July 14, 2011
Ah! Hah!!

The Method to Their Madness

The Republican Party’s strategy in the debt-ceiling negotiations has baffled centrists and vindicated liberals. For months, the party’s leaders have repeatedly turned down deals that would cut spending significantly because their members won’t compromise on taxes. To moderates, this intransigence is inexplicable: Are they crazy? To the left, it’s all-too-predictable: See, we told you they were crazy!

But there is a method to the Republicans’ madness, and it rests on four things they know (or at least sense) about the deficit debate that the rest of the political class often ignores.

Barack Obama wants a right-leaning deficit deal. For months, liberals have expressed frustration with the president’s deficit strategy. The White House made no effort to tie a debt ceiling vote to the extension of the Bush tax cuts last December. It pre-emptively conceded that any increase in the ceiling should be accompanied by spending cuts. And every time Republicans dug in their heels, the administration gave ground.

The not-so-secret secret is that the White House has given ground on purpose. Just as Republicans want to use the debt ceiling to make the president live with bigger spending cuts than he would otherwise support, Obama’s political team wants to use the leverage provided by those cra-a-a-zy Tea Partiers to make Democrats live with bigger spending cuts than they normally would support.

Why? Because the more conservative-seeming the final deal, the better for the president’s re-election effort. In that environment, Republicans have every incentive to push and keep pushing. Since any deal they cut will be used as an election-year prop in 2012, they need to make sure the president actually earns his budget-cutting bona fides.

Tax increases are lurking just over the horizon. The White House hasn’t made spending concessions just because the president wants to campaign as a deficit cutter next year. It has made concessions because it knows that taxes are already scheduled to go up when the Bush-era tax rates expire at the end of 2012.

If Obama gains a second term, Congressional Republicans will have to choose between a deal that lets the top rate go back to 39 percent (a $700 billion tax increase over 10 years) or no deal at all (a $3.8 trillion tax increase). Obviously, this dilemma won’t exist if President Mitt Romney occupies 1600 Pennsylvania Avenue. But Obama’s re-election is the more likely scenario, meaning that any deal struck this summer comes with a very large asterisk attached: *Includes tax increases to be named later.

Bipartisan budget deals usually deliver fewer spending cuts than they promise. The grand bargains of the past haven’t been as bad for conservatives as right-wing mythology sometimes makes them out to be. As a share of G.D.P., federal spending fell faster in the decade after George H. W. Bush broke his “read my lips, no new taxes” pledge and cut a deficit deal with Congressional Democrats than it did during the Reagan era.

But in absolute terms, no bipartisan bargain in the last three decades has delivered anywhere near the spending reductions that it promised. (As The Washington Examiner’s Philip Klein notes, by 1995 actual spending was $58 billion higher than it was projected to be when Bush the Elder and the Democrats reached their 1990 agreement.) Bipartisan tax increases, by contrast, always seem to happen as scheduled.

The long-term deck is stacked in favor of tax increases. For decades, the tug-of-war between left and right has kept government’s share of the economy nearly constant, around 19 percent of G.D.P. But in what you might call the revenge of Lyndon Johnson, the ballooning cost of Medicare is poised to tilt the debate decisively toward liberalism.

For now, tax increases and entitlement cuts are equally unpopular. But with every passing year, the constituency for letting Medicare grow as scheduled gets bigger and bigger, and the clout of working-age taxpayers diminishes. Already, even a relatively radical proposal like Paul Ryan’s budget seems compelled to exempt current retirees from its Medicare reforms. Imagine how the landscape will look in a decade.

These are the realities driving Republican intransigence. Past experience, present politics and future trends all suggest that conservatives should be aiming for the nearly perfect in the current negotiation, rather than the merely good.

But this logic also cuts both ways. Precisely because conservatives have a window of opportunity that they may not have again, there’s also a strong case to be made for striking the biggest possible deal — even if that deal requires concessions that a smaller deal does not.

At the moment, Republicans seem to be moving toward a smaller, purer bargain. Depending on what’s being offered, that may be the right course. But self-described “constitutional conservatives” should remember that Mr. Madison’s ingenious system doesn’t just require compromise. Sometimes it rewards it as well.

The New York Times

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Filed under: politics economy 
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