Obama Takes Control of Budget Debate, but He's Already Lost

When the White House gave budget negotiations a deadline, they killed the "the balanced approach"

600 obama hand reuters.jpg

Reuters

The major newspapers are reporting that President Obama has taken control of the debt ceiling debate. It's a pretty illusion. But by agreeing to have this debate in the first place, he's already ceded majority control of the budget to the GOP.

Forced to find $2 trillion in 10-year savings before an August 2 deadline, but incapable of offering more than $400 billion in tax savings (and that's the opening proposal), the White House has all but ensured that the budget deal will result in deep cuts to domestic spending programs -- precisely what it doesn't want from these negotiations.

It didn't have to go like this. When Republicans said they wouldn't agree to raise the debt ceiling unless Democrats signed on to deep spending cuts, the White House could have called their bluff.

"Republicans apparently don't understand the meaning of the word negotiation," Jay Carney might have said to reporters this spring. "The White House wants to raise the debt limit. Democrats want to raise the debt limit. Rep. John Boehner wants to raise the debt limit. What's to negotiate? If the brat pack in the House wants to hold hostage the nation's ability to pay Social Security, health care, and defense contracts, only they will be responsible for when your grandmother stops receiving checks in September; and your brother can't get care from a hospital because his Medicare reimbursements are suspended; and your 401(k) craters after we default on debt."

Instead, the White House, led by conservative, budget-conscious Democrats in the Senate, followed Republicans into the scrum. This week, Carney made a plea for limited tax hikes on the super-rich and oil and gas companies:

"Do we perpetuate a system that allows for subsidies in revenues for oil and gas, for example, or owners of corporate private jets, and then call for cuts in things like food safety or weather services, things that the federal government really does need to do, on American citizens; or do we look at everything and we take a balanced approach? We obviously believe a balanced approach is the right approach."

But there was never any hope for a balanced approach with tax increases this year. The economy is weak. Most Republicans have refused to raise revenues. All Republicans have refused to raise tax rates. Democrats won't vote on big-ticket tax hikes with businesses hiring below the pace of population growth. But now, by sitting down to find $2 trillion in savings by August, Congress is poised to enact spending cuts that almost every economist agrees will hurt rather than help the recovery this year.

Tax reform needs time. It will require hearings on items like the mortgage interest deduction, negotiations over how to fix the standard deduction, and cajoling among Democrats who would prefer higher rates when the political reality will only allow for fewer exemptions. That process would take many months. Now, we have less than five weeks.

When Democrats gave budget negotiations a deadline, they gave "the balanced approach" a tombstone.



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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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