Did The Left Just Win Big On The Budget?

A blog about business and economics.
Nov. 23 2011 11:15 AM

GOP Intransigence Could Hand The Left A Huge Budget Win

John Boehner may live to regret his failure to seal the deal.

Photo by Kevin Lamarque-Pool/Getty Images

People say this every four years, but in many ways the total lack of bipartisan agreement during the 112th Congress means the 2012 elections are shaping up to be the mother of all pivot points for the long-term budget deficit. Consider: A provocative argument in today's Wonkbook extends the logic of my argument about the deficit-cutting benefits of super committee failure. It's possible that by refusing to agree to a relatively modest tax increase relative to current policy (i.e., relative to full extension of the Bush tax cuts) the congressional Republicans have locked into place a much more left-wing deal in which the majority of deficit reduction is done by tax hikes and a majority of spending cuts come on the national security side. My non-expert political judgment had been that Democrats in congress were likely to fold in the face of Republican pressure and agree to rescind the "automatic" defense cuts mandated by the debt ceiling deal, but Jennifer Steinhauer* reports that's not the case. Similarly, Brian Beutler reports that the White House is clearly stating that unlike in 2010 they will veto any attempted full extension of the Bush tax cuts even if that results in the expiration of even those portions of the tax cuts that the White House favors.

Keep in mind that recently the Obama administration was offering John Boehner a long-term deal that was 75 percent spending cuts with most of the spending cuts coming on the domestic side. Now if Democrats hold the line they'll end up getting a long-term deal that's 75 percent tax increases, with most of the spending cuts coming on the security side. But then comes an election!


If Obama loses and the Democrats (as expected) lose Senate seats, then it's not really going to matter what Obama did and didn't veto. President Romney or President Gingrich will merrily enact a new tax cut package, restore defense spending, and proceed to contemplate his options on domestic spending. They'll also act to start chipping away at large chunks of the Affordable Care Act and likely dismantle the Dodd-Frank financial regulation framework. It'll be as if the entire Obama presidency didn't happen (incidentally, I think this explains Jonathan Chait's question about liberals and Obama -- he's unpopular and if he loses he won't have achieved much of anything). But if he wins, then the new baseline is going to be one that Democrats never could have passed through a normal legislative process. In fact, it'll be one they wouldn't even have dared to propose.

Recall that an analogous situation arose in the fall of 2009 during the debate over the health care bill. Democrats, at that point, were desperate for a bailout from the GOP congressional minority. In order to stop the bleeding on the health care bill and score a warm, fuzzy bipartisan victory they would have been willing to make major policy concessions to the Republicans. After Scott Brown beat Martha Coakley, full-scale panic was developing. Huge numbers of Democrats were eager to jump ship and pass a "scaled-down" bill. But Republicans made it clear that they were going for the kill. They didn't want any concessions and there was no support for a scaled-down bill. Democrats were backed into a corner where they were left with no choice but to pass the big bill. So they did. This got Republicans what they wanted in 2010 -- a major electoral win -- but it didn't help them on policy. Now the same game is playing out on the long-term budget, but this time for all the marbles. Team Obama really, really, really wanted a bipartisan deficit deal which they believed (wrongly, I think, but that's another story) would have boosted their re-election campaign and they were willing to make major substantive concessions to get it. Republicans weren't interested. If they win big again in 2012, their approach will be vindicated. But if Obama gets re-elected, they'll have fumbled the policy substance in a catastrophic way and put in place a budget framework that's much more left-wing than the one Obama was begging them to agree to a few months ago.

* Correction, Nov. 23, 2011: This post originally misspelled Jennifer Steinhauer's last name.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



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