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Last Night's Primary Results Point To No Progress On The Deficit The Next Two Years

15 Sep 2010
Posted by Stan Collender

The federal budget might as well have been on the ballot in Delaware and New York last night because deficit reduction was the big loser.

Last night’s primary results points unambiguously to little or no progress being made on the budget over the next two years because Republicans in the House and Senate will have little or no ability to compromise on taxes and spending.  In light of the Castle and Lazio losses in Delaware and New York, respectively, and following Lisa’s Murkowski’s defeat in Alaska, any GOP senator or representative who even dares vote for a budget deal with congressional Democrats or the White House…or perhaps even looks like he or she is interested in working with them…has to assume that they will get a well-financed primary challenge from a far-right/Tea Party candidate and that his or her cooperation will be stated as the reason they should be defeated.

Add to that the narrow majorities that will exist in both houses next year (regardless of which party is in control) and you have a recipe for absolute budget stalemate. 

This scenario means that the only improvement on the deficit outlook will come from (1) economic growth, (2) a reduction in the amount of stimulus funds being spent as the program winds down, and (3) and a reduction in activities in Iraq and Afghanistan.  That will leave a projected deficit of about $1 trillion in fiscal 2012 and the budget as an almost-guaranteed issue in the 2012 presidential election.

 

The Next Two Years

Given the current ideological trends within the GOP, and the fact that the Republicans will control the House or at least be in position to stop any major policy proposals in the Senate, I really think the President has no choice but to go head to head with them on the deficit and put an end, once and for all, to conservatives' ability to pander on taxes without ever backing their tax cuts up with spending cuts.

Put out a balanced budget proposal that contains a reasonable mix of tax increases (even if it means breaking his campaign pledge about tax increases for households below $250,000) and spending reductions (long-term entitlement reform, elimination of unneeded defense spending). Force the GOP to put out a plan of their own. My bet is they won't be able to do it. They'll want more tax cuts and, regardless, won't be able to come up with the big cuts necessary to balance the budget on the spending side alone (defense spending will be off the table, and they won't risk the ire of the elderly with with major cuts to Medicare/Social Security). If nothing else, the party will fracture between the true anti-government libertarians (Paul Ryan, Ron Paul) and the establishment types who just parrot the rhetoric (most of the rest).

The President would have to go all-in on this and would no doubt upset his own base by proposing significant budget reductions, but, until the back of the GOP supply-side dogma is broken, health care reform is the last major policy outcome progressives will get anyway. If the President could pull it off, he'd set himself up as the voice of fiscal sanity against what promises to be a far-right GOP presidential candidate in 2012 and would then have some leeway to accomplish some Democratic objectives in his second term.


Why should "deficit reduction" even be a priority?

Why should "deficit reduction" even be a priority for the next two years? With unemployment hovering around 10%, inflation steadily drifting towards zero, and GDP growth anemic, why is the budget deficit even considered an issue?


What Else?

What primary results could have produced a different outcome? Is either party signalling a willingness to make serious spending cuts?


Democrats are the problem

I think Republicans are much more likely to vote for a deal including revenue increases than the Democrats are to vote for a deal including spending cuts (not reductions in the growth rate of spending, but actual cuts). I have seen nothing to suggest that the Democrats are anywhere close to embracing reductions in entitlement spending.


Really?

The last President to make any entitlement reform was Clinton. Not only the well known Welfare reform, but they also increased the taxes on Social Security Benefits for those who make too much money (a back-door means test) and put in the give-back for earnings on those who take the early retirement option on Social Security. At the same time, they cut taxes. No where near enough for what we now face, but it was done - with essentially the same economic team in the white house we have now.

It was the Republican administration that passed an entirely knew entitlement program, that is projected to cost far more than the Health Care Bill while at the same time cutting tax rates to the lowest they have been in modern times. I see absolutely no evidence that what you say is accurate except that you want to believe the Democrats are the ideologues and the Republicans are the pragmatists. For the first half of my life that was mostly true, but it isn't true anymore.


Don'f fib and check your facts.

Clinton was *forced* to accept entitlement enform by a Republican congress after vetoing it.

Medicare part D costs nowhere near the projections for Obamacare, and are actually coming in at lower costs than projected


What Alternative Universe Do You Live In?

The heart and soul of the GOP platform is no tax increases under any circumstances whatsoever.


Autopilot

Normally, I would agree, but remember that if nothing gets done the 2001-03 tax cuts expire (as well as the AMT fix) and withholding taxes will be raised January 1--giving almost every working person a pay cut. So it just seems that the Congress/President will need to agree on something (probably a temporary extension of the status quo) or taxes will go up. It seems to me that Obama has the best position on this if he doesn't screw it up (although he hasn't figured out how to blame Congress for everything yet). . .

Since the default is to higher taxes, they have to make a deal in order to increase the deficit--expect all sorts of contortions from the GOP on this one.

As for meaningful spending cuts--that wasn't going to happen anyway no matter who was elected.




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