The Unbearable Debt Deal Quantified

As I wrote before, the wily Dems managed to get the Republicans to agree defense spending cuts that they now find unpalatable. Republicans are looking for ways to avoid those cuts.

• One way is for the House, Senate, and whatever president we have in 2013 to agree not to make those defense cuts. That's a pretty big stretch. It won't happen if Obama is re-elected. Even with a Republican president, Democratic senators could block moves to void the defense cuts.

• Another way is for the super committee to agree on another plan that the House, Senate, and president all accept.

The Republicans are now in the weaker position:

• They want to reduce the defense spending cuts.
• They want to maintain Bush tax cuts, which are worth $3.7 trillion over 10 years.
• They have no leverage for either of these goals.

The Democrats are now in the stronger position:

• They have largely accepted cuts to Medicare that are capped at 2% a year.
• The debt ceiling deal protected Social Security and Medicaid from cuts.
• They have leverage using defense spending cuts and the expiration of the Bush tax cuts at the end of 2012.

Despite their weak negotiating positions, the best offer from the Republicans is:

• $250 billion higher tax revenues through limiting deductions if...
• Tax rates are frozen at below Bush tax rates.

It's no wonder that the Dems aren't agreeing. They hold a lot more leverage now, and the Repubs' offer is paltry. Republicans only seems serious about deficit reductions when social programs pay the price. They can dish out the austerity, but they can't take it. We'll have to see if they'll threaten a government shutdown by holding up appropriations next year. As far as I can see (for what that's worth), that is the only leverage they will have until after the election.

The debt ceiling fight was the historic crisis that prompted me to start this blog. If looks even more historic now. It's quite a reversal for the Republicans. I wonder if that's the price they paid for playing chicken, and which Democrat was responsible for that advantageous outcome.

 Who dunnit?

Despite this apparent win for the Democrats, the 2012 election is still up for grabs. I'm not going to predict which party is going to win, or which party is able to spin this to their advantage. So often, it has been the Republicans, so I won't count them out.

The Growing Importance of the Super Committee

The shutdown looming last week was just barely averted. The rebellious Tea Party continues to demand budget concessions whenever they can take a hostage. But the Dems are not folding anymore. Why? Maybe because of the super committee.

The super committee is charged with negotiating deficit reduction between two camps that are pretty far apart. Too many in Congress have pledged to non-negotiable positions, yet they voted themselves a loophole in the debt ceiling deal. The Congress will give the super committee recommendations an up-or-down vote, no amendments or filibusters allowed.

To many, an agreement between the members of the committee seems unlikely. Several party hardliners were appointed, including Jon Kyl, Patty Murray, Max Baucus, and Jeb Hensarling. (I don't personally know that appointees other than Jon Kyl are hardliners--I'm depending on news sources.)

I'm more optimistic. The appointees may be more partisan, but that means their compromises will have more weight with colleagues. This isn't just a warmed-over Simpson-Bowles committee or Gang of Six, that is, the same people hawking the same plan. This time, core members of the parties are doing the negotiating.

The reasons I think they will strike a deal:

• The form of the committee enhances its chance of success. Don't underestimate the ability of serious people sitting down together and talking to reach some compromises. Not all of them have to agree. Smaller groups of 2 or 3 or 4 can hammer out proposals to present to all twelve.
• Public opinion is for a deal. There is a lot of pressure on both Republican and Democratic officials to stop arguing and make some sort of deal. Republicans lost general support over the August brinkmanship. Democratic seats in the south, midwest, and west are always vulnerable when Democrats as a group drift too far left or if they are obstructionist.

So the super committee is giving tremendous cover to the rest of Congress, but only if they reach a compromise. Major pressure to do something!

I care less about the specifics of the deal than how the rest of Congress reacts to it. But I'll throw out some predictions because I always do. On spending cuts, I think they will probably come to roughly the same conclusions as Simpson-Bowles. Taxes will be harder to work through, so maybe they'll establish another super committee, maybe they won't touch it, or maybe there will be some token tax increases in this deal. The last part of this prediction covers so many possibilities that it hardly counts as a prediction.

Update 11/17/11. It now looks like the super committee will fail. Read my updated analysis.

My new hero

“Citizens will either have to pay more for their government, accept less in government services and benefits, or both.” 

--Douglas Elmendorf, Director of the Congressional Budget Office and first guest of the Congressional super committee working on deficit reduction.

Sorry I didn't post on this right away, but it was my favorite moment last week. Elmendorf told the super committee the plain truth. No finger-pointing, no political games, just the stark truth. No one on the committee argued with him or tried to score points. They just listened, or so it seemed.

We are two months away from getting their recommendations, and I'm waiting with both hope and trepidation. They seem the best hope for a reasonable way forward, and I'm not seeing any other savior on the horizon.

To the committee members, work hard and get it done. A lot of us will be grateful, either immediately or eventually. God speed.

Serious About Deficit Reduction Pledge

"I, ________________, pledge to the American people, including Glover Norquist (are you listening?) that I will: ONE, respect the difficult work of the Congressional super committee on deficit reduction; TWO, encourage all members of the committee to continue working even if negotiations get heated; THREE, carefully consider all reports from the committee, both majority and minority; FOUR, avoid all grandstanding on the recommendations of the committee; FIVE, vote for the recommendations unless SIX, there's a damned good reason AND a better plan available that can pass both House and Senate; and SEVEN, verify within one year that the legislation I voted for actually reduced the deficit a non-trivial amount."

Any member of Congress could and should sign this pledge. Imagine--a bipartisan pledge. Another plus: any American can fulfill provisions 1-4. I wish I had thought of this pledge earlier, because we've already had a perfectly good committee working on this. Maybe there should be an EIGHTH provision: With apologies to Messrs. Bowles and Simpson, I will not squander this opportunity like the last one.

The Debt Limit Deal

I'm glad the bill passed the House and the Senate. The House vote was 269-161, with 174 Repubs and 95 Democrats voting yes. My own representative voted against, prompting me to email a stern disapproval for his rejection of compromise. The vote in the Senate was 74-26.

The rejectionists seem to fall into two camps: the Tea Partiers who want such deep cuts that default is perhaps the ideal way to get them, and the liberals who don't realize yet that the money train can't continue. The lack of a reasonable sense of fear on both sides amazes me. Tea partiers think that government is so bloated that we can do away with 40% without a crisis bigger than 9-11. The liberals must be math-impaired. There is no way that current trend in social program costs is affordable. I want to sit the liberals down and make them crunch some numbers, and then see if they can justify their beliefs.

Overall I'm happy with the compromise, but I would have preferred a few more cuts early on. The bipartisan commission and the triggers are perhaps the best part of the bill. The last bipartisan commission actually worked pretty well. Its report, which is quite detailed and very solid, should have been the basis for an orderly debate on the issue. I don't understand why it wasn't accepted when it was released. With this crisis (courtesy of the Tea Party), most of the country is finally ready for the discussion, but why should 8 months make such a difference? There hasn't been a huge change in the economy or federal budget, so it must have been that our attention (and balls) were grabbed and squeezed, and we finally looked at the problem. It's too bad that's what it takes, but maybe that's part of being an American--living with so many happy people who don't recognize a problem until it almost swallows them.

I'm sad to see Orrin Hatch among the No votes in the Senate. He used to be someone with solid principles, someone who saw the humanity in his adversaries, someone I might have liked as President. But it's a lot harder now for red state politicians to be that kind of respectful and respectable elected official. In light of that, huge kudos to the red state republicans who voted yes--Murkowski, Kyl, McCain, Boozman, Isakson, Crapo, Risch,  Lugar, Roberts, Cochran, Wicker, Blunt, Johanns, Burr, Hoeven, Portman, Thune, Alexander, Corker, Cornyn, Hutchinson, Barrasso, Enzi. I sincerely hope you don't lose your seats in primary challenges. If that happens, maybe do what Lisa Murkowski did and let the entire state decide.

Finally, it would be a lapse not to thank the freshman Republicans in the House for being such hard-nosed, pain-in-the-ass, difficult, nasty, single-minded pricks who happen to be right to focus on the debt issue and make it stick. We need jerks like you sometimes (like now), but I won't love you for it. Sorry, it's not fair, but this is the way it is, at least until my thinking evolves some more.

Update 11/7/11: I needed a reminder of who negotiated this deal. The New York Times credits Obama, Boehner, and McConnell. Biden and Reid were heavily involved just recently, so they're probably due some credit too.