The Hill

Obama's Deficit Opportunity

In every great legislative achievement there are key moments when the right politicians make the right choices and assume the inevitable risks of true leadership. Now is such a moment for President Obama and congressional leaders on both the deficit and the stimulus.

Nearly everyone agrees that the federal deficit is a threat to the nation’s future but that serious spending cuts or tax increases should wait at least a year, in deference to the nation’s stalled economy. The debt-ceiling fight showed that Congress and the president are capable of agreeing to take a bite out of the deficit. True, the public and the media complain about how ugly the fight was, but I don’t recall anything in the Federalist Papers about elegance being a characteristic of good legislation.

Not only did the ugly process achieve nearly a trillion dollars over 10 years in deficit reduction, but by establishing the supercommittee and giving its legislative product every procedural advantage possible, the combatants gave themselves a decent chance of taking a second big bite out of the deficit.

The broad outline of a deal is obvious. The recipe calls for major portions of spending cuts and more modest portions of revenue increases that don’t begin to bite until 2013. The two biggest obstacles to a comprehensive deal are that Democrats want to protect the biggest entitlements while Republicans oppose tax increases. The simple truth is that politically and substantively both positions are nuts — the budget cannot be balanced in a reasonable way without both major changes to Medicare and revenue increases. Nor will either side agree to a major package unless it includes what the other side says it won’t give. But once one side relents the other side will be under tremendous pressure to relent as well.

Sure, most Republicans have signed a pledge not to raise taxes, and the party’s presidential candidates all said they would turn down a budget deal with a 10-to-1 ratio of spending cuts to tax increases. But this is mere chest-beating. The real test of whether Republicans would actually turn down a deal with huge spending cuts and modest tax increases is to put such a deal on the table in full view of the public. Already, GOP Sens. Tom Coburn (Okla.) and Mike Crapo (Idaho), two widely respected conservatives, have agreed to tax increases in exchange for entitlement cuts, and House Speaker John Boehner (R-Ohio) was negotiating a deficit package with the president that included tax increases before their deal-making imploded. There are cracks in the Grover Norquist armor.

Similarly, House Minority Leader Nancy Pelosi (Calif.) and other Democrats say they oppose cuts in entitlement programs. But again, other prominent Democrats have publicly agreed to reductions in entitlement spending. Both the president’s Bowles-Simpson commission and the Domenici-Rivlin bipartisan commission agreed to changes in Social Security and Medicare that would reduce projected spending. And in the Obama-Boehner negotiations the president appeared to be willing to corral spending on Medicare, by far the most important single ingredient in a spending-reduction package.

A few years ago, my colleague Isabel Sawhill, a Brookings economist, and I interviewed 20 members of Congress and senior staffers who had participated in major compromise legislative deals such as the 1983 Social Security reforms and the 1990 and 1997 budget deals. When we asked them about the necessary ingredients to achieve these huge compromise deals, the biggest area of agreement was that presidential leadership was vital.

Now is the moment for the president to step up. His speech Monday was far too political, seemingly aimed at scoring political points more than achieving a budget and stimulus deal. He should reverse himself by inviting the supercommittee to the White House and telling its members he’s putting fundamental reforms of Medicare and the tax code on the table. He should then place before the committee a bill that follows the Bowles-Simpson deficit plan supplemented with the premium-support Medicare reforms envisioned by the Domenici-Rivlin plan. Then he should turn to Rep. Dave Camp (Mich.), the Republican chairman of the House Ways and Means Committee, and say that the supercommittee should send something close to Obama’s proposal to Congress and give Ways and Means until next spring to write tax-reform provisions that would broaden the base and reduce rates while yielding $1 trillion in increased revenue over a decade, one-quarter of the $4 trillion in total deficit reduction the president is proposing.

The conventional wisdom is that a deal of this magnitude cannot be achieved with a presidential election just around the corner. But Obama must realize that without a major demonstration of leadership he might not win the election. His speech Monday appealed to his base, but he can’t win reelection without centrists and independents. Similarly, Republicans must realize that the public regards them as obstructionists already and that rejecting a bargain with the president that will receive accolades from many pundits would have major consequences for both their presidential and congressional candidates next year. If the president leads, both sides have every reason to follow, especially out of fear of the consequences if they don’t. And then there is the minor issue of our children and grandchildren.