Thursday, April 14, 2011
Now its about revenue & ideology
My prediction of the government shutdown last week was wrong. Once abortion politics polluted the waters, I thought for sure that compromise would be too difficult to achieve. But the Republicans realized the stakes were simply too low, and they were too early in their tenure, to instigate a government shutdown. Does the dealmaking of last week, and the centrist bipartisan vote in the House to pass the compromise over the objections of conservatives and liberals, set a precedent for progress on long term entitlement reform & deficit reduction in the future? I don't think so. What was correct in my post last week is that this domestic spending bill (the Pentagon budget was virtually untouched) was small potatoes compared to the issues Congress and the President must now confront. With Obama's speech yesterday, the contour of the debate is beginning to take shape. This is not going to be about whether Commerce Department can afford a $200 million cut in some obscure account -- now it is about core values -- revenues and ideology. The Bowles-Simpson debt commission and all other bipartisan, middle of the road plans recognize that you can't deal with entitlement reform and deficit reduction effectively without doing something on the revenue side. But I do not see any flexibility on this issue emanating from the Republican side on this -- indeed, the Ryan plan calls for new tax cuts beyond a permanent extension of all the Bush era tax cuts. Most Democrats will not support a deficit solution that does not raise some taxes on the wealthy -- and a president heading into a reelection campaign can't cut a deal that will alienate his core base. Even if we could get around the revenue issue (as Obama did this year by extending the Bush tax cuts for two years), there is still the matter of health care ideology -- really the new third rail of American politics. The Medicare and Medicaid reforms in the Ryan budget are a compilation Republican free market ideology on how to limit the size of government and drive down health care costs. Democrats have a totally different ideology and don't believe in application of free market principles to health care. I just don't see a grand compromise on these issues in the offing. Now, things always look like this when parties are offering their opening gambits. But when revenues and ideology are on the table, opening gambits may be very close to "that's about as far as I can go." At the risk of making more bad predictions, I still see a very rocky road this spring (debt limit) and this fall (2012 budget).