus of attention on what kind of cuts everybody can come up with. This is natural Republican turf.
Congress won’t be able to produce specific program cuts and policy reforms in the next few weeks, but it can come up with structural rules that will obligate future Congresses to make cuts and reforms for years ahead. The important argument now is over what kind of restrictions to impose on future Congresses. (This by itself is a sign of just how far rightward the debate has shifted).
Republicans and a few moderate Democrats are rallying behind a spending cap plan, co-sponsored in the Senate by the Republican Bob Corker and the Democrat Claire McCaskill. In its simplest form, the bill would cap federal spending at 20.6 percent of gross domestic product, the recent historic average. If spending rose above that, automatic cuts would ensue.
Democrats like Harry Reid, the Senate majority leader, support a deficit cap plan. If deficits got bigger than, say, 3 percent of G.D.P., then a mixture of spending cuts and tax increases would ensue.
Liberal Democrats hate the spending cap. As the population ages, it would force future Congresses to transform Medicare. Conservative Republicans hate the deficit cap. It would force big tax increases in years ahead to go along with big spending cuts.
This battle of the caps would seem to take us back to the same old gridlock. But, remember, the debt-ceiling limit has to pass. If it doesn’t, there will be ruination for all involved. Moreover, if the two parties do come up with a compromise, the rewards would be enormous. President Obama would have averted a national catastrophe, put the government on a sustainable path and transformed the atmosphere in Washington. He’d surely win re-election in a walk. Boehner and McConnell would go down in history as the men who tamed the federal leviathan. The forces of fear and hope push powerfully toward a deal.
So in the standoff between the spending cap and the deficit cap, how might the two parties come together? Well, for the past few months the Senate’s “Gang of Six” has been working to put some version of the Simpson-Bowles report into legislative form. These senators — liberal, moderate and conservative — are expected to announce their results soon. Their plan will presumably include some serious spending restraint, reaching many of the goals envisioned by Corker’s spending caps.
Once there is a serious spending reduction on the table, that changes the whole psychology. There are many Republicans who, in those circumstances, would support a tax reform package that didn’t raise tax rates but that did, when scored dynamically, raise a lot of tax revenue. That would make Democrats happy.
The whole thing could be enforced by adopting a version of the Bipartisan Policy Center’s save-as-you-go idea. This is like the pay-as-you-go rules that restrained spending and debt in the 1990s, only it is much tougher. If Corker’s spending caps and Reid’s deficit caps got together, the save-as-you-go plan would be their love child.
The circumstances of the debt-ceiling fight make compromise more likely than at any other time. I wouldn’t say a grand bargain is likely, just more likely than it has been.
http://www.nytimes.com/2011/05/13/opini … ntemail1=y
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Get real Mr. President. I'll hold my breath!
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