Grand Bargainism

04.05.13

I Think Obama Is Bluffing

Liberals are upset today because Obama's budget is going to include a call for chained CPI and some means-testing of Medicare. Krugman thinks he seeks the approval of the Serious People. Chait concurs. Ezra Klein tweeted earlier today that it appears that Obama is once again opening a negotiation at the other side's halfway point. In 140 characters he didn't have room to denounce this, but presumably that's what he meant.

Well, could be. But I tend to agree with Kevin Drum on this one. Drum writes that Obama doesn't really expect the GOP to budge on taxes and therefore doesn't expect a deal at all. And that Republicans, rather than make a deal, would prefer to continue to have the deficit as an issue to bang Obama with:

The truth is that, for the most part, the deficit isn't a real issue for Republicans. They don't want to raise taxes; they don't want to cut defense spending; they don't want to cut entitlement spending on seniors (the core of their base); and cutting future entitlements doesn't affect the deficit any time soon. The only thing left is cutting spending on the poor, and although Republicans think that's a fine idea, even they can't cut social welfare spending enough to have a serious impact on the deficit.

So it's mostly a charade. And it's a good one! One of the very best, in fact. Cutting the deficit polls well, it lends itself nicely to demagoguery, and it's an all-purpose excuse to oppose any spending proposals they don't like. So why on earth would you cut a deal to take it off the table? That would be crazy. And if they're forced to swallow a tax increase as well, that makes it even crazier. There's literally no benefit at all in this for Republicans.

So they won't do it. Obama's real hope—since I assume he's not an idiot and knows all this perfectly well—is that Republicans will indeed refuse to make a deal, and this will turn the public against them in the 2014 midterms. I suppose that's possible, depending on how well he plays his hand. It's certainly more possible than assuming that Republicans will voluntarily commit electoral suicide by agreeing to a deal.

This sounds right to me. The risk Obama runs here is that the GOP calls his bluff and does a 180 and says, "Okay, you want some tax increases? We'll go to $300 billion." Or some other smallish figure. Then he'll have to play ball.

But I think the risk of that is small. Can you picture the Republicans giving ground on taxes before 2014? I can't. They'll keep demagoguing the deficit and run on that. The risk for them is that the deficit really goes down and no one gives a crap about it anymore. It's expected to be $845 billion in October. It could be lower. And then what if it's just $500 billion the following October, the month before the election? It'll fade as an issue. Obama will be able to run around on the campaign trail saying he reduced the deficit nearly $1 trillion in two years in such an event. Not implausible.

All that said, people like Bernie Sanders should keep up the pressure in the meantime. But I see no incentive for the GOP to come to terms, and I think the Potus knows it.