Why Backroom Deals Aren't So Bad

Sometimes Washington gets so confusing that you need a cheat sheet to understand what's going on. Like right now: President Obama recently rolled out his budget to widespread criticism. The major complaint is that the president, though he has often voiced concern about unsustainable levels of federal spending, didn't propose nearly enough to bring it under control.

Specifically, the charge goes, he wimped out on "entitlement reform,'' Washington shorthand for reining in expensive government programs like Medicare, Medicaid, and Social Security that are responsible for the overwhelming share of projected future deficits.

This criticism is both valid and somewhat misleading. That's because it discounts the other avenue for entitlement reform, one that avoids a big public fight over what programs to cut and whose taxes to raise. Instead, lawmakers in both parties would engage in a practice they profess to abhor but secretly love: striking a backroom deal.

That's exactly what a bipartisan group of senators is attempting to do -- and it's one reason why prospects for entitlement reform aren't nearly so dire as a reading of Obama's budget might lead one to believe.

But that isn't likely to get a great deal of attention, at least not yet. Instead, Republicans plan to issue their own budget proposal in April that, unless they lose their nerve, will call for much deeper cuts than Obama has. Neither plan is likely to get adopted.

So why all this subterfuge? Because the thought of legislating openly terrifies most politicians -- for good reason. Look at how badly Democrats suffered after pushing through last year's high-profile health law.

Taking on entitlement reform in the same way is a more terrifying prospect, since rather than delivering new benefits it will entail cutting existing ones, raising taxes and making other unpleasant but necessary changes sure to upset voters.

That's what makes the backroom such an attractive option. For all that it is maligned, the practice of working through difficult issues out of sight of the public and the press has a venerable history. Obama himself alluded to it in his press conference after the budget roll-out when he noted that Ronald Reagan and Tip O'Neill had come together to shore up Social Security in 1983.

Obama didn't go into detail, but that episode illustrates perfectly the danger and the possibility of attempting to reform entitlements.

For years before he was president, Reagan had argued that people should be able to opt out of Social Security. Soon after he was elected, he proposed large cuts. Republican senators, worried about upsetting elderly voters, wouldn't take them up. But the mere prospect was enough to frighten people, and the GOP suffered major losses in the 1982 elections.

Afterward, Reagan tried again. Only this time he recognized that changing Social Security was functionally impossible for one party alone to carry off. So he enlisted Tip O'Neill, who wanted some changes of his own. Instead of trading heated public pronouncements to satisfy their political bases, the two negotiated through proxies, in private, which gave both sides cover if things fell apart.

O'Neill chose Robert Ball as his negotiator, a widely respected Social Security commissioner and veteran of three administrations; Reagan chose Alan Greenspan, the future chairman of the Federal Reserve. As the talks proceeded, senators in both parties were kept apprised.

Eventually, Ball and Greenspan settled on a deal that kept Social Security solvent by raising the retirement age (which Republicans liked) and taxing Social Security benefits (which Democrats liked). When the news broke, neither party was at risk. Democrats couldn't attack Republicans for raising the retirement age because their own speaker approved of the plan. And Republicans could hardly criticize Democrats for supporting a deal that Reagan approved of.

This is the model that some Democrats and Republicans think could work now. With national debt higher than at any time since the end of World War II, entitlement reform is the obvious way to bring it under control.

As it did three decades ago with Social Security, reform will entail some combination of benefit cuts and tax increases -- all the more difficult to achieve now that Medicare and Medicaid are also on the block. And even if negotiators reach a deal, the outcome isn't assured. A revolt could come from the right or the left or even both. For all they accomplished, Reagan and O'Neill never had to contend with the Tea Party.

Joshua Green writes a weekly column for the Boston Globe.