RIP: Obama’s Grand Bargain With the GOP on Entitlements

Without a bang or a whimper, the Grand Bargain died this week. Because cynicism passes for wisdom in Washington, the death was little lamented. After all, it was stillborn, never getting a chance to move from idea into action. But its death is a loss to the cause of long-term fiscal responsibility and the all but official end to the post-partisan aspirations of the Obama administration. The immediate cause of death came in the pages of the Obama budget, which quietly rescinded the offer of entitlement reform by pulling something sonorously known as Chained Consumer Price Index–or Chained CPI–from their proposed fiscal blueprint. A contentious but courageous plan, it essentially adjusted federal payments on Social Security to the rate of inflation, slowing the rate of growth slightly and ultimately saving billions in a society with an aging population. Liberals and unions howled, but it was a substantive outreach to Republicans after the president’s re-election, an admirable attempt to forge a grand bargain to deal with America’s long-term debt. This was, after all, allegedly the animating idea behind the Tea Party protests that first popped up five years ago. And because divided government is a fact of life with a Democrat president and a Congress split between Republicans in the House and Democrats in the Senate, a grand bargain was a necessary condition to solving the problem. If achieving the goal was the real cause, then Republicans would have applauded the novel sight of a Democratic president offering real entitlement reform while liberals and unions grumbled. But instead, President Obama’s policy outreach was ignored in favor of the cold comfort of talking points that falsely framed every debate as between Obama’s obsession with tax hikes and GOP common sense commitment to fiscal discipline. The gap between the reality and the rhetoric reflected the troubling disconnect between the fiscal conservatives and fiscal responsibility. We saw this same gap when the Bowles-Simpson commission unveiled their bipartisan proposals to deal with the deficit and the debt. The Republican House members of the Commission–including Paul Ryan–voted against it. And when a bill based on the commission plan was brought to a vote in the House, it went down to a dismal but telling defeat by a 382 to 38 margin with 22 Democrats voting in favor and only 16 Republicans. The reason went beyond the usual my-way-or-the-highway posturing of hyper-partisans–instead, the real problem was that the required cuts were unpopular even to Tea Party members. Thanks to the essential X-factor of economic growth, the deficit is now shrinking even while debt remains a serious problem. But the urgency has faded as both parties pin their hopes to the next election, effectively taking the rest of the year off. President Obama can rightly say that his offer for a grand bargain and entitlement reform were rejected by recalcitrant Republicans. Conservatives can argue with some credibility that the president did not frontload entitlement reform, but they cannot say he did not try. A historic opportunity has been wasted, kicking the can to the next president. Another long-discussed opportunity seemed lost this week when Republican Congressman Dave Camp unveiled his long awaited tax reform bill. Both parties have campaigned on tax reform in the past, with President Obama offering policy lip service while the GOP made it a mantra. Camp’s plan was courageous and dangerous in the degree of specificity he offered. But while inevitably contentious, the plan was non-crazy and closed loopholes even as it proposed to lower rates. At least it should have provided a start to policy talks. Instead, party leadership on both sides of the aisle pronounced it dead on arrival. The devil was predictably in the details, with a surcharge on the rich and a call to end the state and local tax deduction. But all that was window dressing alongside Dave Camp’s real political sin: calling to end the carried interest loophole that so many financiers depend upon to maximize their profits. In effect, the resistance to such an admirably specific attempt to achieve a long-term goal boiled down to fear and fealty to the Wall Street donor class that makes up a huge chunk of campaign cash. Both these proposals–a Grand Bargain and Tax Reform–are needed to get America’s long-term fiscal house in order. Candidates will continue to campaign in favor of them, and a future president will enact them. Whether our era’s hyper-partisan fever or just animus to Obama is to blame has yet to be seen. But the failure is another measure of why this Congress is the most polarized, least productive, and least popular on record. Too many politicians would rather demagogue an issue than deal with it.