After many failed efforts at a big, bipartisan ‘grand bargain,’ the
White House and Congress are scaling back expectations. Progress on
the nation’s fiscal woes is likely to be piecemeal.
By David Grant
WASHINGTON — President Obama’s pitch for a “grand bargain for the
middle class” isn’t all that grand, at least by any standard of
previous fiscal proposals bearing the “grand” brand.
On Tuesday, Mr. Obama’s stakes were much smaller than the $4 trillion
in deficit reduction that once tantalized Washington: “Grand,” he
said, equals a rewrite of the corporate tax code with a handful of the
resulting billions going into long-favored Democratic priorities of
infrastructure, manufacturing, and community colleges for the next few
It’s a lack of ambition that matches a sinking realization on Capitol
Hill that making incremental progress on the nation’s long-running
fiscal disputes is probably the best Congress and Obama can do when
they negotiate difficult issues like funding the government and
raising the federal debt ceiling this fall.
In other words, there’s no end in sight to the partisan budget
slugfest of the past three years.
“If we have to do this in pieces, we’ll do it in pieces,” said Alan
Krueger, outgoing chairman of the White House Council of Economic
Advisers, at a Politico event on Monday, “if it’s too much for the
Congress to do in one grand bargain.”
The grand bargain’s failing prospects aren’t for a lack of trying.
Knowing well that raising the federal debt ceiling and continuing
government funding past the start of a new fiscal year on Oct. 1 will
necessitate policy changes in order for Republicans to collaborate on
either matter, envoys from the Obama administration have met with a
half-dozen or so Republican senators in prior months to sketch out
areas of agreement.
In early 2011, the president and new House Speaker John Boehner (R) of
Ohio spent weeks in private talks that, eventually, proved futile. A
bipartisan gang of solution-minded senators produced its own sweeping
fiscal pact during the negotiations to raise the debt ceiling. At
last, a “supercommittee,” tasked by Congress with negotiating a “grand
bargain” on deficits also failed, triggering a regime of mandatory
spending cuts and caps for the next 10 years.
As a result, the dream is all but gone of “going big” and sweeping
away the fiscal malaise that engulfs nearly every debate, fiscal or
not, in Washington.
Sen. Bob Corker (R) of Tennessee, one of those meeting with Obama
officials on the deal, says that the time is near to decide whether
Congress and the White House will pursue small improvements to the
nation’s fiscal picture or keep hammering at a sweeping deal.
Senator Corker sees that call being made by the end of this week, when
Congress will adjourn for its August recess. But that decision is more
likely to break for a small deal than a sweeping one, he says, with
Congress able to restructure the budget-cutting “sequester” and
reconcile overall government spending levels far more easily.
Corker says there’s a “no brainer” to fixing the sequester: Substitute
cuts to mandatory spending, such as alterations to government benefit
formulas, for example, for the extant across-the-board reductions to
everything from the Defense Department to education and nutrition
assistance for the poor.
Such a plan could draw on a handful of proposals, such as changing the
calculation of some government benefits to a formula known as chained
CPI or giving richer Americans smaller Medicare subsidies, that have
been endorsed by many members of both parties.
The alternative has much less agreement.
“Another route is to try to do the mega deal but, again… to do a
mega-deal, you have to do some structural changes to entitlements to
create long-term solvency and I don’t know if the White House is
prepared to do that,” he says.
Democrats, likewise, see the need to move away from the traditional
grand bargain and to to chip away at the problem, as long as
Republicans refuse to raise taxes.
“We’re not reaching consensus and moving forward on [a sweeping debt
deal] because Republicans aren’t willing to create, to raise new
revenues,” said Jen Palmieri, White House director of communications,
on a conference call with reporters. Thus, “we should take a look at
what we all do agree on, which is that we should do business tax
The problem with going small? Many government spending and taxing
issues are deeply intertwined, as Sen. Johnny Isakson (R) of Georgia
pointed out on Tuesday, and can’t easily be digested on their own.
If lawmakers start with corporate tax reform, the vast majority of
American businesses that pay taxes through the individual income tax
code “are going to go crazy,” Senator Isakson says, because they could
face rates as high as almost 40 percent while large firms like General
Electric could see rates around 25 percent.
“You can’t address these things in small sound bites, you have to look
at the totality of the tax code,” says Isakson, a member of the Senate
Finance Committee who has been working on a comprehensive reform with
Sen. Max Baucus (D) of Montana, the committee’s chairman.
That’s why Senator Baucus and Rep. Dave Camp (R) of Michigan, the
chair of the House Ways and Means Committee, have vowed to move
corporate and individual tax reform proposals through their committees
At a recent breakfast with The Christian Science Monitor, the men
argued that corporate tax reform would be politically untenable
without individual reform.