The seemingly endless series of budget showdowns that have characterized the last two years has a lot of people frustrated, and understandably so. But I think it’s a mistake to attribute that pattern to a failure to seriously bargain, as many critics suggest. It is in fact the only plausible outcome of bargaining given our increasingly problematic fiscal situation. A lasting bargain — a middle-ground deal that provides a solution that endures for many years, of the sort reached in the 80s and 90s — is not really going to be possible in this situation. And the frustration about this has to do with a failure to grasp just what our situation is, and just how different the goals of the two parties are at this point.
It is true, as the self-declared sober moderates among the talking heads remind us, that there is a kind of middle ground between what the two parties are asking for. That instinct is in fact where the so-called “Bowles proposal” that John Boehner offered the president on Monday came from. At a November 1, 2011, hearing of the supercommittee (you can find the transcript archived here, the text quoted below starts on page 50), Erskine Bowles asked for some time to present an idea. Here’s what he said:
Chairman HENSARLING: I would note, prior to Senator Simpson’s departure, he did mention, Mr. Bowles, that you had something you might want to present. Without objection, I would certainly yield you a couple of minutes if I understand you have something else you wish to present to this committee.
Mr. BOWLES: I can do it very quickly. I tried to think, if I were sitting in your shoes or I was the go-between as I was in what became the Simpson-Bowles plan, if it was possible for you all to get to the $3.9 trillion deficit reduction, given where your positions are today, and I think it is, I think you can get this done, and I will just go through briefly the arithmetic. And, again, you have got to flesh out the policies, but if you look at where I understand the two sides now stand, and this is from just listening, which is what you have got to do if you are the guy in the middle, you know, the proposals for discretionary spending, and these are all above what the $900 billion and the 400 that was in the continuing resolution, so this is in addition to the $1.3 trillion worth of spending cuts that have already been done, but you all are between $250 and $400 billion of additional cuts on discretionary. So I assumed that we could reach a compromise of an additional $300 billion on discretionary spending cuts. On health care you are somewhere between $500 and $750 billion of additional health care cuts. I assumed that we could get to $600 billion, and I got there by increases in the eligibility age for Medicare that I discussed with Senator Kerry when he was talking to me. That is about $100 billion. That would take you from the 500 where the Democrats are to $600 billion, and it happens to come not on the provider side, which I think would kind of balance that out. On other mandatory cuts, you are somewhere between 250 and 400, so I settled on 300 there, and we had enough cuts in our plan to get you to 300 on the other mandatory. Interest will obviously just fall out at approximately $400 billion, the savings there. You agreed actually on CPI in your two plans of approximately $200 billion. The total of that is $1.8 billion. That left me a little short. That gets me to revenue. And on revenue I took the number that the Speaker of the House, I had read had actually agreed to, and I was able to generate $800 billion through revenue from the Speaker’s recommendation, and if you did that without dynamic scoring.
Those figures are of course precisely what the House Republicans offered the White House yesterday. And as we see here, they were arrived at by a plain and charming method that ought to greatly please the old Washington hands who miss the old Washington in which, we are endlessly told, serious men with rosy cheeks and names like “Tip” would confer over adult beverages, tell some old Irish jokes, and split their differences down the middle. Those were the days. Well fine. Yesterday’s offer would seem to be the House Republicans’ way of saying to these arbiters of seriousness: “There you go, down the middle and indiscriminate, now you surely can’t complain.”
Whether it’s wise for one side in a negotiation to make an offer that splits the two sides’ differences down the middle is a question for more experienced negotiators. What strikes me about it is that it’s basically a way to get past this particular showdown and into the next one, which, because it is likely to revolve around the debt ceiling, may be better structured to result in some modest spending reductions or (very modest) entitlement reforms.
Over and over, the two parties basically try to position themselves in ways that will let them get nearer their versions of deficit politics in the next showdown. What result are all “middle ground” agreements that avert immediate catastrophe by setting up further decision points to come. They are not “grand bargain” agreements that set us on a sustainable course toward fiscal sanity. And there is a reason for that: Broadly understood, the two parties’ goals are not exactly about the budget but about the nature of the government we have, and now that we have entered the lean years of the welfare state they are not quite commensurate.
The Democrats want to raise revenue and the Republicans want to reform entitlements. Those goals would seem to be easily reconciled — just do some of each, or even lots of each. But it only seems that way because we don’t often think about why the parties want these things. Simply (and surely somewhat too simply) put, the Democrats want more money so that the entitlement system doesn’t have to be reformed, while the Republicans want to reform the entitlement system so that the government doesn’t have to take more of the country’s money or take up even more of the economy. That means that doing some of each, let alone lots of each, doesn’t give both parties what they want, it gives both parties what they are desperately trying to avoid.
For the Democrats, the policy imperative now is the consolidation and defense of the liberal welfare state, and especially its defense from the consequences of its own fiscal collapse. With Obamacare enacted, they are basically done building. They might dream of expanding the reach of one program or another, expanding the tentacles a bit or consolidating some, but their social-democratic edifice has all its major parts. The trouble is that we can’t afford to keep them all, or at least in the form and structure that the left insists those parts must have. The foundation is falling out from beneath the building just as they have finished construction. That means that liberal political power must now be used to raise money to buy the liberal welfare state more time, and it must be used to hold off efforts to change the structure of the entitlement programs. Liberals understand that if they can’t raise taxes now, with the most liberal president they are likely to get holding a position as strong as he’s likely to have, then they aren’t likely to be able to do it at all, and therefore to save the welfare state from itself. They must get as much as they possibly can in this round, and they must resist significant entitlement reforms, which would make the whole exercise largely pointless.
For the Republicans, the policy imperative is to reform our governing institutions through ideas that use the market economy (rather than fighting it) and therefore allow for major savings and for enabling free and responsible choices while protecting the vulnerable. This would enable us to avert both an explosion of the government’s size and role in American life and an explosion of debt that puts prosperity out of reach in the coming years — and indeed to roll both back. They seek to offer a vision of effective but limited government beyond the welfare state.
The great and important choice between these two options is not going to be made in the next few weeks, of course. It won’t be settled in this particular showdown, or in this particular year. But eventually, albeit gradually, over the course of several election cycles, it is going to need to be settled. And given the fiscal constraints we now face, there isn’t all that much of a middle ground. To chase the accelerating costs of the liberal welfare state with taxes is going to take a different way of thinking about government in America; to transform the welfare state into a series of (relatively) efficient and market friendly 21st-century safety-net institutions is going to take a different way of thinking about government too. Middle-ground solutions can put off the need to decide, but they cannot make it go away. And until we take some meaningful step in one direction or another, we’re going to continue to muddle through showdowns at the edges of cliffs.
The sort of thinking on display in that quote from Erskine Bowles above has its place. Muddling through is a very useful and important art. And it’s important to see that the frustrating showdowns we keep going through are a function of the practice of that art, not of a failure to practice it. But important though it is, its fruits can no longer be grand, and when it comes to our fiscal dilemma it is not going to work forever.