The partisan divide over the budget may seem unbridgeable, but there’s a deal to be had if both sides want it.
I’ll open by acknowledging a considerable difference between my budget/fiscal policy hopes and my actual predictions. My hopes for the emergence of a doable centrist budget strategy from the Obama administration have never come close to reality. My predictions that nothing much will happen have mostly been correct. So where are we now?
We’re in the middle of the clash of ideology, reality, what Edward Luttwag calls “the autism of great powers” applied to domestic politics, and an organizational-bureaucratic brain freeze. Both the left and right are deeply mired in the ideologies of another time and another universe. Reality has played out contrary to all expectations. The “great powers” keep saying the same things because that’s what they said yesterday. And the various bureaucracies are all essentially impermeable to new strategies and have no idea what steps to take now.
There are some parallels here to Bill Clinton and the spring of 1995. (Just to be clear, I was an enthusiastic part of that administration.) In the 1994 congressional elections, the Clinton administration had been clobbered. For the first time in 40 years, the Republicans won both houses of Congress, gaining eight seats in the Senate and 54 seats in the House. It was a grim time in the White House, made grimmer by the standoff over 1994-95 spending and the government shutdown that then ensued. Bill Clinton won the public relations battle around the shutdown but, in retrospect, clearly began to be uneasy over how dug-in over budget/deficit issues his own White House was. And it was Bill Clinton, acting on his own, who moved his administration toward a balanced budget as a goal, toward the political center, and toward a huge victory in 1996.
Is something similar happening now?
The circumstances are obviously not exactly the same today. President Obama has won his second term and is now trying to establish the basis for a successful second term and a legacy for the ages.
Just a few weeks ago, the second-term strategy, clearly signaled by the White House, was to run against the Republican House and focus almost completely on turning the House in the 2014 elections. Not that anyone asked, but I thought this was a terrible strategy. (And no, the Truman 1948 “Do-Nothing Congress” campaign is not even remotely an analogue.) Winning the House in 2014 is an uphill fight with the odds very much against the president. If you as the president try and then lose, you can be certain that you will get nothing in your last two years — because you invested your first two in depicting your political opponents as the nation’s enemies. If you try and actually win, you won’t win much because your power ebbs so rapidly in those last two years. All those House seats you won will be filled by moderates who are looking to a future when you won’t be there.
I saw this as the common problem of poker players who don’t understand the central issue of money odds versus card odds. It’s okay to draw to inside straights if the pot is giving you money odds that are more in your favor than the card odds are against you. Which is to say low-probability strategies are fine if you really know the odds and the payoff is big enough. The problem in this specific case is that the odds are worse and the payoff for success less than the enthusiasts believe.
But suddenly we’re in the middle of a charm fest, filled with dinners and meetings and discussions, all about the budget, that were never anticipated. What happened? Reality happened.
I think there is at least a chance that President Obama noticed developments out there in the real world, saw that his own White House was dug in on a low probability/low return strategy and unlikely to change, and moved on his own.
What, possibly, did the president see?
The end-of-the-year tax increases on upper-income families did not lead to the uprising Republicans expected. But they also did not spark the public expressions of devotion that the White House wanted.
Then sequestration happened, which no one expected, and it was a political non-event. The public did not turn against Republicans because of the budget cuts. But it also became obvious to everyone that sequestration makes all of government a bit worse, and is more than anything else a sign of an utter absence of political leadership or comity.
Then the picture of the economy became a bit clearer. Here’s my view: enjoy this nice employment bump we’ve had and the decent first quarter (which is basically over), because it’s the last of the good news. The rest of the year will probably be pretty slow, and the sequester will probably cost us about 500,000 jobs, mostly in the private sector. If you’re President Obama, you know one thing for certain: any chance you have of building a great second-term legacy will be sunk if the economy stays mediocre and you’re spending your time entrenched in the budget wars.
Finally, the polls began to tell a story. In the most recent Washington Post – ABC News poll, President Obama’s approval ratings have dropped 5 points to about 50 percent since his reelection. And the 18-point advantage the president had over the Congress regarding whom the public trusted more to handle the economy has fallen to 4 points. 50 percent of independents now have a negative view of the president’s performance compared to 44 percent with a positive view. Since the end of World War II, only two second-term presidents, Obama and George W. Bush, have had approval ratings this low this early. (This is not good company.)
Meanwhile, of course, the ongoing public debate involves all of the normal agita. Representative Paul Ryan and the Republican House have put out a House budget that progressives hate. And Senator Patty Murray and the Senate Democrats have offered a counter-budget that conservatives hate. The two, of course, have nothing to do with each other, and cannot possibly be used as the basis for a true compromise or “deal.” I think they are like the cans of sardines in the joke: they’re there for trading, not eating. Judging by the mail I keep getting telling me breathlessly there is a desperate need for me to give money to save us from Paul Ryan (I’d bet the conservative side is raising money to save us from Patty Murray), I sometimes suspect that the left and right got together and agreed to put out two undoable budgets as organizing and fundraising mechanisms. Thankfully, we really do not have to spend a dime to defend ourselves against either Ryan or Murray. Both of their efforts are basically sideshows.
What I hope is happening — and a few friends in various places think is happening — is that both sides are looking at all this and concluding they can’t be at all confident they have winning hands, and maybe it’s better to see if there’s a deal to be had. It will be hard to do anything else of real importance until this issue is settled; it will just sit there offering opportunities for completely unproductive fights several times every year. President Obama has a much lower chance of building a real legacy unless the issue is settled. And the hell of it is that if you decide to solve the problem over a decade, it actually isn’t that hard.
Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.