August 19, 2013

Most observers expect Congress will somehow pass a measure this fall funding the government temporarily at current levels, pushing the real fights over the sequester, spending and the size of government into the new year.

That means the long term battle looms as potentially more important than this fall’s immediate showdowns. And Dems believe they have an ace in the hole in the big picture fight that will give them increased leverage to force Republicans to deal on terms that are less favorable to them than expected.

In an interview with me, Dem Rep. Chris Van Hollen — a top party stategist — detailed how this hidden leverage would work, and laid down principles Dems will follow in the coming fight, which should help Dems avoid the mistakes they made in 2011, which locked in the austerity that continues to hamper the recovery today.

This hidden leverage, Van Hollen says, flows from a little noticed wrinkle in the design of the sequester that is only being focused on by Capitol Hill aides right now. Because of that wrinkle, defense programs are set to absorb a much bigger spending cut next year, compared to this year, than non-defense programs are. If the sequester is not replaced, defense will be cut an additional $20 billion in 2014 below current levels.

Since the defense cuts are already prompting some Republicans to say the sequester needs replacing, these additional cuts should increase pressure on GOP lawmakers to agree to replace it partly on Democratic terms, i.e., with a combination of spending cuts and tax hikes via the closing of loopholes.

“We believe this should bring Republicans to the table,” Van Hollen told me. “This will become more acute now. They should be willing to make targeted cuts in special interest tax breaks in order to prevent these additional sequester cuts. We think this will create the conditions for a longer term plan to replace the sequester.”

Remember, the path to a budget deal runs through the Senate. With a few Senate Republicans (particularly “defense hawks” like John McCain and Lindsey Graham) already seemingly prepared to deal to replace the sequester, the prospect of deeper defense cuts could only further intensify pressure on Senate Republicans to make concessions, which in turn would theoretically put more pressure on the House.

“Republicans will face a fundamental question,” Van Hollen continued. “Do they care more about preventing deep cuts to defense, or protecting special interest tax breaks for big oil companies and hedge fund managers?”

Because of this, Van Hollen says, Dems can, and should, prepare to draw a hard line against more austerity in the long term budget fight.

“There’s no negotiating over the principle of parity,” Van Hollen said. “If Republicans want to relieve the $20 billion cut to defense, we must increase non-defense spending by $20 billion. You can’t boost defense at the expense of other investments. That’s got to be a very clear principle.”

To be sure, Dems previously overestimated the impact defense cuts would have on Republicans. They allowed the sequester to go through, showing that “spending hawks” outweigh “defense hawks” in today’s GOP. But things have changed since earlier this year. There appears to be more widespread concern among saner GOP officials about the risks that crisis-to-crisis governing — and clinging to austerity as the party’s only agenda — pose to the party’s overall political health.

Indeed, Van Hollen pointed to the current discussion of using the debt limit (as opposed to a government shutdown) to force defunding of Obamacare as a sign of severe discord to come, and suggested this would weigh on Republicans.

“This is like going from crazy to crazier,” Van Hollen said. “Threatening to shut down the government is like playing with fire. Threatening to default on our debt obligations is the economic equivalent of playing with nuclear weapons. For the cooler heads in the GOP, this has to be raising all sorts of alarm bells.”

And so, it’s possible that things could only look worse to Republicans after a messy series of crises over short term funding to the government this fall — perhaps decreasing the appetite for crisis governing further among select Senate Republicans, and making a long-term deal marginally more likely.

****************************************************************

UPDATE: Congressman Van Hollen gets in touch to explain the added $20 billion in cuts to defense further.

“Earlier this year, changes were made that gave defense some preferential treatment under the sequester, and therefore cushioned the 2013 cut to defense,” Van Hollen says. “That beneficial treatment does not apply in fiscal year 2014. In fact, under current law, defense will go back to being treated the same as non-defense. Because defense will not receive that preferential treatment in 2014, it will face an additional $20 billion cut compared to this year. The cut will be $20 billion more next year.”

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