Deficit Deal a Long Way From Reality

http://www.nytimes.com/2013/05/13/us/13iht-letter13.html

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WASHINGTON — President Barack Obama may have correctly taken the measure of Alan K. Simpson and Erskine B. Bowles and U.S. corporate leaders; that is a reason why any deficit deal is more remote than ever.

Two and a half years ago, when the president refused to embrace the recommendations of his own deficit-reduction panel, he was criticized by the authors, Mr. Bowles, a former chief of staff to President Bill Clinton, and Mr. Simpson, a former Republican senator from Wyoming, as well as by business leaders.

The plan proposed a balance of spending reductions and tax increases of about $4 trillion over almost a decade; that would bring the long-term debt to a sustainable level, according to proponents, who said the president was abdicating leadership.

Privately, Mr. Obama saw the proposal as a trap. If he embraced it, Republicans would say, let us focus on areas where we agree — spending, including entitlement cuts — and return later to raising revenue. Then, he feared, Mr. Simpson, Mr. Bowles and those worried executives would provide aid and comfort for that position, handing a devastating defeat to Democrats.

In these recurring budget battles, Mr. Obama deserves his share of blame. At the turn of the year, he was unwilling to hang tough for a deal as tax increases loomed for all Americans. He blinked and accepted a smaller tax increase on the wealthy. The White House then miscalculated that the mindless across-the-board spending cuts under sequestration were so bad that an alternative entitlements-revenue deal would emerge.

Yet, a month ago, Mr. Obama took a risk and proposed a budget containing cuts to entitlements cherished by his party. The House Budget Committee chairman, Paul D. Ryan, Republican of Wisconsin, and his cohorts were unmoved; they would not give an inch on new revenue.

Mr. Simpson and Mr. Bowles gave Mr. Obama a pat on the back and largely refrained from criticizing Mr. Ryan or the House speaker, John A. Boehner, while corporate leaders ducked.

Moreover, Mr. Simpson and Mr. Bowles have revised their plan and moved to the right, proposing proportionately more spending cuts and less in new revenue. Mr. Obama is playing ball, Mr. Ryan is not, and the two deficit hawks, and their chief-executive supporters, are moving in Mr. Ryan’s direction.

Mr. Simpson and Mr. Bowles have been admirably persistent, open to some modifications and correctly insistent on the need to curb long-term health care costs. A spokesman offered this explanation for their latest move to the right: Republicans now control the House. Sorry, Republicans had just won a huge victory, taking control of the House, and were on a high when Bowles-Simpson was first offered in December 2010.

What is really going on is that their fervent hope for a deal rests on a naïve assumption that the very able Mr. Ryan will strike a responsible compromise, even though he has made clear that he will not.

The Republican position is that taxes went up as part of the fiscal cliff deal and that there will be no more increases. In reality, all the tax cuts enacted under President George W. Bush were slated to expire anyway, and Republican congressional leaders, their back against the wall, had to accept some higher levies on the wealthy.

Moreover, those levies, amounting to about $600 billion over a decade, are only a little more than half of what Bowles-Simpson proposed. In addition, the new revenue is dwarfed by spending cuts, which have been more than twice as large.

Mr. Obama, for all his earlier timidity, showed political guts with his budget last month. He would lower cost-of-living adjustments for most Social Security recipients, subject Medicare benefits for wealthier senior citizens to a means test and enact other changes to entitlements that would amount to about as much as the deficit commission recommended.

This has infuriated the Democratic base, some of whom, unreasonably, oppose any cuts to Social Security or Medicare. Others warned that, whatever the merits, there was a political risk to a unilateral gesture, which would be rejected by the Republicans and rob the Democrats of a good issue.

So far, that has proved to be the case.

Other Republican criticisms are equally dubious. The charge that Mr. Obama does not deal with long-term health care spending would be more credible if a stronger alternative were on the table. Mr. Obama’s Medicare cutbacks, over 20 years, are larger than Mr. Ryan’s. The sequestration cuts, now accepted by many Republicans, as the White House notes, provide no permanent entitlement changes. None.

There is also sniping that the entitlement changes would be phased in only gradually. Well, that is the only way to make entitlement changes politically viable. Consider the much-praised 1983 commission led by the future chairman of the Federal Reserve, Alan Greenspan, that made Social Security more solvent with spending cuts and higher taxes. It takes full effect in 2022, almost 40 years after it was enacted.

Corporate executives say they are pessimistic about any long-term deficit changes and thus it is better not to rock the boat. Who is abdicating now? Senate Democrats, after legitimate criticism for failing to pass a budget for years, did so this year. Now, it is Mr. Ryan and the House Republicans who refuse to go to a conference to try to reconcile differences.

In Washington, there is a propensity to find bipartisan fault in most conflicts. Often, that is on the mark.

Now, however, if Mr. Simpson and Mr. Bowles and the chief executives who warned about the dire need to get America’s fiscal house in order are serious, they have a clear target: Paul Ryan.