The Permanent Raw Deal

Like the dream of immortality, the vision of political power that outlasts the eight years of a single presidency can be an irresistible lure to politicians. One version of the dream involves electoral power. For example, Karl Rove is said to have a plan for the Republican Party to dominate for 30 or 40 years, much as it did after the election of William McKinley in 1896, which helped break a period of partisan deadlock. The other version of the dream involves structuring policies and statutes that will protect themselves against democratic change, conditions that a future majority cannot break.

Constitutional amendments and the appointment of ideological judges are one way to reach into the future, but perhaps the most successful tactic ever to dictate the terms of government policy for generations to come was what has been called “The Permanent New Deal.” The entitlement programs that began in the 1930s with Social Security, blossomed into other social-insurance programs in the 1960s, and were expanded in the 1970s -- through such clever moves as cost-of-living indexing -- became, for many decades, almost part of the backdrop of American politics, the unchanging screen against which the other dramas played out.

In a new introduction to political scientist E.E. Schattschneider's great 1942 book, Party Government, Sidney A. Pearson succinctly describes the choice facing liberals at the end of the Roosevelt era: “Two basic avenues of approach seemed to be possible. The first approach was the creation of an administrative state in which the New Deal programs would be treated as entitlements and thus beyond the reach of democratic majorities that might coalesce in Congress. In Roosevelt's words, the Democratic Party would be “a party to end parties.” A second approach would be to continue the progressive commitment to participation by the electorate.”

(For Schattschneider, the first approach was linked to a strong presidency with a national vision and strong, ideological parties, while the second was associated with the gridlock of congressional politics driven by narrow local interests and weak party allegiances. That analysis may not apply to today's ideological and partisan Congress.)

By taking the first approach, liberals committed themselves to a long battle for high stakes. As long as it worked, the idea of entitlement -- incorporating both an individual right to benefits and a budgetary approach that takes the program out of the ordinary annual squabble over a fixed pie of discretionary spending -- would mean that Americans would continually encounter the beneficent hand of an expansive government. Meanwhile, the security provided by entitlements would in turn reinforce the political consensus that created them.

Naturally, the gyre turned, and if one wants to segment history into 30-year cycles, a convenient turning point would be the publication in 1975 of a manifesto by a young congressman named David Stockman in The Public Interest titled “The Social Pork Barrel.” Stockman complained of “the apparently immutable tendencies of fiscal politics to close the door to any fundamental innovation in strategy well into the future.” (One of the “innovations” that Stockman claimed to want was “national health insurance.”)

The article helped lift Stockman out of congressional obscurity, and he was appointed as Ronald Reagan's first director of the Office of Management and Budget. There he adopted a little-used technical tool of the budget process known as reconciliation to force the first serious rollback of entitlement spending. The stultifying congressional politics of the next two decades, whether under the uninformative names Gramm-Rudman Act or “pay as you go,” were all about mechanisms to restrict the expansion of entitlements. In the 1990 budget reconciliation deal, the choice facing liberals in the 1940s was again on the table, as Democratic Senator Robert Byrd struck a deal with the first President Bush's budget director, Richard Darman, to limit entitlement growth in exchange for greater freedom in discretionary spending. The major moves to expand entitlements -- the Catastrophic Health Care Act of 1988 and the Clinton health plan of 1993 -- went crashing to defeat, in part because opponents understood the political potency of entitlements.

By 2001, the cycle was almost complete and the end of “The Permanent New Deal” in sight. Social Security's long-term financial problems were within a manageable range, welfare had been converted to a capped entitlement to states rather than individuals, and while Medicare still posed long-term problems, they might have been manageable with help from the budget surplus that had been created through choices and luck. The innovations that Stockman claimed to want would at last have been possible.

But at that point, the cycle seemed to enter its decadent phase. The Republican right, facing the same choice as Roosevelt, elected to create “an administrative state … which would be beyond the reach of democratic majorities that might coalesce” in the future and wish to restore an active role for government. Using the process that Stockman discovered in 1981, budget reconciliation, to block most amendments and sharply limit debate on legislation, the narrow current congressional majority has set out to ensure that it will be many decades, if ever, before government again has the resources to innovate.

This “Permanent Raw Deal” would be made up of what might be called anti-entitlements: uncontrollable expenditures through the tax code and special budget rules. But, fortunately, most of it is still on the table. As damaging as the tax cuts of 2001 and 2003 were, even worse are the proposals that wait in George W. Bush's “opportunity society” agenda. By creating fully tax-exempt savings vehicles, these cuts would take much investment income out of the tax base entirely -- forever.

Also on the table is a version of the budget rules that are almost a mocking parody of the “pay-as-you-go” rules that helped limit spending in the 1990s: New spending would have to be paid for by cutting other spending, not by raising revenues, whereas tax cuts or spending through the tax code would be allowed, without requiring any offset at all.

One might protest: Didn't Congress just create the largest entitlement since Medicare itself, in the prescription-drug benefit? Yes, but that program might also be called an anti-entitlement. Unlike Medicare or Social Security, it does not create a direct beneficial connection between individuals and government. It is more like an entitlement to certain companies to provide subsidized insurance policies to seniors, who will have to actively find the best deal in the marketplace. It has no countercyclical effect. It hides within it provisions that will undermine the existing Medicare entitlement. And the predictable unpopularity of its complexity, skimpy benefits, and “doughnut hole” in coverage for high prescription costs will, when it takes effect in 2006, most likely produce a political effect opposite that of the huge, self-sustaining popularity of Social Security and Medicare. Like the tax cuts, the prescription-drug bill provides a short-term political boost and then proceeds to its main goal, which is simply to move trillions of dollars off the table for decades into the future.

But suppose the best-case scenario occurs: The meltdown of the Bush presidency means that no new tax cuts or budget rules pass this year, Bush is defeated, and President John Kerry succeeds in rolling back some of the previous tax cuts. What then for liberals? Does the protection and expansion of entitlements remain the cornerstone of the agenda? Do we start the long climb back up that mountain? Or can we revisit Schattschneider's choice? Is there another approach that perhaps doesn't seek so much to constrain majority choices in the future as enhance participation and short-term problem solving in the present?

I can't say quite yet what this alternative might look like, but one can perhaps see an example in Senator Kerry's health plan, which is remarkably thoughtful by the low standards of campaign documents. The centerpiece of Kerry's plan is not a new entitlement but a federal reinsurance system to help moderate the unpredictability of costs to employers in the private health-insurance system. In other words, it is a tactical intervention at a key point in the current problem, not a fix-all for all time. It just might work. With a little more thinking like this, the next time there is an opportunity to innovate, liberals might have something more to offer than New Deal nostalgia.

Mark Schmitt is the director of policy for the U.S. Programs of the Open Society Institute, and a former congressional staffer. His blog is The Decembrist, which can be accessed at

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