Beware a Grand Bargain

Will President Obama and the Democrats win a major battle only to lose the war?

The longterm war that Republicans are fighting is a deadly serious struggle to destroy the most important and valued achievements of the New Deal-Great Society legacy, Social Security and Medicare.

Wall Street billionaires like Peter G. Peterson and Stanley Druckenmiller have been softening the ground for decades by claiming that Social Security is bankrupting the country and destroying future prospects of America’s youth.

So there is a kind of pincer movement between the scorched-earth Republicans of the Tea Party, willing to shut the government if they don’t get their way, and the more mannered Wall Street Republicans who want to gut social insurance for the alleged good of the country.

It adds up to the same thing—cut or privatize the Democrats’ two crown jewels.

What’s worse, even though Nancy Pelosi and Harry Reid were able to maintain 100 percent party unity in their House and Senate caucuses in this past week’s epic fight, the partisan alignment is very different when it comes to a grand bargain.

Wall Streeters were among those pressuring House Republicans to relent last week. But Wall Street Democrats are very much part of the Pete Peterson coalition. Robert Rubin, late of Goldman Sachs, Citigroup, and the U.S. Treasury, has been promoting a grand bargain, with Peterson, for more than a decade. President Obama bought into this idea when he appointed the late and little-lamented Bowles-Simpson commission.

What would the latest incarnation of the grand bargain look like? The Republicans, worried about the cuts in Pentagon spending mandated by the sequester (which is still in effect) propose to allow military spending to rise in exchange for cuts in Social Security and Medicare. Excuse me? This is a little like saying, I’ll take your house and in exchange you have to give me your money.

Right, we’ll cut Social Security and Medicare in order to increase money for the military. Are you kidding?

It gets worse. In exchange for this proposed deal, Republicans are not willing to talk about raising taxes or restoring other social spending or to stop trying to undermine the Affordable Care Act. The only good thing about this proposed bargain is that it should be dead on arrival.

Senate Majority Leader Harry Reid immediately declared that he wanted no part of any such deal. But President Obama, who has flirted with grand bargains in the past, was more equivocal. He has already put disguised cuts in Social Security in his own 2014 budget, though a revision of annual cost of living adjustments.

The deal to keep the government open set a deadline of December 13 for some kind of progress on a grand reform of entitlements and taxes. That’s only eight weeks away. It is preposterous to think that a bargain on taxes, social insurance, and deficits that has eluded the two parties throughout the Obama administration can be struck in less than two months. One has to hope that the deadline comes and goes, and that when Republicans think about shutting down the government again when the continuing resolution expires in January, they will think twice.

But that will happen only if Reid, Pelosi, and House and Senate Democrats display the same resolve that they did in the last round. And given his past dalliances with putting Social Security and Medicare on the block, some of that resolve may need to be displayed against their president.

The medical profession has a credo—primum non nocere—first do no harm. The best thing Democrats can do in the next budgetary silly season is no harm, and then wait for public opinion to turn against the recklessness of the Republicans in the 2014 midterms. Only with a Democratic Congress will we be able to make real progress on a fairer tax code, a strengthening of valued social insurance, and a more robust recovery.

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