Paul Krugman looked past the election yesterday and toward its aftermath, framing the election as a referendum on the social safety net and warning Democrats not to take the wrong lesson.
Here’s the reason he felt the need to do that. Jonathan Weisman’s lead story in today’s New York Times puts together the three-stage process key Senators want to use to force a grand bargain on the country, which would put Medicare and Social Security on the table for cuts. Right now this hasn’t advanced to the upper echelons of leadership, and the best hope to stop it remains House Republican antipathy to tax increases. But here’s what it looks like.
The first step would be where everyone is already at: setting a target for cutting $4 trillion from the budget over the next 10 years. It’s not totally clear whether the $1 trillion already cut in the spending cap factors into that at all, or the $1 trillion from ending the war in Afghanistan. Both of those are part of President Obama’s overall figure, but he’s been using the $4 trillion topline number in his campaign ads and deficit plans. He calls it a “balanced approach,” and that’s what this would incorporate, with tax increases, spending cuts and social insurance reforms.
A plan for budget savings from all those pieces would get forwarded to the relevant committees, which would have a timeline to fill in the specific details. The time frame would be the next 6 months to a year. So this goes from Super Committee to Super Committees, plural, aka the committees of jurisdiction.
And much like the Budget Control Act, we would have “trigger II.” If the committees failed to reach agreement on a plan, a placeholder deficit reduction proposal, basically Bowles-Simpson or something very much like it, would go into effect. So that would then become the other alternative. Republicans wouldn’t like it because of the tax increases. Democrats wouldn’t like it because of the increases to the retirement age and cuts to safety net spending. And that would be the baseline. We either get that, or whatever the committees come up with.
Stage III of this rocket would put off trigger I and the tax increases – not sure if this just means the Bush tax cuts or all the various tax increases that will add over $500 billion to the Treasury next year – with a “down payment” of some deficit reduction, probably enough to delay the trigger cuts for 6 months to a year, in the range of $55 billion to $110 billion. This was Dick Durbin’s idea, according to the NYT.
There are a lot of hurdles to this approach, to be sure. The White House has refused to sign any bill that would extend the Bush tax cuts over $250,000 for one more day. On the flip side, House Republicans have almost all signed the Norquist pledge, which this three-stage grand bargain rocket would violate. In fact, no House Republicans are involved in the talks at the moment. And then there’s the threat of Social Security cuts, which Harry Reid has said he would not do inside a deficit reduction package, along with 29 Senate Democrats in all.
That’s the framework, however. The details would get worked out after the election, and the outcome of that election would loom large. Obviously the deal looks different depending on the President and the composition of Congress. But the legislation is already being written:
With their party leaders’s encouragement, Senators Michael Bennet, Democrat of Colorado, and Lamar Alexander, Republican of Tennessee, have begun talks on legislative language to lock a deficit reduction framework into law.
The real depressing aspect to this is how much the focus has completely shifted away from a still-simmering unemployment crisis. The economy had to have stimulus at the beginning of last year, when unemployment was 8.3% with a low employment-population ratio. Now we’re at 8.1%, still with a low employment-population ratio, and Washington has not only resigned itself to end all the stimulus, they want to actively make things terrible through an austerity program. The 6-12 month buffer may delay the pain slightly, but the anti-stimulus from letting things like the payroll tax cut expire will still cut into GDP in the short term. There’s just no sense of urgency on jobs whatsoever.
As usual, gridlock is the main friend to those who would want to scuttle this deal. And there’s ample opportunity for that to happen. But there are definitely a lot of wheels in motion.