Avoiding a Bad Budget Deal

President Obama has backed himself into a corner on the budget negotiations, where he's allowed deficit hawks from both parties to define "progress" as a ten-year deal to cut the projected deficit by a huge amount. In fact, his own Bowles-Simpson Commission led the way.

Obama has also lost the framing battle over whether it's acceptable to hold an increase in the debt ceiling hostage in order to achieve a deal as Republican congressional leaders have done. This is now taken for granted.

Both assumptions make for bad policy, and they're bad politics for Democrats.

The result is that Republicans can dig in their heels and make radically far-right demands, which include refusing to raise taxes and insisting on devastating program cuts. Of course, we've seen this movie before: Obama breaks the logjam by making most of the concessions.

At his press conference today, Obama made the cases for increased taxes on the wealthy, but he was mostly conciliatory -- too conciliatory. He casually mentioned that cuts in entitlements could be part of a deal--a major concession before he gets anything in return. This is bad policy and bad strategy.

The president would be wise to draw two lines in the sand. First, with the economy mired in long-term stagnation, this is not the time for a ten-year budget deal. We don't know how bad the prolonged recession will be, or what additional spending will be required in 2013 or 2014. If the Congressional Budget Office thinks a ten-year economic or budget scenario can be accurately forecast, they are delusional.

Roll the clock back to 1945. The public debt was 120 percent of GDP, double today's level. The economic debate, appropriately, was about how to prevent the economy from slipping back into depression once the immense stimulus of war spending was over and 12 million vets were home looking for work. Not a soul was debating what the debt level should be ten years hence in 1955, and rightly so

The Supreme Court has long held that one Congress may not legally bind the actions of a future Congress. So a ten-year budget deal is mainly a gesture unless it includes automatic triggers, which is even worse policy.

This afternoon, the Economic Policy Institute released a letter to the Congressional leadership urging Congress to disconnect the debt ceiling debate from the current budget discussions. The letter said, in part:

"We, the undersigned economists, urge Congress to raise the federal debt limit immediately and without attaching drastic and potentially dangerous reductions in federal spending. Not doing so promptly could have a substantial negative impact on economic growth at a time when the economy looks a bit shaky. In a worst case, it could push the United States back into recession."

We need more talk like this from our president. Obama should fight harder to de-link the debt-ceiling vote from the broader budget talks. He should meet the Republicans halfway on this year's budget deal, but repudiate the idea of a ten-year deal as dubious policy. Then he should campaign next year against the Republicans' extreme plans for cutting valued federal outlays and refusing to increase taxes even on the most affluent.

Above all, Obama needs to open up some political space so that he can campaign on the need for social investment and jobs. This is why we have elections -- so that the public can choose between leaders with competing visions.

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