Tuesday, August 02, 2011

The Debt Deal as Continuing Political Theater

Paul Campos attempts to find a silver lining in the debt deal, but in so doing he reminds me of how seriously we take this type of political theater. Although there are some who argue that the deal harms the President, it would appear that his primary goal was to make sure that there was not a repeat performance of this debacle prior to the 2012 election. But then what?

The 2012 election will have one of two outcomes: Either Obama will be reelected or a Republican will become President. Do you recall the noise that Ronald Reagan made about Jimmy Carter's deficits before taking the nation's debt to unprecedented levels? Do you recall G.W. "joking" that he hit a "trifecta" and was thus free to deficit spend as he pleased, while Dick Cheney argued that deficits don't even matter? If President Obama does not win reelection, we'll return to Republican business as usual. The Republicans in Congress will set aside their obsession with balancing the budget in favor of attempting to buy votes. Serious cuts in Medicare? In Social Security? Budget cuts that may drag down their President in 2016? Get real. We're more likely to get the proud announcement of an unfunded, multi-trillion dollar "Medicare, Part E."

But what happens if President Obama is reelected? Then we are again faced with one of two realties: Either the Democrats control Congress, or the Republicans control one or both chambers. Realistically speaking, it's going to be the latter. The Republicans, with all of their sound and fury about government spending and the need for budget cuts, agreed to this deal to postpone identifying the actual cuts for two reasons: First, they couldn't identify and agree upon enough cuts to hit the arbitrary figures they kept tossing around, and second because they wanted to avoid having to take responsibility for cuts that will inevitably be very unpopular with motivated blocs of voters. Recall, the principal targets for Republican budget cuts are Social Security and Medicare. It's possible that they will insist, through the latest iteration of a deficit commission, that deficit reduction occur only through budget cuts. It's possible that, through lockstep partisanship and obstructionist tactics, they'll force a budget cutting bill through Congress. It's even possible that the President would sign the bill. The Republicans will then have to go to the polls attempting to blame obviously partisan, Republican-driven cuts on the other party's outgoing President. I don't see that the voters at issue are going to fall for that one.

Oh, and the special interests? Health insurance companies, long-term care facilities, doctors and hospitals, all of whom profit enormously from the status quo (even as they squawk about the alleged inadequacy of Medicare reimbursements)? You expect them to sit quietly by the sidelines as the Republicans slash hundreds of billions of dollars out of Medicare and the ACA? This Congress cannot bind future congresses - if they don't like the constraints of this legislation, they can and will change it. And the pressure to do so will be intense.

Here's something else to ponder: The best possible outcome would be for this new deficit commission to succeed where prior deficit commissions failed, and to actually come up with a viable long-term plan for the budget and economy that could be supported by both parties. Right now the left is expecting that the commission will principally target entitlements, something that is inevitable given that entitlement growth is significantly higher than inflation, while doing too little to generate new revenues (i.e., raise taxes). If it's impossible to come up with a fair and sensible plan to get Medicare spending and spending growth under control, we're doomed. We can wait and hope for a miracle, but there's no reason to believe that we're going to produce a new form of medical treatment or a new approach to medical care that is going to transform the bleak financial picture arising from the cost of treating chronic medical conditions and terminal disease, of "old age". But as we all know, it's not going to happen. Given a choice between responsible governance that could cost them reelection and running the nation into a brick wall, most members of Congress will choose the latter.

So this commission will fail and the Republicans in Congress will plot their next move not on policy but on elections and reelection: Who is in the White House, how much of a price will they pay for cutting entitlement spending, will it serve them better to return to their "business as usual" of running up the nation's debt to heights they know to be unsustainable (then complain and obstruct in their usual fashion when a Democrat is elected to clean up their mess). For a Republican President, after all, two wars, a recession and a national disaster (e.g., the collapse of the financial industry) is anything but cause for austerity - it's a "trifecta".

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