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Obama and the ?Grand Bargain?

By Anonymous

What are we to make of Obama?s ?grand bargain?? My initial reaction to the news that Obama was putting Social Security and Medicare cuts on the table was despair. What was/is the White House thinking? Obviously, no one outside the White House knows for sure, but I think I have a pretty good idea.

As I said in a DM exchange with Mike Konczal on Wednesday night, I think the White House is trying to scare Democrats into accepting a deficit reduction deal with little or no revenue increases. I think Boehner can?t get the votes in the House for a deal that includes any revenue increases, and I think the White House knows it. They know that the final deal will end up being 100% spending cuts. The problem with this is that it might not get enough Dem votes to pass ? especially if Dems on the Hill are obsessing about the ratio of spending cuts to revenue increases throughout the negotiations.

So in order to retain enough Dems, the White House needs to make sure that the $2 trillion, all-spending-cuts deal is the ?compromise? position. If the alternative is an even larger deficit reduction deal that includes savage cuts to Social Security and Medicare, then plenty of Dems will be downright eager to vote for a deficit reduction deal that doesn?t touch Social Security or Medicare, even if it is 100% spending cuts. If you know that the final deal will be 100% spending cuts, then you don?t want the Dems to make their ?line in the sand? the inclusion of revenue increases. By putting Social Security and Medicare on the table, you allow the Dems to make the protection of those programs their ?line in the sand,? rather than the inclusion of revenue increases. And that will free enough Dems up to vote for the final, all-spending-cuts deal.

This would also explain why Obama is still saying that he wants a ?grand bargain,? even after Boehner said that they should focus on the smaller deal that the Biden-led group had been working on ? for the strategy to be effective, the grand bargain needs to continue to be a viable option (that the Dems are afraid of).

Now, we can argue about whether Obama truly wants to strike a ?grand bargain? that cuts Social Security and Medicare. I don?t know if he does, and neither do you. (It?s certainly possible that he does, but again, I don?t know.) However, I think that question, interesting though it may be, is ultimately irrelevant. Even if Obama truly does want a grand bargain, there?s simply no way that he thinks they can agree on $1 trillion in tax increases, and an overhaul of Social Security, Medicare, and Medicaid, all in under 2 weeks. Purely as a legislative matter, it?s almost an impossible task, which I?m sure Phil Schiliro would have explained to him. So really, the only way the ?grand bargain? makes sense is if it?s a negotiating strategy.

And if this is a negotiating strategy, the best explanation is that the White House is using the threat of Social Security and Medicare cuts to scare Democrats into voting for an all-spending-cuts deal.

Full post as published by Economics of Contempt on July 11, 2011 (boomark / email).