The Morning Plum: Why Obama wants a Grand Bargain

The news of the morning is that President Obama will propose a budget next week that includes specific cuts in Social Security and Medicare along with new revenues — an effort to bring Republicans back to the table for a “Grand Bargain” to replace the sequester.

The entitlement cuts include Chained CPI for Social Security and a combination of means testing and provider-side cuts on Medicare, in addition to other spending cuts, which will anger liberal Democrats. Chained CPI is a fancy way of describing what is a real benefits cut. The budget seeks $580 billion in new revenues via closing loopholes enjoyed by the wealthy and oil and gas companies. There will reportedly be some new spending offset by money raised elsewhere — which is designed to prove that you can reduce the deficit and spend to prime the economy and help the middle class at the same time.

At a certain level, this shouldn’t surprise anybody. On entitlements, Obama is merely reiterating what he’s previously offered John Boehner, and it has long been clear that this offer is still on the table. Many liberals have long suspected that Obama actively wants to cut entitlements. So here is my understanding of White House thinking on why a Grand Bargain is a good outcome.

Obama and his advisers don’t necessarily view Chained CPI as good policy. But they think a Grand Bargain is ultimately a better outcome than continued sequestration, and the only way to the former is to peel off individual Republicans who are open to new revenues. They believe a Grand Bargain is good for Democrats in general, because it essentially would lock in a medium-term agreement over core disputes — about the safety net and about the size of government, and who should pay for it — that have produced a debilitating stalemate in Washington.

Yes, Republicans would continue railing about government spending, the thinking goes, but no one would listen, since they would have already endorsed a deal stabilizing the deficit. This would deprive Republicans of the ability to focus attention on one of their core targets — Big Government — as a way to avoid grappling with other issues, such as jobs and long-term middle class economic security, immigration, guns, and perhaps even climate change. Reaching a deal on the deficit will force Republicans to confront those problems more directly and to choose between real cooperation on them or continue to calcify as a hidebound, reactionary party incapable of addressing major challenges facing the country.

Liberals will point out that it’s folly to offer Republicans so much up front, because they’ll only denounce the offer as “unserious” and demand more, shifting the debate further in their direction. But officials insist the White House has no intention of budging on its demand for new revenues or allowing Republicans to pull Obama further towards them. (This doesn’t mean liberals shouldn’t make it clear that any further concessions on revenues are unacceptable.) The offer in the budget, the thinking goes, will drive home that Obama is the one who occupies the compromise middle ground, and if Republicans refuse to deal, it will be crystal clear in the public mind who is to blame for continued austerity. The White House doesn’t worry about putting its fingerprints on entitlements cuts, because Obama has long proposed them himself.

I’m not defending this thinking; I’m simply detailing it. In my view, it’s not clear yet that the sequester will shape up as enough of a political liability to force Republicans back to the table.

Liberals who oppose Chained CPI need to start thinking right now about how to answer this question: Which is worse, a Grand Bargain, or continued sequestration? It’s unclear to me that there is any other likely outcome. Either Republicans will decide to weather sequestration or they will agree to some kind of a deal to replace it. So liberals need a good policy answer to that question.

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* Sluggish jobs numbers: The economy added only 88,000 non-farm jobs in March. Could that be the beginning of sequestration? Or, alternatively, it could be wrong and could end up getting revised upwards.

Indeed, January was revised upward to 148,000 jobs, and February up to 268,000. Of course, we may soon find out whether the sequester will undermine whatever recovery is underway.

* Is sequester already damaging economy? Jared Bernstein speculates that today’s numbers are already showing the impact of the sequester, though he sees it as a minor factor, albeit one that will grow over time.

* Fashback of the day: With Republicans already hitting Obama for today’s weak jobs report, perhaps it’s worth recalling that Republicans themselves warned that the sequester would damage the economy, back before they had decided it would be a “victory” for them.

* Obama’s budget strategy: Ezra Klein explains it well: It’s all about occupying the middle ground and offering compromise to avert the sequester, even as the sequester’s bite actually is beginning to sink in. This is the danger:

[L]iberals worry that Obama risks pushing a final compromise to the right. It is unlikely that Republicans can accept Obama’s initial budget offer, no matter how much good will it embodies. They will have to respond with a counteroffer. If the White House wants to continue pursuing a deal, they’ll then have to respond with something more compromised than even their initial compromise. And so on.

* Which side is lying more in the gun debate? Glenn Kessler has a good wrap up of all the falsehoods and distortions from both sides in the gun battle. Note that many of the claims that form the foundation of the entire argument made by the “gun rights” side are major whoppers.

* Gun control set to become law in Maryland: The package of strict gun proposals has cleared the final hurdle to becoming law in Maryland, making it the first state in nearly 20 years that will require fingerprinting of gun buyers. It’s a striking contrast to the total inaction we’re seeing in Congress in response to the slaughter of 20 children.

* Cultural issues now favor Dems: Ron Brownstein has a good piece examining how Democrats are now on offense on guns, gay marriage, and immigration, issues on which Democrats now believe majorities agree with them. As I noted here recently, part of this is driven by the changing Dem coalition; Dems no longer worry about alienating culturally conservative whites over these issues, which has freed them up to push their agenda on them a lot harder.

* And the deficit obsession as morality play: Paul Krugman’s column today links today’s deficit mania directly to the responses of officials in the 1930s who insisted government should do nothing to limit the damage, with current officials similarly insisting that we should punish ourselves for “past sins” with spending cuts, rather than spending to get the economy going:

[T]he notion of macroeconomics as morality play has a visceral appeal that’s hard to fight. Disguise it with a bit of political cross-dressing, and even liberals can fall for it. But they shouldn’t. Mellon was dead wrong in the 1930s, and his avatars are dead wrong today. Unemployment, not excessive money printing, is what ails us now — and policy should be doing more, not less.

Obama has mostly moved away from “government must tighten its belt” rhetoric, and has been calling for more stimulus, although today’s news about the budget and entitlement cuts could shift things back.

What else?

 

Greg Sargent writes The Plum Line blog, a reported opinion blog with a liberal slant -- what you might call “opinionated reporting” from the left.
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