Short-term thinking killed the “Grand Bargain,” the mythical compromise to avert a fiscal crisis that Democrats and Republicans know is unavoidable without slashing entitlement spending and/or raising taxes.
Long-term thinking “¦ well, there is none of that in Washington. Because long-term thinking requires courage and transparency, and such traits are dead to this town. Allow me to highlight two facts that President Obama and House Republicans, cowardly, don’t want their followers to know.
Delaying an agreement to tame the $17.3 trillion debt will backfire on liberals. Obama said it best himself, repeatedly, when he defied (or gave the pretense of defying) his most liberal supporters by offering modest entitlement cuts. “The biggest driver of our long-term debt is the rising cost of health care for an aging population,” he argued last year, adding that “those of us who care deeply about programs like Medicare must embrace the need for modest reforms — otherwise, our retirement programs will crowd out investments we need for our children, and jeopardize the promise of a secure retirement for future generations.”
That equation hasn’t changed. At its current course, the nation’s debt will be 74 percent of gross domestic product by year’s end, 79 percent of GDP by 2024 and 100 percent of GDP by 2038. The deficit reduction Obama now brags about? It’s an aberration. The president knows — but does not tell Americans — that, barring a budget deal, annual deficits will begin rising again in the next two or three years as the population ages.
One thing that has changed is Obama’s politics. With his re-election behind him and mid-term elections looming, Obama can ignore compromise-seeking independent voters and pander to his base. Last week, he dropped from his budget a plan to reduce the cost-of-living adjustment for Social Security recipients. As Brett LoGiurato wrote in Business Insider, Obama felt pressure from the left. “Led by Sens. Tom Harkin (D-Iowa), Sherrod Brown (D-Ohio), and Elizabeth Warren (D-Mass.), many Democrats now not only oppose the cuts, but also favor an expansion of Social Security benefits.”
Delaying an agreement to tame the $17.3 trillion debt will backfire on conservatives. Liberal columnist Jonathan Chait argued that point:
“While I don’t come close to sharing their bug-eyed fear about the scope of the long-term deficit, I do agree that at some point, a fiscal correction will probably be needed. Now here is an important political-economic reality undergirding this long game. It’s politically feasible to cut future retirement benefits, but it’s not feasible to cut current retirement benefits (as even Republican hard-liners agree.) The longer any such correction is postponed, the longer current benefits are locked in. Every year a deal is delayed, the harder it gets to cut spending, and thus the easier it gets to raise taxes. Bolstering this reality is a simple political dynamic: cutting retirement benefits is wildly unpopular. If forced to choose, people would overwhelmingly prefer to raise taxes.”
Chait seems to think that once Washington is forced to confront the oft-punted fiscal crisis, tax increases will be the only fix on the table. My suspicion is that entitlement cuts will remain in play, even if we wait so long that current retirees are targeted. The crisis (Chait calls it a mere “fiscal correction”) will be that bad. Despite our disagreements, on this Chait and I agree: A price for delaying compromise is higher taxes.
Our leaders can delay, distort and lie about the facts, but they can’t wash them away. Both parties needed the Grand Bargain. That brings me to two questions I hear every day:
Is the GOP more to blame than the White House? I think so, a bit more than Democrats, because of Speaker John Boehner’s inability to rally the hard-right GOP House behind a tax compromise to match Obama’s offer on entitlements. But that should be no solace to liberals or to Obama; their agenda and his legacy are yoked to the Grand Bargain.
Does Obama share some blame? You bet, quite a bit. Don’t forget, he squeezed tax increases out of Republicans after his 2012 re-election, claiming them as his “mandate” rather than leveraging them for a Grand Bargain. That was a huge mistake, a stroke of arrogance that will haunt his place in history. Obama surrendered to GOP intransigence rather than overcoming it, becoming a hostage of a Washington culture he was twice elected to change. But this should be no solace to conservatives or to Boehner; their agenda and his legacy are yoked to the Grand Bargain.
See what I mean? Regardless of your politics, short-term thinking is a killer.