The 10 Reasons There Won't Be A Grand Budget Bargain Until 2019
I've been talking for months about how the Grand Bargain or Big Deal that's always mentioned whenever there are budget talks in Washington won't happen until 2019 at the earliest.
I first posted about 2019 in June and have mentioned it a number of times on television and radio and in speeches since then.
I've also been told that my analysis recently made the big time when a group of the most senior tax lobbyists in Washington discussed it at a private meeting (It's not clear whether they were happy about having six more years to work on issues or sad that nothing much would be done before the end of this decade at the earliest).
Each time I've talked about 2019 I've gotten reactions that range from shock to amazement. No one ever tells me I'm wrong; they just shake their heads in disbelief.
So once again, here's are the top 10 reasons we're likely facing six more years of crisis-by-crisis budgeting in Washington and no Grand Bargain any time soon.
1. Democrats won't agree to the big changes in Social Security, Medicare and other mandatory programs that Republicans want without getting a substantial revenue increase. Republicans won't agree to a revenue increase without big changes in Social Security, Medicare and other entitlements.
2. Republicans absolutely can't and won't increase taxes until after the 2016 presidential election. Doing it before then virtually guarantees that the GOP base will look elsewhere or not vote. Either one would be devastating for Republican candidates.
3. Because of the problem with raising taxes before 2016, changes in mandatory spending are on hold until after 2016 as well.
4. Therefore, there will be no big budget deal for the next three years. There may be tax and mandatory spending reform hearings between now and November 2016, but not much else beyond that.
5. That means that, if it happens at all, the serious work on tax and mandatory spending reform -- the Grand Bargain -- won't begin until early 2017.
6. As the effort in the 1980s showed, tax reform is difficult and lengthy process. The substantive changes being considered will have an impact on virtually every American individual and business and that means that each member of Congress will need to address the issue in some way even if they are not on the House Ways and Means or Senate Finance Committee -- the two committees with jurisdiction over taxes..and Social Security and Medicare.
7. It also means that most members of Congress will have to express their dissatisfaction in some way over what's being considered because they cannot possibly get everything each of their constituents wants. In the 1980s, that translated into several near-death experiences for tax reform.
8. The 1985 tax reform act took three years to enact. It was relatively easy from a budget point of view because from the start the bill was going to be "revenue neutral," that is, it was never going to be an overall tax increase. Yes, some taxpayers would pay more and others less under the new system, but the aggregate revenues raised per year were always going to equal what would have been paid under the old system. That's not going to be the case this time. The cost of admission for Democrats will be additional revenues so the next tax reform effort can't be revenue neutral. That will increase...perhaps significantly...the amount of time needed for the next tax reform debate.
9. Before Republicans will even be able to start to negotiate with Democrats, there will have to be a GOP vs GOP debate on revenue increases. Given the state of the party (the next redistricting doesn't take effect until the 2022 election) that will be politically ferocious and time-consuming.
10. The tax reform debate from the 1980s also took place when there was no tea party wing of the GOP and no social media. Fox News and MSNBC were a decade away from launching, let alone attracting the attention they get today and conservative talk radio as we know it today was in its infancy. As a result, members of Congress were far less concerned about challenges from the right or left and most often tried to appeal to a broader audience than the narrower one that dominates much of the political debate today. That will make compromise more difficult this next time around.
Given these 10, it's hard to see (1) how a process that could produce a grand bargain could get under way before 2017, and (2) how it could take less time than than it did in the 1980s.
If anything, that makes 2019 an optimistic forecast.