Rumors of a “grand bargain” haunt Washington like a nettlesome poltergeist, and because it could include entitlement reform, liberals are feeling a touch of pre-Halloween fright. They worry that Democrats will squander the upper hand they earned in the government shutdown by making a bad deal with Republicans (it wouldn’t be the first time) in the bicameral committee tasked with crafting a budget by Dec. 13 for the remainder of the fiscal year. Outside groups such as Democracy for America are warning of “a civil war within the Democratic Party” if any party member so much as thinks about touching Social Security. The AFL-CIO declared “there will be no cover” for members who support changes to entitlement programs.
But progressives can put away the pitchforks, because nobody seems interested in making whatever bargain emerges from the committee very grand. “Everyone, stop freaking out. This is going to be a small thing. Folks are going to try to find a top-line number and that’s about it,” says a Senate Democratic aide familiar with the negotiations. “This is not the super committee, part two.” Tax rates—where Republicans would need to compromise for Democrats to muck about with entitlements—are “not something that we’re talking about,” says another Democratic aide close to the negotiations, so anything beyond a modest deal is unlikely.
That’s why, with the social-safety net secure for now, Democrats hope to get two big things out of the budget conference. First, they want to roll back sequestration cuts and boost spending levels, especially on infrastructure, to create jobs; some Republicans appear amenable. Second, they want to replace those cuts with new revenue from closing tax loopholes; if the conference breaks down, it’ll be over how to replace sequestration.
Coming off a fight they mostly won, Democrats say they want a deal but feel confident making some demands, for a change. “It will depend on whether or not our Republican colleagues are willing to make compromises that they have refused to make so far,” Rep. Chris Van Hollen of Maryland, the ranking Democrat on the House Budget Committee, tells National Journal. Spending cuts have doubled since the 2011 Budget Control Act, thanks to sequestration, and Democrats want to get back to those earlier levels. “The BCA is what Congress determined on a bipartisan basis to be a fair level of spending,” Van Hollen says.
It says a lot about how far to the right Congress has moved on fiscal issues that Democrats are now hoping to use their new political capital to restore spending levels set by a deal that House Speaker John Boehner called “98 percent of what I wanted.” But Democrats have co-opted the austerity argument and want to preserve the deficit reduction achieved by sequestration—just in a way less painful than the indiscriminate, across-the-board cuts.
And they have some leverage: Sequestration is just starting to affect the military, a sensitive spot for Republicans, while programs that Democrats care most about have already borne the brunt of the burden. “I get an extra billion dollars this year compared to [last] year. Defense? They lose $23 billion,” Senate Majority Leader Harry Reid told, sizing up each sides’ projected losses.
Two of the Senate’s biggest GOP defense hawks, South Carolina’s Lindsey Graham and New Hampshire’s Kelly Ayotte, sit on the bicameral committee and have complained loudly about the cuts. “We need to add some money back, particularly for defense,” Ayotte said last week. What’s more, the House has had trouble passing appropriations bills at sequestration levels. Conservatives support the spending reductions in theory, but they’ve balked at specific cuts, so Boehner wants to boost funding levels as well.
The problem is how to get there. Republicans seek additional cuts to domestic programs to free up money for defense, but Democrats say they’re not going to cut the likes of Head Start. Instead, they want to use some of the nearly trillion dollars in “wasteful spending in the tax code” they identified in their Senate budget, which includes perennial political footballs like the oil-production tax credit and the carried-interest loophole. But Republicans aren’t eager to be seen raising taxes. “I’m pretty sure you know the House Republican response to anything that is a net revenue increase,” says William Allison, a majority spokesman for the House Budget Committee.
And this is where talks could break down. It’s comfortable political turf for Democrats, who would inevitably blame Republicans for siding with oil companies and Grover Norquist instead of making a deal to keep the government open. “It’s hard to take seriously claims that folks want to reduce the deficit when they refuse to close a single tax loophole,” Van Hollen says. But he insists that Democrats don’t want stalemate. Compare their narrow agenda to the lengthy wish list Republicans presented during the shutdown. They desperately want a return to regular order, and a conference committee deal would be the first step. After all, Senate Budget Committee Chairwoman Patty Murray is essentially out of a job if Congress continues to fund the government through continuing resolutions (there’s no need to write a budget).
The same could be said about House Budget Committee Chairman Paul Ryan, R-Wis., although his ambitions likely go beyond his chairmanship. Indeed, Republicans stymied a return to regular order more than 21 times by refusing to make appointments to a bicameral conference committee. But the government shutdown changed that, and Democrats hope it’ll change the GOP’s stance on tax loopholes as well. As one Democratic staffer says, “It’s always going to be a nonstarter for them, until the time they sign onto it.”
This article appears in the October 26, 2013, edition of National Journal Magazine as Small Ball.