Sorry, There Won't Be a Grand Bargain Or Any Other Type of Bargain

Republicans' anti-tax absolutism will kill a deal again

Are you ready for a grand bargain? No? Well, how about a medium-sized bargain? Still no? Okay, a bargain that's only slightly bigger than a breadbox?

Yeah, probably not.

Here's the good news: Republicans have finally relented after shutting down the government and threatening a possible debt default just so that their members least in touch with reality could act out their Churchillian fantasies. But here's the bad news: Washington is going back to its preferred pastime of not negotiating a budget. Now, in a rational world, there would be a pretty obvious trade. Republicans and Democrats both hate the sequester, though Democrats hate it more. It cuts spending as painfully and stupidly as possible — Washington can still do that! — and it painfully and stupidly cuts the kind of things the economy needs to grow. So rather than cutting non-defense discretionary spending quite so far below its lowest level since 1970, we could just ... repeal the sequester. Replace it even. Democrats could offer modest entitlement cuts if Republicans would offer modest revenue increases.

If that formula — entitlement cuts for revenue increases — sounds familiar, that's because it's been the crux of every failed budget negotiation the past few years. Democrats have consistently offered to cut entitlements, and Republicans have consistently not offered to increase revenues. The one time Republicans did say they were open to new revenue, it turned out they were only open to Laffer revenue. In other words, they were open to new revenue that came from assuming tax cuts would more than pay for themselves — an idea former Bush adviser Greg Mankiw has said belongs to "charlatans and cranks." Here's how Matt Bai of the New York Times describes Boehner's supposed offer of $800 billion in new revenue back in 2011:

Boehner would argue that some sizable chunk of that money — if not all of it — would come to the government as a result of economic growth spurred by new, lower tax rates, and from better compliance, since the new tax code would be less confusing. Thus, by this feat of actuarial magic, Boehner contended that raising revenue did not require raising taxes, and in fact would enable you to lower them.

Nothing has changed. Republicans still won't agree to higher revenues. It's why they rejected the Bowles-Simpson plan. And why the "grand bargain" fell apart in 2011. And why the super-committee failed later that year. And why the budget conference will almost certainly fail later this year. Indeed, Mitch McConnell has already said that Republicans are still only open to Laffer revenue, not "revenue that's CBO scored" like the Democrats want.

Now, it might make sense, as Josh Barro and Ezra Klein argue, for Democrats to give up on taxes, and try to get, say, immigration reform instead. But even that doesn't seem likely to succeed. Sure, some Republicans like immigration reform (and none like new revenues), but enough others don't because they think it would just create millions of new Democratic voters. The same applies, of course, to infrastructure spending. Are House Republicans who took weeks to approve Superstorm Sandy aid going to approve roads and bridges that Tea Partiers will demagogue as pork barrel?

The depressing reality is we're stuck with a Republican caucus too afraid of its craziest members to do anything useful. Even more depressing is that the median Republican member agrees enough with Democrats that we could get plenty of useful things done if it weren't for the Tea Party. Things like, yes, immigration reform, tax reform, and infrastructure. But the Tea Party does exist. And John Boehner is only willing to cross them after convincing them that he really has no other choice.

Sorry, but Washington is going to continue to be a drag on the recovery. But at least the panda cam is back on.