Who Is To Blame? The Art of the Deal, Part I

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As near as I can tell from piecing together the news fragments leaking from the usual anonymous sources on both sides of the debt debate, Boehner and Obama had a framework for a significant budget deal in place along the lines I had predicted a week back.  The deal went like this:

Republicans get between $3 trillion and $3.5 trillion in spending reductions.  In return, they agree to nearly $800 billion in revenue increases over 10 years, but not through a tax rate increase.  (In other words, not by rescinding the Bush tax cuts for upper-income earners.)  Instead, the revenue would come through closing tax loopholes, exemptions, etc.  To insure that real tax reform took place, however, the deal would include a legislative “trigger” that would automatically rescind the Bush tax cuts if real tax reform didn’t occur.  Republicans countered with their own trigger: no tax reform would mean no individual mandate for health insurance.  The White House resisted this, and it probably would have been dropped, but the framework of a deal was still in place and negotiations still ongoing.

Note that this plan included significant entitlement reform. The spending cuts included more than $1 trillion in cuts to discretionary spending, both domestic and defense and $650 billion in cuts to Medicare, Medicaid and Social Security. Evidently Obama had signed on to a plan to reduce Medicare spending by gradually raising the eligibility age to 67 – a significant concession given the virulent opposition to this from the Democratic Left.   In short, spending cuts outweighed revenue hikes by more than 4-to-1.   That’s what 2010 and the Tea Party did to the context of budgetary negotiations.

So what happened?  On Tuesday, the Senate “Gang of Six” – three Democrats and three Republicans – proposed their own deficit reduction proposal that included a bigger tax revenue increase than Obama had already agreed to, in principle.  Meanwhile, Senate Democrats in his party, who were largely bystanders in these negotiations, were already complaining about a deal that essentially traded spending cuts today for a proposed increase in tax revenues down the road.  Obama’s political cover with the Left was suddenly pulled out from under him when the Gang of Six came out with their more generous tax revenue plan.  At this point he really had no choice but to come back to the table to ask Boehner for an additional $400 billion in revenue, to essentially match the Gang of Six plan.

Although talks continued for a couple of more days, this additional request is evidently what led to the current impasse.  So, who is to blame?

Again, speculating between the lines, it is not clear to me that Boehner appreciated the box Obama was in with his Senate party’s left wing once the Gang of Six proposal came out.  At that point he had to at least go through the motion of asking for additional revenue.  I think Obama fully expected to get rejected, but at best he hoped Boehner might make a counteroffer, and at the worst negotiations would continue.  In a couple of days, if no progress was made, and with the August 2 date looming,  Obama could then tell Senate Democrats there was no give on the revenue side from Republicans, and he was going to take the deal on the table.

Instead, Boehner surprised Obama and walked out – for now. I think he misread Obama’s sudden counteroffer as a sign that the President really wasn’t serious about striking a deal – but I think that was an incorrect read of Obama’s intention.   In fact, I think Obama’s 2012 reelection depends in large part on striking a deal, and he’ll make considerable  concessions to get one.  In short, a misreading of intentions led Boehner to overreact here.  It is unfortunate that both sides went public with the dispute, as that may make it harder to get back to the table.  Harder – but not impossible.

Contrary to media reports, then, I don’t believe the “grand bargain” is done.  It is quite possible, with a deal this close that Obama will agree to a short-term increase in the debt ceiling while negotiations continue.  I continue to believe that he is willing to move as far right as Republicans insist is necessary to strike a deal – but to do so he needs political cover with the Left in the Senate.  In the end, however, his political interests in striking a deal are going to trump their policy preferences.

Stay tuned.

2 Responses to Who Is To Blame? The Art of the Deal, Part I

  1. Will says:

    Professor Dickinson,

    You mentioned in a previous post that some prominent critics such as David Brooks aren’t giving enough weight to the constraints that the Tea Party creates for Boehner – constraints that, by the way, may be giving Boehner himself some major migraines and hot flashes as well.

    In a recent column, Brooks also wrote that Republicans are taking a huge risk if they don’t accept a deal in which cuts are 4 times larger than revenue increases. He claimed that, during next year’s elections, republicans would pay a harsh price for refusing to accept such a robust deal that is far more aligned with conservative economic policy than liberal policy. In other words, the republicans got most of what they wanted but still didn’t take it, so shame one them. I disagree.

    If a deal doesn’t get done (although I think it will), the president usually still gets the blame regardless of congress’s actions. That explains why Obama has been this willing to lean so far right – the stakes are actually higher for him than they are for Boehner and the republicans if a deal doesn’t get done. I think David Brooks believes the opposite, but I am curious as to your opinion. For whom are the stakes the highest in a selfish partisan sense (obviously the stakes are highest for the US of A!)? For whom does a failure to pass a deal cause the worst electoral migraine and hot flash?

  2. Matthew Dickinson says:

    That’s a great question and, in the absence of polling data, I’m going to speculate a bit here – take it with a grain of salt. My gut reaction is that your instincts are better than Brooks’ in this regard. Part of the problem is we tend to think about blame in terms of “Republicans” and Obama. But Republicans in Congress are not a monolithic group – they are 200-plus individuals who answer to their own constituents and have their own policy preferences, so a poll question that asks whether Republicans will get the blame is really meaningless. Again, think back to 2010 and the Tea Party-backed candidates who won election. My guess is that they will get rewarded by holding the line on taxes. In contrast, given the unemployment figures, Obama is likely feeling tremendous pressure to cut a deal here that he can run on in 2012. that, I think, accounts for much of his anger yesterday – rather than being Trumanesque, as Jonathan Chait would have us believe, and draw a line in the sand, he was still willing to negotiate when Boehner withdrew. So, yes, Obama is feeling the heat right now and while polls may blame “Republicans” in Congress if the deal breaks down, that will be small solace to Obama.

    A final thought – I need to check the data, but I’m very skeptical of any poll that compares a party or figure in Congress with the President – any president – simply because the presidency is almost always held in higher regard than Congress. I suspect there’s a halo effect that affects polling in this regard, so that questions that pit Congressional figures, or parties will almost always show them as less popular than the president in any debate. But I need to check this with real data!

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