Thursday, July 7, 2011

My take on the "grand bargain"

The big news today is that there might be a grand bargain in the works that will bring Democrats and Republicans to an agreement about deficit reduction and open the door to raising the debt ceiling. Overall, what I'm hearing from Obama is that he's essentially telling the Republicans..."You want to make raising the debt ceiling a big deal? OK, lets make it THE big deal."

Some people, like Steven Benen and Ezra Klein are hedging their bets a bit and holding on to the possibility that this is a political ploy from the White House. Here's Benen:

Indeed, if I were a betting man, I’d say the most likely scenario is that these leaks are coming from the White House with the intention of making Republicans look even worse if the talks break down. “Democrats offered the GOP everything,” the argument will go, “and Republicans still said no.”

I'm not sure that's how President Obama tends to do things. But the idea of setting up a win/win (either the Republicans go along or they get the blame) would certainly be his style.

It sounds like the broad outlines are that Democrats give on entitlement reforms and Republicans give on taxes. There's a lot of speculation about what taxes might be in play - some even suggesting an end to the Bush tax cuts for the wealthy. But I doubt the specifics have been agreed to.

On the entitlement reforms, the poutragers have clearly gone into apoplexy about all that. Of course, this should not surprise them. Just a couple of months ago, President Obama gave a major speech on fiscal policy that was credited as being the strongest progressive defense by him yet of his support for these programs and the social safety net (oh, how soon they forget).

But in that speech, Obama laid out the opening for just the kind of thing he's likely proposing right now.

Part of this American belief that we’re all connected also expresses itself in a conviction that each one of us deserves some basic measure of security and dignity. We recognize that no matter how responsibly we live our lives, hard times or bad luck, a crippling illness or a layoff may strike any one of us. “There but for the grace of God go I,” we say to ourselves. And so we contribute to programs like Medicare and Social Security, which guarantee us health care and a measure of basic income after a lifetime of hard work; unemployment insurance, which protects us against unexpected job loss; and Medicaid, which provides care for millions of seniors in nursing homes, poor children, those with disabilities. We’re a better country because of these commitments. I’ll go further. We would not be a great country without those commitments...

The third step in our approach is to further reduce health care spending in our budget. Now, here, the difference with the House Republican plan could not be clearer. Their plan essentially lowers the government’s health care bills by asking seniors and poor families to pay them instead. Our approach lowers the government’s health care bills by reducing the cost of health care itself.

Already, the reforms we passed in the health care law will reduce our deficit by $1 trillion. My approach would build on these reforms. We will reduce wasteful subsidies and erroneous payments. We will cut spending on prescription drugs by using Medicare’s purchasing power to drive greater efficiency and speed generic brands of medicine onto the market. We will work with governors of both parties to demand more efficiency and accountability from Medicaid.

We will change the way we pay for health care -– not by the procedure or the number of days spent in a hospital, but with new incentives for doctors and hospitals to prevent injuries and improve results. And we will slow the growth of Medicare costs by strengthening an independent commission of doctors, nurses, medical experts and consumers who will look at all the evidence and recommend the best ways to reduce unnecessary spending while protecting access to the services that seniors need.

Now, we believe the reforms we’ve proposed to strengthen Medicare and Medicaid will enable us to keep these commitments to our citizens while saving us $500 billion by 2023, and an additional $1 trillion in the decade after that. But if we’re wrong, and Medicare costs rise faster than we expect, then this approach will give the independent commission the authority to make additional savings by further improving Medicare.

But let me be absolutely clear: I will preserve these health care programs as a promise we make to each other in this society. I will not allow Medicare to become a voucher program that leaves seniors at the mercy of the insurance industry, with a shrinking benefit to pay for rising costs. I will not tell families with children who have disabilities that they have to fend for themselves. We will reform these programs, but we will not abandon the fundamental commitment this country has kept for generations.

That includes, by the way, our commitment to Social Security. While Social Security is not the cause of our deficit, it faces real long-term challenges in a country that’s growing older. As I said in the State of the Union, both parties should work together now to strengthen Social Security for future generations. But we have to do it without putting at risk current retirees, or the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market. And it can be done.

My read is that President Obama has always been clear that these reforms need to be put into place in order to shore up the picture of our long-term financial challenges. Previously, he's simply wanted to put that on the table. But if the Republicans are dead set on creating a crisis with these negotiations over raising the debt ceiling, he's ready to take on these tough choices now. So he's raised the stakes right back on them. As the NYT article linked up at the top says:

White House officials acknowledge the unrest among Democrats. But they argue that Democrats will be in stronger shape politically heading into November 2012 if they help enact a credible deficit reduction deal, allowing them to mount the argument that they protected Medicare from a much more drastic overhaul by Republicans.

In other words, lets use this crisis to do it right and take the issue away from the Republicans.

The truth is that - just like what taxes are on the table - we don't know yet what specifics about entitlement reform are being put on the table - but we do know what he suggested in his speech quoted above. So I'll not join the chorus of those who are wailing that "all cuts are bad cuts." What we learned from the last negotiations on the 2011 budget deal is that not all cuts are created equal and the Democrats took the Republicans to the cleaners on that one. I suspect the same thing will happen this time.

To summarize, I'd suggest that we're seeing President Obama do things the Aikido Way.

1] We must maintain our own balance while taking theirs
2] We must react fearlessly
3] We must enter into the very center of the conflict
4] We must understand our opponent's intentions in order to achieve resolution


  1. Your writing is superb! I love your level-headed, thoughtful, intelligent approach. I come away with such great insight. Thanks so much. Keep 'em coming.

  2. Thanks for two superb postings. I have sent them everywhere. I am so grateful you are here.

  3. Well thought-out and well put. Maybe some of the Chicken Littles will read this, stop screaming, and listen.

  4. I retweeted this excellent post.

  5. Thanks everyone!

    Take a look at my latest post above and give yourselves a good pat on the back for hanging in there.

  6. :-) Thank you for this post.

  7. Great analysis! I just very recently discovered your site. It is very uplifting to realize that FDL, huffpo and dkos are not the only voices around (ok dkos is a mixed lot).

    Anyhow, congratulations on your work!