Sunday, July 03, 2011

Why Obama can't entirely channel Bill Clinton circa 1995

Worried by the Obama administration's apparent large concessions to date in the debt ceiling negotiations (demanding paltry revenue hikes in exchange for massive spending cuts), I've been reading newspaper chronicles of Bill Clinton's epic budget battles with the Republican House and Senate in 1995 and 1996, seeking a kind of benchmark and maybe a bit of reassurance.

Clinton pretty much won these battles, which were not really resolved until the Balanced Budget Act was agreed upon in August 1997. The $284 billion in Medicare cuts over seven years that the Republicans had written into their 1996 bills was winnowed down to $112 billion; the GOP's $182 billion in Medicaid cuts was reduced to a fraction of that and offset by $24 billion for the S-CHIP program to provide Medicaid to uninsured children; the $245 billion in tax cuts became $95 billion in cuts reflecting Clinton's priorities.

That long-term deficit reduction blueprint followed a long, bitter slog that included not only the two government shutdowns in late 1995 through early 1996 but several more threatened shutdowns -- and threatened refusals to raise the debt ceiling. These threats lingered until late April 1996, when a deal was struck for the remainder of the fiscal year ending Oct. 1. That deal included $23 billion in cuts for the half-finished year -- a somewhat higher percentage of the total budget than the $39 billion in cuts Obama agreed to for FY 2011, though partly offset by $5 billion in spending for Clinton priorities in health, education, the environment and jobs programs.

Clinton was quite steadfast throughout this process. In June 1995, he reversed what his staff had thought was settled policy -- to bash the GOP budget and tax cuts without offering a specific counterproposal -- and released his own 10-year deficit reduction plan, which included far more moderate spending cuts.  In the months preceding the shutdown, he repeatedly announced that he would veto bills containing specific features, such as the $284 billion in Medicare cuts and the $241 billion in tax cuts; true to promise, he vetoed the omnibus spending bills passed by the GOP Congress in late October, and on 11/13 he vetoed stopgap spending bills and a debt ceiling raise with onerous riders, triggering the shutdown. In late December, he vetoed three spending bills in two days.  Throughout, he contrasted his own spending priorities and moderate, CBO-verified budget balancing plan with what he cast as GOP extremism.  

If Obama seems unlikely to do as well, that is due in part to several structural differences:
  • Clinton was not seeking tax hikes. He had already rammed those through a Democratic Congress in 1993, for which he and the Democrats paid in political blood, as Obama would for passage of the ACA.  Conversely, Clinton had his own tax cut proposals to contrast with the GOP's.
  • Clinton was dealing from a position of relative economic strength -- because of those 1993 tax hikes, and because the economy was growing. By fall 1995, he could boast that the deficit had shrunk for three years running.
  • GOP moderates still existed, and the GOP was more divided then than now -- partly because, unlike today, several Senators were planning or considering presidential runs.Dole was constantly pressured from the right by Phil Gramm, but he wanted to cut a deal with Clinton and avoid both the shutdowns and the extremist tag.
  • Because the Republicans controlled both houses, they were writing legislation that would arrive on Clinton's desk -- unlike the Republican House today.  That gave Clinton a clean contrast -- he used both the veto threat and the actual veto liberally.
  • While the Republicans threatened repeatedly not to raise the debt ceiling, I gather that no one believed them then.  Of course, that's one contrast that may be Obama's fault, since he early on signaled willingness to negotiate deficit reduction under a debt ceiling deadline.
In light of these situational differences, it's interesting that Clinton would offer Obama this seemingly self-contradictory advice at Aspen last night:
Asked what the administration could do if GOP leaders hold to that posture, Clinton replied: "First the White House could blink. I hope that won't happen. I don't think they should blink."

If Republicans will not accept revenues in a package to lift the debt ceiling by August 2, Clinton said, Obama should pursue a short-term agreement based on the spending reductions both sides have already accepted.

"There are some spending cuts they agree on ...and he can take those and [get] an extension of the debt ceiling for six or eight months," Clinton said.

"I don't think you can agree to some mega-deal on their terms. And so I think as they get closer I believe they will agree on a more modest package of cuts and the Republicans, if I were in their position, I would say this only counts for six months or eight months or whatever but we don't want to let the American people's credit go under, let our credit get downgraded."
Most Democrats would consider a package that's all spending cuts and now tax hikes a massive "blink," even if the cuts were more limited than those supposedly already agreed upon. Clinton seems to be acknowledging that the Republicans will not be budged on tax hikes -- yet. Since he suggests longer-term negotiations on the basis of Bowles-Simpson, it would appear that he believes Obama can agree to spending cuts now -- presumably structured to some degree on his own terms -- and get revenue-raising tax reform done on a longer time frame.

To me, that underscores that it's still early days for judging Obama's negotiations with the GOP. There was plenty of Democratic hand-wringing over the course of Clinton's year-long budget battle with the GOP before truce was called in April 1996. They were enraged when he decided to present his own long-term deficit reduction plan in June 1995, instead of simply blasting away at the GOP bills, and again in October, when he said he could agree to balance the budget within seven years rather than ten; that concession was magnified in Democrats' eyes because at about the same time Clinton  told a roomful of wealthy donors that he'd raised their taxes too much in 1993 -- a kerfuffle that soaked up a lot of headlines as the showdown over GOP legislation came to a head. Dick Morris's influence over Clinton was very much in the news at that point; triangulation was the word of the day, and many Democrats were convinced that Clinton was going to cave on his core priorities.

What's worth keeping in mind now is that Clinton often made the actual terms of negotiation clear: he would veto cuts spending and tax at specific levels; he proposed cuts at different levels, generally less than half those of the Republicans.  The 1997 budget agreement looked a lot more like his proposals than like the GOP legislation he vetoed in October 1995.

1 comment:

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