Friday, August 05, 2011

Taxes or trigger!

Nancy Pelosi was not entirely clear when she said that Democrats negotiating (if such a thing is possible) with the GOP on the bipartisan supercommittee charged with putting forward a deficit reduction plan should be "as forceful as possible and as unified as possible," but that they should not rule out reforms to entitlement programs. She raised a lot of Democratic eyebrows by declaring "you won't see me drawing lines in the sand."  But if I understand her right, she's right. 

There is confusion about the kind of line in the sand Democrats on the supercommittee must draw. They will have to resist Republican intransigence, not mirror it. That is, they have to hold the line on taxes, not entitlements.

In the insane whirlpool of internal GOP politics, anyone who seriously engages in any negotiation worthy of the name is instantly sucked under. Ultraconservative Senator Bob Bennett co-sponsored an eminently sensible free-market approach to universal healthcare -- and was toppled in a primary challenge. Boehner was neutered while negotiating a Grand Bargain with a 4-to-1 ratio of spending cuts to tax increases. And -- most saliently now -- the staunch conservatives on the Gang of Six who had the courage to take on Grover Norquist and acknowledge that the deficit cannot be closed without new tax revenue have apparently been sidelined. The GOP leadership is swearing that its appointees to the super-committee will not consider any tax increases.

Those assertions have induced a sickening deja vu among Democrats, who fear getting rolled again into an all-spending-cuts-no-new-taxes "deficit reduction" deal, i.e., a gut-the-government deal.  It has led to pressure for a reciprocal intransigence -- we will not touch Medicare and Social Security.

But that is exactly the wrong response. It confirms the vision of those who have asserted a false equivalence -- Democrats won't touch the major social programs, Republicans won't touch taxes. That's not true of the Democratic mainstream. Everyone knows that by ones means or another, the Medicare cost curve needs to be bent further. Social Security needs an adjustment too, though not nearly as urgently (and some Democrats would make the program solvent solely by raising the FICA tax cap). Reasonable deficit reduction plans that now seem impossibly far left of anything we're likely to get -- Bowles-Simpson, and left of that, the Bipartisan Policy Center's plan, include proposals to trim spending in both. Obama's April deficit reduction plan included a mandate for Medicare's Independent Payment Advisory Board to hold spending to a slower growth rate than that mandated by the Affordable Care Act.

Where Democrats need to hold the line is on taxes. That is not intransigence. It's a simple reality check for Republicans. "Everything is on the table when you put everything on the table. Until you're willing to discuss raising new revenue, there is nothing to discuss."  Such a stance is only possible, of course, if they are willing to squeeze the deal's triggers.

It's true that starting with this basic condition does constitute a refusal to entertain changes to Medicare and Social Security, insofar as it is a refusal to discuss anything at all -- and in the absence of a deal, entitlements will be spared the mandated automated spending cuts.  The worst approach would be to discuss cuts other than those mandated by the triggers without  insisting on revenue hikes.  Taxes or trigger should be the negotiating baseline.

My fear is that Obama will once again turn the trigger on himself -- in this case, the large (if back-loaded and ultimately unenforceable) defense cuts that go into effect automatically if the supercommittee can't agree on a package. Would any president really suffer the defense budget to be cut by fiat, even notionally?  Not this president, I fear.  Look again at his rationale for not squeezing another trigger last December -- the scheduled expiration of the Bush tax cuts:
And the reason is because this is a very unique circumstance. This is a situation in which tens of millions of people would be directly damaged and immediately damaged, and at a time when the economy is just about to recover.
A mandated $750 billion reduction in projected defense spending over ten years is also "a unique circumstance." I can just hear it: "I cannot allow the security of the United States to be compromised..."

This time, the President cocked the trigger himself, or allowed it to be cocked in concert with Reid and Biden while negotiating the debt ceiling deal. It's meant to be aimed at the GOP. So I hope I'm wrong.  But the precedents are not encouraging.

UPDATE: "One move and the triggerer gets it..." -- right on cue, the Obama administration turns the barrel allegedly aimed at the GOP on itself:
Defense Secretary Leon Panetta wants to prevent further defense cuts, report Greg Jaffe and Jason Ukman: "Defense Secretary Leon Panetta warned Thursday of dire consequences if the Pentagon is forced to make cuts to its budget beyond the $400 billion in savings planned for the next decade. 'We’re already taking our share of the discretionary cuts as part of this debt-ceiling agreement, and those are going to be tough enough,' Panetta told reporters in his first news conference as defense secretary. 'I think anything beyond that would damage our national defense.' The initial round of Pentagon cuts is part of a debt-reduction package that would slice about $1 trillion from agency budgets over 10 years. A second round of cuts, totaling as much as $1.5 trillion, will be prepared by a bipartisan congressional panel later this year."
Timing note: the next (or now prior?) post kind of buried this prematurely, so I flipped them.

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