Prospects for a “grand bargain” on the budget finally seem dead, and, we’re told, the reason is the improved budget outlook. While it is certainly true that the Congressional Budget Office’s latest projections of federal deficits over the coming decade are less dismal than they were previously, that’s not the main reason Washington has lost interest in a bipartisan compromise on the budget. The chances of such a compromise have been low all year, and are due to the tactical choices made by the one person with the most to gain from a deal — the president.
There was a period when the prospects for a “grand bargain” were on the rise — right after President Obama’s reelection in November 2012. The president was riding high and had campaigned on a “balanced approach” to deficit reduction, by which he meant any deal to reform entitlements and cut spending must also increase taxes, especially on the rich. In the weeks after his reelection, the president might have been able to press a demoralized congressional GOP into agreeing to a large, multiyear budget framework along these lines.
That certainly would have been in his interests. Based on where things now stand, his presidency will be defined in part by the $7 trillion in debt he will run up during his time in office. A “grand bargain” on the budget at the beginning of his second term could have fundamentally altered the legacy of his budgetary performance in office, turning what is sure to be viewed as a rather large failure into perhaps a modest achievement. Moreover, a multiyear budget deal would have taken fiscal issues, including the sequester the administration despises, off the table for the remaining years of the president’s time in office, freeing up his administration to press for agenda items he clearly is more passionate about.
But for some unfathomable reason, the president decided to pursue a different strategic approach. Instead of moving quickly to do what was necessary to create the conditions for a budget deal, he chose instead to pursue a two-part strategy on taxes and spending. That was a huge mistake.
First, after his reelection, the president moved quickly to secure the largest tax increase on the rich that he could get out of a reluctant House GOP. The thinking was, apparently, that he had campaigned on taxing the rich, and won, and so he was going to secure the spoils of victory without having to concede anything to his opponents. He then planned to come back for another bite at the tax-increase apple as part of a “grand bargain” in 2013.
And that’s where he made a big miscalculation.