Defusing Austerity

[ Posted Thursday, February 20th, 2014 – 18:01 UTC ]

The White House has just given everyone a peek at what President Obama's next budget proposal is going to look like. Full details aren't yet available and likely won't be until next month, when Obama's budget is officially released. What is known, at this point, is that the White House is signaling that the attempt to reach out to Republicans and meet them halfway in some "grand bargain" on the budget is officially over, at least for the time being. Specifically, Obama has dropped his "chained C.P.I." idea. What this is going to mean for the rest of the year is likely "not much," at least outside the realm of politicking. It is, after all, an election year. But Obama is sending a strong message to Democrats that he won't be "giving away the store" in any budget agreements this year, which comes as a relief to many Democrats.

The first reason this is nothing more than messaging is that no president's budget is approved untouched by Congress. It just doesn't happen, ever (no matter who is in the White House). The president, after all, really has only one responsibility when it comes to creating a federal budget: either signing the bills Congress passes, or vetoing them. Constitutionally, that's the end of any president's responsibility. And Congress knows it.

So why does an "official White House budget proposal" even exist? Well, it's kind of an extended version of the presidential State Of The Union speech, in a way. By offering up a proposal, the president puts his money where his mouth was (so to speak) in his big yearly speech. When you budget, you have to prioritize, after all. This makes the presidential budget a clear statement of presidential priorities for the year. Congress will create their own budget bills (as they always do), showing their own priorities. This is all the natural order of things in Washington.

The House, led by Paul Ryan, will pass some sort of budget. So will the Senate, led by Patty Murray. In a normal year, the two houses of Congress would then appoint a joint committee to hash out a compromise. This isn't a normal year, however. In the first place, as mentioned, it is an election year. In the second place, the two parties have successfully kicked the federal budget "can" beyond the election already -- guaranteeing that absolutely nothing will be agreed upon by both sides until (at the earliest) the "lame duck" Congress (between the election and the beginning of January).

This won't stop the political hay from flying, of course. Both parties will pass budgets which they will then use out on the campaign trail as a bludgeon against their opponents. No compromise will emerge, because that's not the point of this political exercise.

President Obama is signaling two things with what we know about his budget proposal. The first is that he feels it is pointless to even try to compromise this year, when he doesn't have a bargaining partner who can deliver on promises made. Obama and John Boehner have gotten close, in the past, to actually hammering out some sort of budgetary compromise. Every time, however, Boehner has been unable to sell his deal to his own party in the House. So the deal blows up at the last minute. When this happens, Obama takes a lot of heat from Democrats over the compromises he offered to make in the deal, while Boehner avoids such heat from fellow Republicans, since he always tells his own party that "no deal was ever actually reached."

President Obama, as evidenced by what leaked today, is done playing this no-win game. Obama now knows that Boehner is never going to be able to deliver on any deal they strike. Period. It just isn't going to happen, even if we weren't in an election year. So Obama has dropped the biggest compromise he offered to Republicans (in last year's budget proposal), the "chained C.P.I." idea.

What this means is that Obama has once again returned to the basic Democratic position of protecting Social Security. The "chained C.P.I." is a wonky way of saying "we're going to use a different number to calculate how Social Security benefits are adjusted each year -- and, by the way, that means smaller increases in the future for retirees." Obama made this offer to Republicans for two reasons. The first was that he saw it as the "least worst" option in a list of very bad choices for a Democrat to agree to. Adjusting using chained C.P.I. is better than all the other ways that Republicans wanted to "cut entitlements" (or "cut benefits for everyone on Social Security" in its longer form). The second reason Obama made the offer is that he wanted to see what Republicans would offer from their side of the table. Obama wanted to end some corporate tax loopholes, and since he moved first on the entitlements question, he allowed Republicans to make their move on loopholes. They didn't. They haven't offered up a single loophole worth ending. Republicans are terrified of even suggesting such a thing, because it will immediately be labeled "raising taxes" by their conservative allies.

But this was the whole point of such a "grand bargain" compromise in the first place. Obama takes heat from Democrats for daring to touch Social Security, and Republicans take heat from their side for daring to end tax giveaways to Big Business. Obama was brave enough to hold up his end of this bargain, but Republicans were not.

Obama's new budget -- unlike last year's -- does not have this chained C.P.I. offer in it. Why bother, when Republicans obviously aren't going to budge? The Republican position was "you do this, and then we will not do anything except continue to demand 100 percent of our agenda... until you give in on something else." To be repeated, after every offer of any compromise from Democrats.

President Obama, as mentioned, is no longer playing this game. Democrats will be able to say in their campaigns that the party stands squarely for protecting any raids on Social Security by the austerity-obsessed Republicans, and make good political hay by doing so (cutting Social Security is wildly unpopular with the public, it should be mentioned).

Which brings up something that most in the political world haven't quite realized yet: austerity is not going to be a big issue in this year's election. For the past two election cycles it has been an enormous issue, but one thing the recent C.B.O. report predicted (that hasn't got a lot of media attention) is that next year's budget deficit is likely to drop, once again, by at least $100 billion. If these figures are pessimistic (as they have been for the past few years), the annual deficit could come in lower than $500 billion. We'll know the correct figure right before the election, since the federal fiscal year ends at the beginning of October. If the economy continues to improve, and if health care costs continue to rise at the historically-low rates of the past few years, then Democrats might very well be able to make the case that "President Obama has cut the budget deficit by two-thirds during his term!" -- right before voters go to the polls (one-third of $1.4 trillion is $467 billion).

This is going to defuse the calls for drastically slashing the federal budget, obviously. Which means, for the first time in a long time, it won't be as potent a political issue for Republicans. If unemployment continues to fall, the rate could be below 6.0 percent by the election, as well. Which further defuses the austerity issue.

Obama felt politically backed into the austerity corner by economic realities that have now drastically changed for the better. He only made the chained C.P.I. offer in an effort to avoid an even worse plan. But the lessening of the austerity pressure and the improving jobs outlook -- and, crucially, the unwillingness of Republicans to meet him in the middle -- mean that the entire budget picture has changed. Obama has just signaled this, through today's sneak peek at his budget proposal. His real priorities list will become apparent when his proposal is unveiled next month. My guess is that Obama's priorities are going to be a lot more politically acceptable to the average voter than whatever "austerity forever!" plan Paul Ryan comes up with. Which, of course, we'll be arguing about right up to November.

-- Chris Weigant


Follow Chris on Twitter: @ChrisWeigant


2 Comments on “Defusing Austerity”

  1. [1] 
    Michale wrote:

    Every time, however, Boehner has been unable to sell his deal to his own party in the House.

    Let's be fair here..

    Obama wasn't offering anything that A> was really worth anything and 2> would have passed muster with the Democrats..

    The House, led by Paul Ryan, will pass some sort of budget. So will the Senate, led by Patty Murray. In a normal year, the two houses of Congress would then appoint a joint committee to hash out a compromise.

    No, in a normal year, the Democrat Senate wouldn't even PASS a budget... :D

    You speak as if everything is all goodness and light vis a vis the economy..

    Newsflash. The economy STILL sucks...

    Put another way...

    If you are neck deep in shit and things get a little better so that you are only WAIST deep in shit, guess what??

    Yer still mired in shit.. :D

    Sure, things are looking a little better..

    But if you poll every average American who doesn't have an ideological stick up their arse (either from the Left OR from the Right) guess what the results would be??

    Americans would STILL say that things really really suck...

    All I am saying is that it's a tad premature to dust off the old HAPPY DAYS ARE HERE AGAIN 45...


  2. [2] 
    Chris Weigant wrote:

    Michale -

    I defy you to name ONE thing Boehner offered to Obama. I can name MULTIPLE things Obama offered to Boehner. The GOP is the one that insists on "my way or the highway," no matter what Fox News tells you.


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