The White House’s Kent Conrad problem

December 26, 2012

On Fox News Sunday, Sen. Kent Conrad (D-N.D.), the outgoing chairman of the Senate Budget Committee, made a proposal to solve the "fiscal cliff." The proposal isn't going anywhere, but its specifics explain something important about the White House's negotiating strategy.


Can the White House trust Kent Conrad to hold the line? (Joshua Roberts/Bloomberg)

"My own belief," Conrad said, "is what we ought to do is take Speaker Boehner's last offer, the president's last offer, split the difference, and that would be a package of about $2.6 trillion."

Chris Wallace, to his credit, pressed Conrad for details. And Conrad provided them. "The spending cuts would be $1.45 trillion. The revenue would be $1.15 trillion. So, you see there, that's a combination of $2.6 trillion."

This in an amazing offer for a Democrat to make. House Speaker John A. Boehner (R-Ohio) has already accepted that "a balanced deal," by his definition, would include a ratio of 1:1 spending cuts to tax increases. Indeed, his second offer included $1 trillion in tax increases in return for $1 trillion in spending cuts ($1.3 trillion if you count interest). By averaging Boehner's second offer with Obama's third offer -- that is to say, by starting from a baseline that includes more rounds of Democratic concessions than Republican concessions -- Conrad is proposing a more lopsided deal than Boehner is currently asking for.  

No major Republican is echoing Conrad's willingness to compromise. There's been no similar concession from Sen. Jeff Sessions (Ala.), the ranking Republican on the Senate Budget Committee. Rep. Paul Ryan (Wis.), the chair of the House Budget Committee, has been helping to kill compromise proposals. Sen. John Barrasso (Wyo.), who was on Fox News Sunday alongside Conrad, used his time to hammer the White House. "I believe the president is eager to go over the cliff for political purposes," he said.

Understanding the asymmetric interest in compromise is important both to understanding the White House's interest in a deal and the GOP's resistance to one.

There are good theoretical arguments that the fiscal cliff's tax hikes give Democrats the bulk of the leverage, but the White House has watched Senate Democrats fold on taxes again and again and again. They worry that if we go over the fiscal cliff, skittish Senate Democrats will quickly fold before some House-passed plan that raises taxes on income over $750,000, does nothing on stimulus, and sets up a debt-ceiling fight for early next year. The White House thinks it'll be very difficult for them to veto anything Senate Democrats agree to, and so they would prefer to strike the deal themselves rather than getting into a situation where vulnerable Senate Democrats could strike a deal on their behalf.

Meanwhile, the Republicans hope, and some of them even expect, that that's exactly what will happen, and so they see little reason to strike a deal now when there's some possibility that they can jam Senate Democrats and the White House later. I've argued before that the Republican belief that they'll come out on top of another debt-ceiling fight is a terrible miscalculation, but it's not hard to see why Republicans believe it.

Clarification: Just to be clear, Conrad is counting interest savings in his spending cuts. So cuts to programs, in his plan, would be closer to his target for revenues. That would make it 1:1 in Speaker Boehner's accounting, which doesn't include interest savings, but more than 1:1 in an accounting that counts interest savings as spending cuts. More on how to think about interest savings here.

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williamsm | December 26, 2012