Now Is Not the Time for a 'Grand Bargain'

The Washington Post took time this weekend to reprimand progressives who think continued budgetary austerity when the economy is still recovering is ill-advised.

In a June 9 editorial, it took issue with a recent report from the Center for American Progress that questioned such austerity. In it, the Post declared it "far too soon to declare victory over the nation’s budget problems."

Here’s what has not been accomplished: structural change to the out-of-whack tax code or to the entitlement programs — Medicare especially — that drive the long-term deficit. Worrying about those unsolved problems does not constitute a call for growth-killing “austerity.”

The editorial concludes the piece by arguing that "the best time to start negotiating it is still now." While liberal on some issues, The Washington Post is decidedly conservative on fiscal policy. Its editorial board is headed by Fred Hiatt, who recently wrote this about federal budget deficits:

Left to their own devices, both parties would neither raise taxes nor cut entitlements ... They would come together, in other words, to protect the status quo, which is to say a future of gradually rising debt.

Hiatt's column went on to reprimand President Obama for failing to lead on deficit reduction.

The conservative leanings of The Washington Post editorial board on fiscal policy are important to recognize. It does not speak for the progressive community and should be seen for what it is (The Washington Post Wonk Blog being an important exception). Readers interested in tracking the Post's misadventures in economic and fiscal policy should follow Dean Baker's excellent blog, Beat the Press, at the Center for Economic and Policy Research.

Meanwhile, it is important to point out that the time for a grand bargain is most decidedly not now. Neither the politics nor the economics support this conclusion. On the economics, the recent economic track record of austerity in both the United States and Europe has been clear. Even The Washington Post editorial board seems to recognize this, placing its emphasis on long-term deficits.

This is where the politics become important. Despite repeated outreach from President Obama, congressional Republicans have shown no willingness to consider progressive revenue changes or, indeed, any net increase in revenues. Meanwhile, President Obama has already offered to cut Social Security benefits as part of a grand bargain when the average benefit is less than $15,000 per year. Any final bargain, if it occurred, would almost certainly be worse than this.

Some might argue that a grand bargain is needed to reverse the damage being done by sequestration. Such arguments ignore how sequestration got here in the first place. When Senate Majority Leader Harry Reid (D-NV) sought to push sequestration into next year as part of the fiscal cliff negotiations, he was undercut by the administration, which allowed sequestration to be delayed just two months, from January until March.

Some have pointed out that discretionary spending has borne the brunt of deficit reduction to date, arguing that this justifies further increases in revenue. Such arguments ignore political reality. In this case, the past is prologue. Deficit reduction to date has disproportionately cut such programs because that is what the politics of a conservative House of Representatives and centrist administration predisposed toward deficit reduction produced. (For more, see Why Non-Defense Discretionary Spending Keeps Getting Cut.) Sequestration should not be addressed as part of a grand bargain. It should be repealed.

If budget deficits are, in fact, a long term problem, then they can be addressed in the long term – preferably when the political environment is better. Such changes, if they are needed, should wait for an environment more sympathetic to modest efforts to ask more from the wealthiest and less sympathetic to budget cuts for those who can least afford it.

Now is most assuredly not the time for a "grand bargain."

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