How (And Why) Obama and Boehner Should Strike a Spending-Cut Deal

National Journal

When you hear President Obama and House Speaker John Boehner define their "final" negotiating positions on the $1.2 trillion sequestration budget fight, don't believe them.

The nation's leaders are not exactly lying, but they certainly aren't telling the truth, which is this: "No compromise" is a firm position until it's not. Even in this era of stubborn partisanship, both Obama and the GOP-controlled House have incentive to bend.

And there are at least three paths toward compromise, which I will outline later.

For Republicans, the stakes are obvious and immediate: A Washington Post-Pew poll suggests that significantly more Americans are inclined to blame Republican leaders rather than Obama for consequences of the cuts. The GOP's image is already mired at near-record lows.

The president's incentives to bend are more subtle — but potentially just as significant. First, Obama and his Cabinet are portraying the consequences of sequestration in the grimmest terms. With most of the cuts scheduled to take effect gradually, Americans might conclude that the president exaggerated the impact. He could lose credibility and leverage.

Second, a drawn-out battle over sequestration could undermine the president's bold agenda. Gun control, immigration reform, climate change, and other issues would get less attention and Obama's political capital would be diverted.

Barring agreement, sequestration takes effect Friday and requires the administration to make across-the-board, haphazard cuts to federal programs.

It is the result of a 2011 deal between Obama and the GOP to reduce federal borrowing. Their intent was to devise a package of cuts so onerous that the parties would be forced to find alternative means of reducing the federal deficit.

It hasn't worked. Obama is pushing a plan to delay sequestration until January, replacing the cuts with a mix of $110 billion in new taxes and more-narrowly tailored spending cuts. Republicans say they won't raise taxes after more than $600 billion in hikes were approved in January.

Refusing to even discuss ways to resolve the fifth fiscal crisis since Republicans took control of the House in 2011, Obama and Boehner are quibbling over micro-issues such as who first proposed the sequester and who compromised the most in the past budget fights.

Obama is afraid of angering liberal allies. Boehner worries about his right flank. Both men are talking almost exclusively to their partisan backers, with Obama staging taxpayer-funded rallies outside Washington.

That is the state of play. If you believe Obama and Boehner, they won't compromise beyond what they've already given, and the public's faith in government will be dealt another blow. Fortunately, we have some reason not to believe them.

Here are three paths to a deal:

Congress gives the administration flexibility on how to impose the $1.2 trillion in cuts. This would allow the White House to mitigate dangers and inconveniences. To the public, that might seem like a good thing. To Obama, it could be a trap: Accept the GOP's compromise and lose his leverage, or be seen as the guy holding out for the worst-case scenario.

Republicans agree to a deal that includes new revenue from closing loopholes favoring the rich. This would be a victory for Obama, essentially ceding to his demands. The president could help Republicans save face (a critical element of any compromise) if he agreed to use some new revenue to reduce military cuts.  A senior White House official who described this potential path said "it's not exactly an accident" that Obama traveled to Virginia on Tuesday with Rep. Scott Rigell, a Virginia Republican who bills himself as a problem-solving lawmaker. Rigell's district relies heavily on military spending.

Modest entitlement cuts could be mixed with loophole closures to produce a "win-win" package. Obama has already put "chained CPI" on the table for long-term debt reductions. He might prefer to wait to adjust the cost-of-living formula for Social Security, but taming the debt was always going to require more sacrifice from Americans than tinkering with one formula. In exchange for entitlement cuts, Republicans could swallow new revenue through closing loopholes on the rich — a concept they reluctantly accepted not too long ago.

To be sure, anything short of an absolute victory will anger liberal and conservative commentators, a prospect that Obama and Boehner hope to avoid. But risk is a part of leadership, and compromise is an ingredient to success.