Democrats Must Step Up on Entitlement Reform for Fiscal Cliff Deal
The good news is that Republicans are starting to recognize the need to break with Grover Norquist and his anti-tax pledge. But that’s only part of the way toward a genuinely balanced bipartisan deal to avoid the fiscal cliff.
Listen carefully to what one of the principled defectors, Sen. Lindsey Graham (R-S.C.) said Sunday on ABC’s This Week: “I will violate the pledge, long story short, for the good of the country, only if Democrats will do entitlement reform.”
Got that? Democrats are going to have to step up with serious entitlement reforms to get a balanced plan done.
Luckily, there is a well-worn path from two years of failed negotiations—Bowles-Simpson, the Gang of Six, and the Obama-Boehner grand bargain—that include specific proposals backed by Democrats on entitlement reform. These will be the basis for finding common ground going forward.
The postelection debate to date has mostly been about Republicans slowly coming to grips with the need for tax-revenue increases. But with divided government, spending cuts and entitlement reforms also will have to be part of the prescription.
The GOP reluctantly learned this election that ideological extremism and obstruction is not a winning formula. It will be willing to negotiate to an extent far greater than in the past. The challenge for President Obama will be to provide second-term substance to his first-term style as a reasonable man in an unreasonable time. It is the price of leadership.
Obama has always talked a pretty good game about the need for entitlement reform. Even before his first inauguration in 2009, the president-elect told The Washington Post editorial board that he would pursue Medicare and Social Security reforms, saying, “We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else’s.” That time is now or never.
Talk is cheap, but we now know that Obama did offer significant concessions on entitlement reform in his ill-fated grand bargain negotiations with House Speaker John Boehner in the summer of 2011.
The Washington Post’s legendary Bob Woodward, author of The Price of Politics, received a leaked copy of final negotiation offers shortly after the election.
Among the specifics the White House proposed were $1 trillion in spending cuts over 10 years, as well as significant cuts and cost adjustments to Medicare and Social Security. There was evident willingness to take on liberal sacred cows and special interests.
A line offering “alteration in the eligibility age for Medicare” likely refers to Democratic plans in the Gang of Six and Bowles-Simpson to increase the eligibility age gradually to 67, resulting in $250 billion in estimated savings over 10 years. The White House also apparently offered $150 billion in cuts “across the board on Medicare provider payments” and a $150 billion “increase in Medicare premiums,” much of which would presumably come from overgenerous (and unsustainable) public-sector union contracts.
Likewise, the Obama administration showed a willingness to tackle Social Security reform to keep the plan strong and solvent into the future. Proposals included applying “Superlative CPI”—consumer price indexing—to Social Security, mandatory programs, and the tax code beginning in 2015. In addition, there was talk of reducing the 75-year shortfall with a “balanced package of tax and benefit changes.”
Reading between the lines, such a package could mean increasing the payroll tax cap to $190,000 from the current $107,000, as groups like Third Way have proposed, and/or raising the retirement age to 69 by 2075, as the Bowles-Simpson Commission proposed. The latter idea would affect no one but today’s toddlers but was nonetheless deeply controversial in a slippery-slope way to unions.
“It appears President Obama is serious about slowing the growth of public health and retirement costs, which is the key to bending down the curve of federal spending,” says Will Marshall, president and founder of the Progressive Policy Institute. “The big question now is whether leading Democrats in Congress will stand up to the Norquists of the left and put real entitlement reform on the table.”
That is the big question. Labor unions rightly believe that they were essential to the president’s winning coalition and ground-game effort in the November election. They and many liberal partisans will insist that now is not the time to make any concessions, especially on core philosophic policies like Social Security and Medicaid. They will find comfort in the arguments of some party activists and pundits who say there is no problem, that the fiscal cliff is a myth, and that current levels of deficits and debt are perfectly sustainable, especially if we just soak the rich. They are, like their conservative corollaries, embracing a feel-good reality distortion field.
Math isn’t partisan. The Congressional Budget Office has projected that because of our aging population, cumulative spending on Social Security, Medicare, Medicaid, and interest on the debt could gobble all federal revenues by the end of the next decade. The status quo is unsustainable. We cannot simply tax or spend or borrow our way out of this problem. Striking the right decisive balance is critical to our long-term economic strength as a nation.
Obama won the election in part by promising a balanced bipartisan plan to deal with the long-term deficit and debt, as opposed to the imbalanced (all cuts and no revenue) and narrowly partisan plan put forward by conservatives this election. He won by successfully arguing that his balanced bipartisan plan would be better for middle-class families than the alternative.
And bending the long-term cost curve on Medicare and Social Security with formula adjustments that preserve those programs is vastly preferable to vouchers or insolvency.
Republicans were foolish to walk away from the past deficit deals offered by bipartisan commissions and the Obama administration—just as the president should have backed the Bowles-Simpson panel. But not all that work was in vain.
Now is the time for responsible leaders in both parties to declare their principled independence from their respective special interests. Both sides will need to sacrifice their vision of the perfect to achieve the larger good. We know the path, and we have some of the specifics already on the table. However difficult the final negotiations might be, they will be far less painful than doing nothing. Make a deal.