Monday, November 21, 2011

Was the Budget Control Act a 60-yard punt for Obama?

Like Paul Krugman, Jonathan Chait is pleased with the supercommittee failure:
[The Budget Control Act] forced Congress to agree to $1.2 trillion in deficit reduction, or else automatic budget cuts would go into effect. But the key detail was that the budget cuts would not happen until 2013. Meanwhile, the debt ceiling would be lifted through the 2012 election. Between now and then, the two parties can fight over what to do about the automatic budget cuts scheduled to take effect. That’s not really the important thing. The important thing is that the debt ceiling is no longer on the table.

The whole plan was to start talking about something other than the debt ceiling, in hopes that the tea party would find some different shiny object to pick up and try to smash with a rock. And it worked!
Progressives have pretty much given up their multidimensional chess fantasies about Obama in this bruising year, and Chait does not explicitly credit Obama for this not-bad outcome.  But basically he's crediting Obama with a 60-yard punt.  If you accept the premise that no budget mandates past 2012 in this year's legislation matter, then in the summer negotiations Obama achieved his chief goal -- raising the debt ceiling to carry him past the 2012 elections -- at a net cost of $21 billion cut out of the 2012 budget, or about 2/3 of 1% of outlays. 
In practice, I would think it improbable that future Congresses will roll back the amount of spending cuts mandated over ten years by the Budget Control Act -- the $1 trillion in cuts agreed at its passage, and the $1.2 trillion "sequestered" cuts triggered by supercommittee failure.  But the mix and timing of such cuts, and their relationship to tax increases or the lack thereof, will be determined in large part by the elections of 2012 -- and perhaps of 2014, 16 and 18.

Nor do you have to credit Obama with playing multidimensional chess to think he may have achieved his chief goal at relatively modest cost.  As the debt ceiling deadline approached, he drew one line in the sand -- not, as his allies craved, getting some mix of revenues into any deal, but rather gaining the power to raise the debt ceiling enough to last until 2013 without any further hostage taking scenarios.  If you assume that a) Obama wanted a deal that included at least as much in cut spending as the BCA mandates; b) he is willing to live with the large defense cuts if he can't renegotiate them on his own terms; c) he will finally make a firm stand on the Bush tax cuts in 2012, insisting on either a restoration of the Clinton era top marginal rate or tax reform that provides more revenue than just that sunset would yield; and d) once Boehner backed out of the summer deal, a good outcome was impossible without and until Obama's reelection... then maybe he tacked his way to the lowest risk/highest yield strategy available to him.

1 comment:

  1. I agree that it was an amazing reversal for the Democrats, though I don't know who deserves credit for it. This summer, Republicans had incredible leverage with the debt ceiling, but now it is the Democrats who have leverage with the defense cuts and expiration of the Bush tax cuts. There are some payroll tax cuts due to expire at the end of the year, but they are smaller, and I doubt the Democrats will make huge concessions to keep them.